Global Market Quick Take: Asia – August 3, 2023

Global Market Quick Take: Asia – August 3, 2023

Macro 7 minutes to read
Charu Chanana

Chief Investment Strategist

Summary:  Risk off sentiment broadened after the Fitch downgrade, and higher Treasury yields from Treasury’s quarterly refunding and a hot ADP print brought stocks lower and VIX to early-June highs. Dollar was boosted with AUD and NZD leading the decline. Crude oil prices plummeted despite a large inventory draw. Focus today on BOE decision and Apple and Amazon earnings.


What’s happening in markets?

US equities (US500.I and USNAS100.I): VIX coming back to life

Equity markets plummeted on Wednesday, with NASDAQ 100 leading the losses as it was down 2.2%. S&P 500 was down 1.4% while DJIA was down close to 1%. Fitch’s downgrade of the US to AA+ from AAA, on worries about fiscal deterioration over the next three years. That led to a broader risk-off in markets, and a quarterly refunding as well as hot ADP data further led to a rise in Treasury yields which weighed on growth stocks. VIX returned back to early June highs of over 16. Earnings remained mixed with PayPal and Qualcomm down in post-market as focus turns to Apple and Amazon reporting today.

Hong Kong & Chinese equities (HK50.I & 02846:xhkg): HSI breaks below 20k

Hong Kong stocks closed down over 2% and CSI 300 was down 0.7% on Tuesday amid broader risk-off following the Fitch downgrade. Commerce and industry stocks led the decline after China’s Caixin manufacturing PMI dipped into contraction. Services and composite PMI prints will be in focus today.

FX: Risk-off sentiment boosts the dollar

After some setback in the dollar earlier on Wednesday, USD picked up later in the session amid higher 10-year Treasury yields and a blowout ADP report. AUDUSD extended its post-RBA slide lower to 0.6527, with May low of 0.6458 now in view. NZDUSD also remained under pressure after jobs data yesterday and printed a low of 0.6069 with the 0.60 handle on target. EURUSD still holding up above 100dma at 1.0917 while GBPUSD at 1.2714 may be exposed to more downside if BOE proves dovish today.

Crude oil: plummeted despite a large draw as sentiment weighed

Crude oil prices dropped amid a broader risk off tone across markets. This was despite a sharp drawdown in inventories as EIA stockpiles fell 17mn barrels last week, the largest drop on record. The drop was however a broader risk off tone across markets. This was despite a sharp drawdown in inventories. Focus however was on the broader macro concerns after Fitch’s downgrade of the US and Treasury funding which pushed US yields and USD higher.

 

What to consider?

Blowout US ADP jobs report may be a one-off

ADP’s data surprised to the upside, once again, reporting 324k private payrolls were added in July, blitzing through the consensus view of 189. June data was revised marginally lower to 455k from an initially stated 497k. The wages metrics also cooled sharply again, taking the annual rate for Job Stayers to 6.2% Y/Y (from 6.4%), and for Job Changers to 10.2% from 11.2%. Focus remains on NFP data due on Friday as ADP remains less reliable.

Brazil central bank cuts rates by 50bps

Brazil's central bank, Banco Central do Brasil or BCB, has cut its benchmark rate, Selic target rate, by 50bps. The consensus was for a 25bps cut. The Bank says that 25bps was considered but the improvement in inflation dynamics was enough for a 50-point move. The Bank also said that future rate cuts will likely be of the same magnitude. We have noted earlier that Chile’s 100bps rate cut was a start of the EM easing cycle, and with Brazil following up with a rate cut, it further reaffirms that more EM central banks may follow. Uncover the investment implications in this article.

Bank of England to announce rate decision today

Bank of England policy decision is due on Thursday and expectations are for another rate hike to bring interest rates to 5.25% from 5% and the possibility of a 50bps move has reduced with inflation on the downward trajectory after June CPI came in softer-than-expected albeit still high at 7.9% YoY. But risks remain that the central bank could follow through with another 50bps move as price pressures are proving to be persistent and sticky. The BOE will also publish new forecasts, and investors will be keen to watch whether recession calls return. Medium-term inflation forecasts will also be key as rates are expected to peak below 6% now. Read the full preview here.

Qualcomm earnings: extending slide on disappointing outlook

Qualcomm shares were down about 7% in choppy extended trading. EPS for fiscal third quarter came in at $1.87, better than the analyst estimate of $1.81. Revenue for the quarter missed expectations as it came in at $8.44B versus the consensus estimate of $8.51B. Guidance for Q4 was also conservative with revenue expectation at $8.10B-$8.90B versus the analyst consensus of $8.70B and EPS of $1.80-$2.00 expected versus the analyst consensus of $1.91. The company would likely cut jobs as consumer spending on gadgets like smartphones remained stubbornly weak amid slowing global economic growth.

