Global Market Quick Take: Asia – October 25, 2023

US Equities: US stocks ended the day in gains, halting a 5-day drop as earnings such as from Coca-Cola, GE and 3M boosted risk appetite and Treasuries also stabilized after Monday’s moves. Strong US PMIs also eased concerns of an immediate recession, and Q3 GDP data out tomorrow is also expected to be strong. However futures are pointing lower after Microsoft and Alphabet reported earnings after the bell. Microsoft jumped over 3% as AI best boosted the cloud business, but Alphabet shares were down 6% as it missed expectations.

Fixed income: Choppy day for US Treasuries as European and US PMIs underpinned, and the 2 year auction was relatively soft. 2-year ended the day 6bps higher as stronger PMIs put more weight on Fed’s higher-for-longer message, while 10-year was down nearly 3bps.

China/HK Equities: Despite a 0.4% rebound in the CSI300 driven by Central Huijin's purchase of index ETFs, the Hang Seng Index extended its losing streak to four sessions, dropping by 1.1% to close at 16,992, slipping below the 17,000 mark on Tuesday. China's internet stocks displayed weakness, with Alibaba declining by 1.7% and Tencent plummeting by 2.1%. Additionally, China's property sector faced a sharp decline as S&P warned that China's 2024 growth might be limited to 2.9% if the property crisis worsens. However, sentiment was revived for now and futures are pointing higher with stimulus announcements around issuance of more sovereign debt.

FX: The diverging US and European PMIs brought some strength back into the US dollar after Monday’s losses and the USD is now unchanged on the week to date basis. EURUSD plunged back below 1.06 from highs of 1.0694 while EURGBP made a round trip back to 0.87+ as GBPUSD slid back below 1.22 handle. USDJPY still close to the 150 area while AUD outperformed hitting highs of 0.6379 after commentary from RBA's Bullock who said the board will not hesitate to raise the cash rate further if there is a material upward revision to the outlook for inflation. That could make AUD extremely sensitive to Australia’s Q3 CPI release today.

Commodities: Crude oil extended losses as geopolitical risks were not seen to be widening amid delays in Israel’s ground invasion of Gaza, and announcements of China stimulus or higher US PMIS not offsetting the decline in war premium as demand outlook remains weak. Copper bounced higher while Gold was relatively stable after being supported at $1955 as safe-haven bid retreated and strong dollar underpinned, but long-end treasury yields declined slightly.

Macro:

• Preliminary PMIs for September showed European underperformance while US is still holding steady. Eurozone composite PMI slipped back to 46.5 from 47.2 with manufacturing staying weak at 43 while services disappointed, slipping back to 47.8 from 48.7 (48.6 expected). Hope for continued stabilisation in German services disappointed, with a fall to 48.0 in the German Services PMI after briefly eking above 50 last month.
• US PMIs where slightly stronger than expected, the composite at 51.0 from 50.2. Manufacturing PMI rose back into expansionary territory, albeit only just, to 50.0 (prev. 49.8) against the expected 49.5. Services rose to 50.9 from 50.1, despite consensus for a decline to 49.9.

Macro events: Bank of Canada rate exp 5.0% vs. 5.0% last, Australian CPI (Q3) exp 5.3% YoY vs. 6.0% prior, German Ifo Survey (Oct) exp 86 vs. 85.7 prior

Earnings: Meta, Thermo Fisher Scientific, T-Mobile, IBM, Service Now, Boeing, China Unicom,

In the news:

• China to issue additional central government bonds to support disaster relief (Xinhua)
• China's Xi makes first known visit to central bank -sources (Reuters)
• China Growth May Fall to 2.9% If Property Crisis Widens, S&P Says (Bloo,mberg)
• China sacks missing defence chief Li Shangfu with no explanation (SCMP)
• Microsoft sales beat estimates as customers prepare for AI rollout (Reuters)
• Google-parent Alphabet's cloud division misses revenue estimates, as Microsoft’s cloud booms (Reuters)

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

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