Global Market Quick Take: Asia – October 6, 2023
APAC Strategy Team
Summary: The S&P 500 ended slightly lower at 4,258, while calm returned to the Treasury market and crude oil prices continued to decline. Brent crude dropped below $85 per barrel, its lowest since August. The focus shifted to the US employment report and the upcoming earnings season. The 5-30-year yield curve steepened, suggesting that the recent long-end Treasury sell-off is driven by increased demand for term premiums rather than intensification of the expectation of “higher for longer” Fed policy. The US dollar weakened as Treasury yields stabilised ahead of the US jobs report, with non-farm payrolls expected at 170k compared to the previous 187k.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The S&P 500 hovered above its 200-day moving average, ending the session 0.1% lower at 4,258. The Nasdaq 100 slid 0.4% to 14,723. The return of calm in the Treasury market and the continuous decline in crude oil prices helped. Meanwhile, the focus is on today's employment report and the start of the earnings reporting season next week.
Fixed income: Calm returned to the Treasury market, with the 10-year yield trading in its narrowest range in more than two weeks to finish the session 1bp lower at s4.72%. There was mixed performance across the curve, with the 5-year yield dropping the most by 4bps, and the 30-year yield rising the most by 3bps, bringing the 5-30-year yield curve steepened by 7bps to 20bps. The steepening of the 5-30-year part of the curve lends credence to the notion that the sell-off in the long end of the Treasury curve is more related to an increase in the demand for term premium rather than any rise in expectations of a "higher for longer" Fed policy, which should hit the 5-year segment more. For today, the focus is on the employment report.
China/HK Equities: The Hang Seng Index pared nearly all the gains from the morning session rally to finish 0.1% higher at 17,214. Sunac received approval from a court in Hong Kong for its debt restructuring plan, becoming the first major Chinese developer to secure court approval. This news lifted the share prices of other Chinese developers. Beer stocks had a notable performance due to headlines about beer consumption in the mainland during the Golden Week.
FX: Broad-based weakness in the US dollar as Treasury yields retreated further in the wait for US jobs report due today. NZD was the top performer, with NZDUSD heading above the 50DMA to 0.5970. AUDUSD also pushed higher, but unable to break above 0.6360 for now. Oil price declines put pressure on CAD and NOK, sending NZDCAD and NZDNOK surging as noted in yesterday’s FX note. EURUSD attempting a push above 1.0550 while USDJPY stays near 148.40.
Commodities: Oil prices extended their decline with Brent also below $85/barrel now and the lowest since end-August. There were no fresh catalysts for the move, expect demand concerns starting to be a big focus going into Q4. Gold is finding some stability in the $1820-area and US jobs report and its reaction on bond yields could be key. Wheat futures extended gains from last week’s low with export demand underpinning.
Macro: Fed’s Daly (2024 voter) showed increasing confidence in the lack of need for further hikes, citing the recent backup higher in yields (tightening financial conditions) removing the need to do more on hikes. Initial jobless claims data rose marginally to 207k from 205k in the week ending September 30th, beneath the expectations of 210k. Focus now shifts to September NFP report due today.
Macro events: US Jobs Report (Sep) exp 170k vs. 187k prior – read full preview here; Canadian Jobs Report (Sep) exp 20k vs. 39.9k prior
In the news:
- UK to examine Amazon and Microsoft's cloud dominance (Reuters)
- GM Has at Least 20 Million Vehicles With Potentially Dangerous Air-Bag Parts (WSJ)
- Levi Strauss cuts annual forecasts as promotions, wholesale weakness weigh (Reuters)
- Trump Considers Meeting With Republicans on House Speaker Vote (Bloomberg)
- JPMorgan steps up securitisation effort ahead of new US capital rules (FT)
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.
Latest Market Insights
Outrageous Predictions 2024
The end of the road
The end of the road
World hit by major health crisis as obesity drugs make people stop exercising
As the world embraces GLP-1 obesity wonder drugs, the people next in line to get a prescription stop caring about dieting and exercising, figuring that the drug will later solve all of their weight-related health problems.
The end of capitalism in the USA
With the US budget deficit spiraling above 10% of the GDP, the government is desperate to foster demand for US Treasuries. Under intense pressure from the White House, Congress makes income from government bonds tax-free.
Generative AI deepfake triggers a national security crisis
After a criminal group deploys the most deceptive AI deepfake ever seen, generative AI becomes a national security threat. With public distrust soaring, governments crack down with harsh new laws, puncturing the AI hype.
Deficit countries form ‘Rome Club’ to negotiate trade terms
To fix the divergence in the global trade and financial system, the largest deficit countries unite to negotiate new world trade terms. For surplus countries, the reset of the global economic model is a painful adjustment.
Robert F. Kennedy Jr wins the 2024 US presidential election
As discontent with Biden and Trump rises to fever pitch, Robert F. Kennedy Jr sees his support rising inexorably in the polls. On November 5, Kennedy wins the US presidential election, ushering in a new era in US politics.
Japan’s ‘lucky 7%’ GDP growth rate forces BoJ to abandon yield curve control
Stepping up Japan's economic transformation in 2024, PM Kishida brings in a host of populist policies to boost domestic demand. As the GDP growth rate hits 7%, the BoJ is forced to abandons its yield curve control policy.
Luxury demand plunges as EU goes Robin Hood, introducing wealth tax
As people wake up to how little tax Europe’s billionaires are actually paying, the EU Commission implements a wealth tax of 2%. The tax sends shockwaves through Europe's luxury industry, with luxury giant LVMH plunging 40%.