Global Market Quick Take: Asia – September 22, 2023

US Equities: Rising Treasury yields, which reached new highs since 2007, continued to weigh on stocks. The S&P 500 plunged 1.6% to 4,330, marking a decrease of more than 1.5% in a single day for the first time since April. All sectors declined, with the rate-sensitive real estate sector being hit the hardest. Magacap Tech names dragged down the Nasdaq 100, which tumbled 1.8% to 14,694. Amazon plummeted 4.4%, while Nvidia declined by 2.9%.

Fixed income: Yields from the belly (5-year) onward to the long end extended their post-FOMC march higher following the surge in long-end UK Gilts after the Bank of England held rates unchanged across the pond and a surprise drop in the initial jobless claims to 201K, signifying a still-hot US labor market. The USD15 billion 10-year TIPS action registered robust demand. Selling concentrated on the long end, with the 10-year and 30-year yields rising by 9bps to 4.49% and 13bps to 4.57%, respectively, while the 2-year yield ended the session 3bps lower at 5.14%.

China/HK Equities: Following the post-FOMC selloff in the US equity market, the Hang Seng Index slid by 1.3% to 17,655, while the Hang Seng Tech Index plunged by 1.9%. Healthcare, materials, and information technology were the top laggards. Alibaba Health tumbled by 4.9%, and XPeng plummeted for the second day, down by 6.9%, after lowering the selling price of the new version of its G9 model. The CSI300 shed 0.9%.

FX: Dollar strength continued in the post-Fed reaction, although some of the gains were reversed. High event risk from the Bank of Japan meeting ahead and USDJPY hit fresh near 11-month highs of 148.46 but fell subsequently to ~147-.50 levels. AUDUSD plummeted from highs of 0.6511 to drop back towards 0.64 amid risk-off although NZDUSD did better and stayed above 0.59 on Q2 GDP surprise. GBPUSD broke below key 1.23 support with BOE holding rates but rebounded to the big figure later. EURUSD stays below 1.07.

Commodities: Crude oil prices remained soft earlier in the session on Fed’s higher-for-longer message offsetting concerns of tighter supplies, but Russia’s announcement to temporarily ban diesel and gasoline exports brought some gains again. Macro theme continued to be of a risk-off, which is capping the move in oil towards $100 for now. Copper was down over 2% along with declines in other base metals amid risk-off and lack of China stimulus announcements.

Macro:

• US jobless claims fell to 201k from 221k, the lowest since the end of January, and against expectations for a rise to 225k. The downtrend again suggested that labor market is not cooling too rapid, and raised concerns whether the Fed will have to keep its foot on the pedal.
• The Bank of England defied market expectations and kept interest rates unchanged with a 5-4 vote split. Instead, the Bank upscaled the rate of quantitative tightening from £80b to £100b per annum to accommodate a larger bond maturity profile next year. A tightening bias was maintained with the MPC repeating the message that “further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures”. Market still expects another rate hike with 70% probability.
• Among other central bank meetings yesterday, the Swiss National Bank defied wide expectations for a 25bps hike and left its policy rate unchanged, while Sweden and Norway’s central banks both hiked the expected 25bps. Brazil’s central bank cut rates by the expected 50bps after starting the easing cycle in August and following recent rate cuts by Poland and Chile.
• Japan’s headline August CPI came in firmer-than-expected at 3.2% YoY vs. expected 3.0%, slowing only a notch from prior 3.3% YoY. Inflation ex-fresh food remained unchanged at 3.1% YoY, and also above expectations while the core-core measure (ex-fresh food and energy) held up at 4.3% YoY as expected.

In the news:

• The China Securities Regulatory Commission (CSRC) has checked with several major brokers about short-selling activities and trading strategies of their quant clients (Reuters)
• Cisco to Buy Splunk for $28 Billion in Giant AI-Powered Data Bet (Bloomberg)
• To reduce AI costs, Google wants to ditch Broadcom as its TPU server chip supplier (The Information)
• Microsoft announced a "unified" AI for its Windows 11 platform and four new Surface devices (Reuters)
• Senate Republicans are predicting that Speaker Kevin McCarthy (R-Calif.) will need to reach out to House Democrats to get the votes to prevent a government shutdown at the end of next week (The Hill)

Macro events:

• BoJ Policy Announcement – read full preview here
• EZ/UK/US Flash PMIs (Sep), UK Retail Sales (Aug), Canadian Retail Sales (Jul)

For all macro, earnings, and dividend events check Saxo’s calendar.

For a detailed look at what to watch in markets this week – read our Saxo Spotlight.

For a global look at markets – go to Inspiration.