US Equities: The S&P 500 and Nasdaq 100 extended their winning streaks into the 8th and 9th consecutive days, respectively, both gaining moderately by 0.1% on Wednesday. Nvidia saw a 1.4% increase, and Microsoft edged up by 0.7%, contributing to the benchmark's rise, which was otherwise weighed down by energy, utility, and biotech companies. Small-cap stocks lagged, with the Russell 2000 plunging 1.1%. Warner Bros. experienced a 19% drop in advertising revenue. Walt Disney's stock rose by over 3% in after-hours trading after reporting earnings that beat estimates and better-than-expected Disney+ subscriber numbers.
Fixed income: Treasuries saw yields grinding lower throughout the session, influenced by lower European yields following former ECB President Draghi's statement that the Eurozone would enter a recession by the end of the year. The unwinding of curve-steepening trades also aided the outperformance of the 10-year and 30-year despite a lackluster but better-than-feared 0-year auction, which experienced a slight decline in the bid-to-cover ratio to 2.45x and was awarded at a yield 0.8bp higher than the when-issued level before the auction deadline. The 10-year yield ended the session 7bps lower at 4.49%, while the 2-year ticked up 1bp to 4.93%. On Thursday, attention will be on the $24 billion 30-year auction and Chair Powell's participation in a policy panel discussion at the IMF's Jacques Polak Annual Research Conference at 2 pm NY time, focusing on the topic of "Monetary Policy Challenges in a Global Economy."
China/HK Equities: Markets remained in consolidation mode, with the Hang Seng Index sliding by 0.6% and the Hang Seng Tech Index declining by 0.9%. Ping An Insurance plunged 5.4% following a Reuters story that cited "people familiar with the plan" as saying that China's State Council had asked the Guangdong provincial government to arrange for Ping An to take a controlling stake in the ailing Country Garden. However, Ping An denied the report. Ping An was once the second-largest shareholder in Country Garden but has reportedly unloaded all its stake in Q3. Meanwhile, Chinese property names gained ground as mainland media reported that financial and housing regulators jointly met with the management of developers to discuss the latter's liquidity situations. Chinese authorities are likely stepping up measures to restructure and resolve insolvency, as well as address liquidity stress in the property sector. The CSI300 slid 0.2%.
FX: The US dollar was broadly unchanged despite the run lower in long-end yields. Fed Chair Powell did not comment on policy, while Cook spoke on risks to the financial system, but focus is again on Powell speaking at the IMF on Thursday where he may try to push back on market’s dovish interpretation of the last FOMC meeting. AUDUSD continued to lose ground, and slid lower again to test the 0.64 handle while NZDUSD is down to 0.5910. Yen bears returned, taking USDJPY back higher for a test of 151 and verbal intervention risks escalate at these levels. BOJ Governor Ueda said that the BoJ doesn't necessarily need to wait until real wages actually turn positive in existing YCC and negative rates, but his remarks helped yen little. EURJPY rose to its highest levels since 2008 at 161.73 with EURUSD pushing back above 1.07 and GBPUSD attempting a move back above 1.23 after BOE Governor Bailey tried to push back on market pricing for rate cuts after dovish comments from Huw Pill a day ago.
Commodities: Another sharp fall overnight in crude oil prices with Brent now below $80/barrel as demand concerns continue to underpin with US inventory data indicating a massive 11.9mn barrels of crude stock build. If EIA data confirms that, it will be the biggest build since February, but the EIA data will only be available next week. Metals were mixed with Copper down another over 1% but iron ore up 1.4% to 7-month highs on expectations of support to China’s property sector after reports that Beijing asked Ping An Insurance Group to take a controlling stake in the embattled developer, Country Garden, which were later denied. Focus turns to China’s inflation data today. Gold dropped sharply to $1950 as hawkish comments from the Fed governor Lisa Cook weighed. She said worsening of geopolitical tension could trigger negative spill over and aggravate inflation.
- Eurozone October Retail sales -0.3% MoM vs -0.2% expected, though YoY it was at -2.9% vs. -3.1% expected. ECB’s 1yr inflation expectations jumped higher to 4.0% from 3.5% earlier, while 3yr was unchanged at 2.5%. Former ECB chief Mario Draghi said the Eurozone will be in recession by year end, though he pinned the blame for that partly on high energy prices.
- Final German October CPI unchanged from the preliminary release at 3.8% for the headline and 3.0% for HICP.
Macro events: US Initial Jobless Claims, exp 219k; Japan Current Account (Sep) exp ¥2,977.8bn; Japan Current Econ Conditions; China PPI (Oct) exp -2.7% Y/Y; China CPI (Oct) exp -0.1% Y/Y, Banxico Policy Announcement
Earnings: AstraZeneca, Deutsche Telecom, Zurich Insurance, SoftBank, Honda Motor, Li Auto, Hua Hong Semiconductor, SMIC
In the news:
- BOJ Ueda signals chance of exit from easy policy before real wages rise (Reuters)
- Disney Tops Profit Estimates, Seeks Extra $2 Billion in Cost Savings (Bloomberg)
- Eli Lilly Wins FDA Nod for Obesity Drug That Rivals Wegovy, Ozempic (Bloomberg)
- Arm forecasts Q3 below Wall Street on deal delay, shares dive 8% (Reuters)
- Lyft beats third-quarter estimates, bookings underperform rival Uber (Reuters)
- China Vice President Sees ‘Positive Signals’ in Ties With US (Bloomberg)
- Xiaomi 14 sales top 1 million units as it jostles with Huawei and Apple in China’s shrinking smartphone market (SCMP)
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