Platform GL Asia 1406x160 v2

Global Market Quick Take: Asia – May 31, 2024

Macro 6 minutes to read
Saxo Be Invested
APAC Research

Key points:

  • Equities: Dell plunges after disappointing results
  • FX: USD back lower but yen weakness persists
  • Commodities: All eyes on OPEC+ meeting
  • Fixed income: BOJ bond buying adjustment on the watch
  • Economic data: US PCE, OPEC+ meeting (Sunday)

------------------------------------------------------------------ 

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 


31_QT

Equities: The S&P 500 Index tumbled to a nadir unseen in over a fortnight on Thursday, briefly pausing due to a pricing hiccup, amid persistent anxieties that the Federal Reserve may persist with its stringent monetary stance, casting a pall over market sentiment.

Dragging the index down to 5,235 were notable declines in the technology sector. This was exacerbated by a slowdown in the approval process for export licenses by U.S. authorities, impacting prominent chip manufacturers like Nvidia Corp. and Advanced Micro Devices Inc. These firms have reportedly been facing delays in obtaining permissions necessary for shipping advanced AI accelerators to the Middle East, insiders say.

In contrast, Asian equities are poised for an uptick on Friday, buoyed by the latest tranche of U.S. economic figures which suggest a deceleration in economic activity, potentially bolstering arguments for the Federal Reserve to commence a rollback of interest rates within the current year. Futures markets signal a positive opening for stocks in Australia, Japan, and Hong Kong, while the Golden Dragon Index—a barometer of Chinese firms traded on the Nasdaq—saw an ascent of over 1%. Meanwhile, futures tied to U.S. equities dipped following a downturn in Dell Technologies Inc.'s stock during after-hours trading, as the company's reported revenue growth fell short of investor expectations.

FX: The US dollar slumped again yesterday, erasing Wednesday’s gains as US economic data sent dovish signals and brought yields lower. Fedspeak had little new message and continued to reiterate high-for-longer. USDJPY slid from highs of 157.60+ to dive back below 157 handle as intervention threat picked up, but yen still continues to be a favored funding currency for carry trades as we discussed here, and pair was back higher in early Asian trading. AUDUSD took a look below 0.66 but bounced back higher to 0.6630 in the overnight session, while NZDUSD ended the session broadly unchanged and trades close to 0.6120. Eurozone inflation print is on the radar today ahead of the likely ECB rate cut next week, and EURUSD traded higher to 1.0830+ levels.

Commodities: Gold prices inched up 0.2%, reaching $2,341.92 per ounce and crude prices extended their decline for a third consecutive session, with market indicators pointing to excess supply ahead of an upcoming OPEC+ gathering this weekend.

West Texas Intermediate crude dipped below the $78 mark, following a 1.7% drop on Thursday, and Brent crude hovered around $82, with both benchmarks on track for their second successive monthly decline. The immediate Brent futures spread shifted into a contango—a market scenario where near-term prices are lower than those in future months—for the first time in months, signaling concerns of a supply glut.

Copper continued to backpedal from its peak, while aluminum receded from its highest level in two years, as traders seized the opportunity to realize profits following a sustained surge in the industrial metals sector. In a widespread pullback on the London Metal Exchange, it witnessed declines for the sixth session out of seven, shedding up to 3.8%.

Fixed income: A day before the Federal Reserve is set to review its preferred inflation metric, new data indicated that the U.S. economy expanded at a more modest rate, with revisions suggesting both consumer spending and inflation have moderated. This economic downshift may strengthen the argument for the Fed to begin reducing interest rates within the year. However, the prospect of subdued consumer spending could raise red flags for U.S. businesses. In the bond market, yields on two-year Treasury notes fell by five basis points to 4.92%.

Market participants are also closely monitoring the Bank of Japan for any signs of adjustments in its bond-buying activities and its strategy for June, alongside the release of Tokyo's May inflation figures, which could provide clues about the BOJ's trajectory toward policy normalization. Additionally, traders are keeping an eye on the Ministry of Finance's currency intervention records, especially with the yen hovering near the 157 level against the dollar—a threshold where Japanese authorities are rumored to have previously intervened to bolster the currency.

Macro:

  • US economic data continued to show that cracks were emerging. Q1 GDP growth was revised down to 1.3% from 1.6% as consumer spending estimates eased from 2.5% to 2.0%. Price metrics such as Q1 PCE prices were also revised down. Meanwhile, weekly jobless claims for the week of May 25 were a notch higher at 219k (vs. 217k expected and 216k prev) signaling that labor market is loosening slowly and unemployment rate may rise. April PCE data today is the next key test of inflation dynamics in the US.
  • The NY Fed President Williams was on the wires, but largely suck to the script. He acknowledged the lack of progress on lowering inflation but did suggest it should moderate in the second half of the year. He believes the policy is well positioned to get inflation back to target. Although there was no clear signaling on how many cuts may come this year, his comments continued to suggest that a rate hike is not on the table.
  • Japan’s May Tokyo CPI jumped higher to 2.2% YoY on the headline from 1.8% previously, coming in as expected, signaling that the nation-wide print may face upside pressure as well. Inflation ex-fresh food rose to 1.9% YoY from 1.6% in April, although the core-core measure which excludes fresh food and energy came in softer at 1.7% YoY from 1.8% previously. The BOJ has been signaling further tightening, and this inflation print continues to leave room for the central bank to take further action to normalize policy and support the yen.

Macro events: China PMIs (May), EZ Flash CPI (May), US PCE (Apr), Canadian GDP (Q1), US Dallas Fed (Apr).

Earnings: BRP, Genesco

News:

  • DJT stock drops 8% after Trump found guilty in hush money trial (Yahoo)
  • DELL shares tumble as solid results, AI server orders fail to satisfy investors (Investing)
  • Core inflation in Japan's capital accelerates, keeps BOJ rate hike view alive (Investing)
  • Fed officials see inflation falling, signal no rush to cut rates (Reuters)
  • Oil falls as US reports surprise fuel build, weak demand (Investing)

 

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

For a global look at markets – go to Inspiration.

Quarterly Outlook

01 /

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

The information on or via the website is provided to you by Saxo Bank (Switzerland) Ltd. (“Saxo Bank”) for educational and information purposes only. The information should not be construed as an offer or recommendation to enter into any transaction or any particular service, nor should the contents be construed as advice of any other kind, for example of a tax or legal nature.

All trading carries risk. Loses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money.

Saxo Bank does not guarantee the accuracy, completeness, or usefulness of any information provided and shall not be responsible for any errors or omissions or for any losses or damages resulting from the use of such information.

The content of this website represents marketing material and is not the result of financial analysis or research. It has therefore has not been prepared in accordance with directives designed to promote the independence of financial/investment research and is not subject to any prohibition on dealing ahead of the dissemination of financial/investment research.

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.