Global Market Quick Take: Asia – December 20, 2023

US Equities: Stocks advanced into new year highs again in the U.S., with the S&P 500 gaining 0.6% to 4,768 and the Nasdaq 100 adding 0.5% to 16,812. The robust housing starts print added to the optimism of a resilient U.S. economy while the moderation in inflation may allow the Fed to cut rates. Meta gained 1.7% while Nvidia slid 0.9%. In the extended hours, Fedex plummeted 10% after reporting profits missing estimates due to air-freight volume declines and revising down revenue guidance for the fiscal year ending in May 2024.

Fixed income: Treasury yields finished the Tuesday session nearly unchanged. This stability occurred amid robust housing starts data, Fed officials pushing back to rate cut anticipations, and a dovish-leaning Bank of Japan. The 2-year yield fell 1bp to 4.44%, while the 10-year yield remained flat at 3.93%.

China/HK Equities: The Hang Seng Index declined by 0.8% as Chinese property developers, property management companies, and Internet names experienced weaknesses. Meituan plummeted 5.7%, reaching a new 3-year low. NIO gained 5.7% after Abu Dhabi investor CYVN announced plans to invest USD 2.2 billion in the Chinese EV maker, increasing its stake to 20%. Xiaomi rose by 1.5% following CEO Lei Jun’s upbeat comments and commitment to building a successful EV business. The CSI300 edged up by 0.1%.

FX: After the BoJ kept its monetary policies unchanged, the post-Monetary Policy Meeting communication was deemed somewhat more dovish than anticipated. In particular, there were no hints of leaning towards ending its ultra-loose monetary policy in Q1 2024. As a result, USDJPY surged to a high of 144.96 before retracing to trade around 144.00. Additionally, AUDJPY gained 1.6% to reach 97.30, while EURJPY rose 1.3% to 158.00.

Commodities: Crude oil extended its rally as a result of elevated risks posed by potential attacks from Yemen’s Houthi rebels on tankers passing through the Red Sea and the Suez Canal. Brent crude oil gained 1.6%, reaching $79.23, while WTI crude added 1.5%, reaching $73.94. The tension is likely to underpin the crude oil prices in the coming days.

Macro:

• As anticipated, the BoJ maintained short-term interest rates at minus 0.1% and 10-year JGB yields around zero per cent, with a 1% reference rate serving as the soft upper bound of the range. Notably, the wording in the statement about inflation changed to “underlying CPI inflation is likely to increase gradually toward achieving the price stability target, as the output gap turns positive and as medium- to long-term inflation expectations and wage growth rise” from the “the Bank expects that underlying CPI inflation will increase gradually toward achieving the price stability target of 2 percent, while this increase needs to be accompanied by an intensified virtuous cycle between wages and prices” in the previous statement. The emphasis of wage increases as a precondition to achieving the price stability target has been tuned down.
• During the statement and post-meeting press conference, the BoJ provided no hints of a potential move in January. Governor Ueda mentioned that while price stability had become more certain, it had not yet reached the threshold for a policy change.
• Looking ahead, key dates to monitor for potential developments in BoJ policies include Governor Ueda’s speech on December 25 and the release of the Summary of Opinion for the December meeting on December 27. The next BoJ Monetary Policy Meeting is scheduled for January 22-23. During the press conference on Tuesday, Governor Ueda noted that the BoJ would incorporate new information in its policy decision and could not completely rule out a policy surprise. Therefore, the January meeting remains a ‘live’ meeting."
• US housing starts increased 14.8% M/M to 1,560k in November, surpassing the median forecast of 1,360k. Building permits fell 2.5% M/M to 1,460k, slightly below the 1,465k projected. The surge in housing starts is largely due to a 18% increase in the single-family component.

Macro events:  US existing home sales (Nov), US consumer confidence (Dec), Germany PPI (Nov), Germany consumer confidence (Dec), Eurozone consumer confidence (Dec), UK CPI (Nov), UK PPI (Nov), Japan Exports (Nov), China 1-year & 5-year Loan Prime Rate

Earnings: Micron, General Mills

In the news:

• Fed’s Bostic Says He Doesn’t See Urgency to Cut Interest Rates (Bloomberg)
• FedEx shares tumble 9% after weaker demand hit revenue outlook (CNBC)
• Oil rises 1% as Red Sea shipping concerns unnerve traders (Reuters)

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

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