Summary: US equities halted the recent run lower with strong earnings and guidance from Coca-Cola, 3M and GE while Treasury yields also steadied after Monday’s moves. European PMIs underperformed US, bringing the dollar higher once again but AUD was the outperformer on hawkish comments from RBA Governor Bullock. Microsoft earnings brought AI enthusiasm again while Alphabet disappointed and focus turns to Meta today.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
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:
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:
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