PayPal earnings: down 7% in post-market on margin miss

PayPal posted revenue of $7.3 billion in the second quarter, compared with $6.8 billion last year, as total payment volume surged 11% in the second quarter to $376.5 billion, benefiting from resilient consumer spending trends. It earned $1.16 per share on an adjusted basis, in line with Wall Street expectations but adjusted operating margin for the quarter came in at 21.4%, missing its forecast of 22%. PayPal expects third-quarter revenue of about $7.4 billion, above analysts' estimates of $7.32 billion with adjusted profit per share for the current quarter to be in a range of $1.22 and $1.24, above analysts' estimates of $1.22.

Occidental earnings: higher full-year production forecast

Occidental missed Q2 profit expectations due to a slide in oil and gas prices and took a writedown to exit some operations. Adj EPS of $0.68 was below $0.71 expected, but it raised the year-end production target by 1% after production in the quarter rose 6% to 1.2 million barrels of oil equivalent per day (boepd), above the company's estimate in May. Warren Buffet holds Occidental, and the stock was down 2.3% post-market.

Singapore’s DBS Bank announces larger-than-expected dividend

Singapore's largest bank DBS Group posted 2Q total income S$5.05b beating estimate S$4.82b and net interest margin 2.16% (est 2.1%). Q2 net profit was up 48% and hit a quarterly record high S$2.69 billion compared to S$1.82 billion a year earlier. The board declared an interim dividend of S$0.48 (est S$0.42). The bank sees upside bias to NIM from current level and FY ROE above 17% with continued momentum expected in wealth management. OCBC Bank reports on Friday.

Apple and Amazon earnings due today

Big tech earnings season rolls forward with Apple and Amazon reporting after-market on Thursday. Apple’s big focus will remain on iPhone sales and targets, while VR headset and Chinese production bottlenecks will also be a focus. Amazon streaming and advertising growth could remain a key focus area, while the impact of cost-cutting on margins and the sustainability of the ecommerce business could also be key.

 

For a detailed look at what to watch in markets this week – read our Saxo Spotlight.

For a global look at markets – tune into our Podcast.

Quarterly Outlook

01 /

  • Equity outlook: The high cost of global fragmentation for US portfolios

    Quarterly Outlook

    Equity outlook: The high cost of global fragmentation for US portfolios

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: Commodities rally despite global uncertainty

    Quarterly Outlook

    Commodity Outlook: Commodities rally despite global uncertainty

    Ole Hansen

    Head of Commodity Strategy

  • Upending the global order at blinding speed

    Quarterly Outlook

    Upending the global order at blinding speed

    John J. Hardy

    Global Head of Macro Strategy

    We are witnessing a once-in-a-lifetime shredding of the global order. As the new order takes shape, ...
  • Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Quarterly Outlook

    Asset allocation outlook: From Magnificent 7 to Magnificent 2,645—diversification matters, now more than ever

    Jacob Falkencrone

    Global Head of Investment Strategy

  • Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    Quarterly Outlook

    Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?

    John J. Hardy

    Global Head of Macro Strategy

  • Equity Outlook: The ride just got rougher

    Quarterly Outlook

    Equity Outlook: The ride just got rougher

    Charu Chanana

    Chief Investment Strategist

  • China Outlook: The choice between retaliation or de-escalation

    Quarterly Outlook

    China Outlook: The choice between retaliation or de-escalation

    Charu Chanana

    Chief Investment Strategist

  • Commodity Outlook: A bumpy road ahead calls for diversification

    Quarterly Outlook

    Commodity Outlook: A bumpy road ahead calls for diversification

    Ole Hansen

    Head of Commodity Strategy

  • FX outlook: Tariffs drive USD strength, until...?

    Quarterly Outlook

    FX outlook: Tariffs drive USD strength, until...?

    John J. Hardy

    Global Head of Macro Strategy

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

None of the information provided on this website constitutes an offer, solicitation, or endorsement to buy or sell any financial instrument, nor is it financial, investment, or trading advice. Saxo Capital Markets UK Ltd. (Saxo) and the Saxo Bank Group provides execution-only services, with all trades and investments based on self-directed decisions. Analysis, research, and educational content is for informational purposes only and should not be considered advice nor a recommendation. Access and use of this website is subject to: (i) the Terms of Use; (ii) the full Disclaimer; (iii) the Risk Warning; and (iv) any other notice or terms applying to Saxo’s news and research.

Saxo’s content may reflect the personal views of the author, which are subject to change without notice. Mentions of specific financial products are for illustrative purposes only and may serve to clarify financial literacy topics. Content classified as investment research is marketing material and does not meet legal requirements for independent research.

Before making any investment decisions, you should assess your own financial situation, needs, and objectives, and consider seeking independent professional advice. Saxo does not guarantee the accuracy or completeness of any information provided and assumes no liability for any errors, omissions, losses, or damages resulting from the use of this information.

Please refer to our full disclaimer for more details.

Saxo
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo is a registered Trading Name of Saxo Capital Markets UK Ltd (‘Saxo’). Saxo is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871. Registered in England & Wales.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.

©   since 1992