Global Market Quick Take: Asia – November 29, 2023

US Equities: The S&P 500 inched up 0.1% to 4,555 and the Nasdaq 100 added 0.3% to 16,010. Tesla gained 4.5%, being one of the top performers. Microsoft gained 1%. Specialty retailers, such as American Eagle and Urban Outfitter surged 4%-5%. In the extended hours, ClowdStrike pulled back around 1% despite the cyber security company reported an earnings beat. For a discussion on investing in the cyber security industry, you can read Peter Garnry’s note here.

Fixed income: 2-year and 5-year Treasury yields fell sharply by 15bps to 4.73% and 13bps to 4.28% respectively, after Fed Governor Waller’s dovish comments. A poor 7-year auction did not spoil the rally as yields across the curve finished the session at their lows. The 10-year yield fell 7bps to 4.32%. The OIS curve is pricing in around a 70% chance of a 25bp cut by May.

China/HK Equities: Hong Kong stocks pulled back for the third straight day. The Hang Seng Index declined by 1%, dragged down by internet, beverage, properties, and financials. Meituan plunged 5.2% ahead of reporting results. Kuaishou and Bilibili each fell nearly 4%. SenseTime dropped by 4.9% after Grizzly Research alleged the AI software company of inflating revenue. On the other hand, technology hardware stocks outperformed again, with AAC surging 7.5% and Sunny Optical adding 4.7%. Healthcare stocks outperformed amid the surge of respiratory infections in the mainland. Meituan’s ADR plunged 10.8% or a further 6.1% from the Hong Kong close after reporting in-line results and a downbeat Q4 outlook. Meanwhile, PDD soared 18.1% after the company reported revenue and earnings substantially beating expectations.

FX: Dovish Waller put further pressure on the dollar, offsetting any buying seen due to the month-end demand. So far, this week is turning out to be the worst week for the dollar since the start of the year, and a similar dovish shift from Powell on Friday could make it worse. SEK continued to come out at top of the G10 board, while JPY also caught up to gains with Treasury yields slumping in a broad-based manner. USDJPY slid to test 147 in early Asian trading, while EURJPY slipped below 162. AUDUSD and NZDUSD hit fresh 3-month highs of 0.6666 and 0.6150, respectively, with the Aussie supported by RBA's hawkish Bullock outweighing the retail sales miss. Australia CPI comes next followed by RBNZ rate decision today and a dovish rhetoric could mean AUDNZD rises back to 1.0850+ levels. EURUSD testing 1.10 and GBPUSD rose above 1.27.

Commodities: Gold extended its Santa rally on dovish Waller comments, much as we have highlighted in articles, podcasts and a webinar over the last week. XAUUSD has come up on top as one of our highest traded FX products this week, but worth noting that yesterday’s positioning was only 47% on the long side, potentially as high cost of carry still underpins which could make the rally prone to corrections. Crude oil also surged higher amid a weaker dollar, breaches in Israel/Hamas truce and reports on lack of OPEC progress as the decision nears. Copper rose but iron ore fell for a second consecutive day amid concerns of market intervention by Beijing.

Macro:

• Fed Governor Waller, a hawk and voter, opened up to the idea of rate cuts saying that if inflation continues to cool for several more months… then we can start lowering the policy rate”. This aided a dovish repricing of the Fed curve with the May rate now prices with over 90% probability. He said that he is "increasingly confident" policy is well positioned to slow the economy and get inflation back to 2%. Fed’s Goolsbee also said that he has some concerns about keeping rates too high for too long.
• US economic confidence rose in November following three consecutive months of decline. Headline rose to 102.0 from the revised lower 99.1 for October. Present Situation Index was slightly lower at 138.2 from 138.6, but Expectations lifted to 77.8 from 72.7.

Macro events: Australia CPI, German CPI, Spain CPI, US GDP, US PCE, RBNZ Policy Announcement, Fed Beige Book, BoE's Bailey, Fed’s Mester

Earnings: Salesforce, Snowflake, BAE System, AIA, Synopsys, Naspers, Rolls Royce, Dollar Tree, Bilibili, Luk Fook

In the news:

• Meituan Tumbles on Warning of Slower Growth as Consumption Wanes (Bloomberg)
• China's PDD beats estimates as online discounter Temu booms (Reuters)
• CrowdStrike posts better-than-expected earnings, but its stock slips (DJ)
• Bill Ackman Bets Fed Will Cut Interest Rates as Soon as First Quarter (Bloomberg)
• US Thanksgiving weekend sales hit record on big discounts, online boost (Reuters)
• Panama to shut major copper mine after court ruling (FT)

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

For a global look at markets – go to Inspiration.