Global Market Quick Take: Asia – November 17, 2023

US Equities: In a mixed session, the S&P500 and the Nasdaq 100 edged up 0.1%, while the Russell 2000 Index tumbled 1.5%. Information technology and communication services stocks gained, but energy and consumer names declined. Intel surged 6.8% on an analyst upgrade due to strong server product pipelines. Cisco plunged 9.8%, and Walmart dropped by 8.1% after reporting earnings with downbeat guidance. Oilfield services, oil and gas exploration and production, as well as downstream energy, experienced declines.

Fixed income: Treasuries rallied in response to larger-than-expected initial and continuous jobless claims, with the latter reaching its highest level in two years. Additionally, a worse-than-expected contraction in industrial production and tumbling oil prices added fuel to the advance in Treasury prices and declines in yields. The 2-year and 10-year yields dropped by 7 basis points to 4.84% and by 10 basis points to 4.44%, respectively. The Treasury announced a $16 billion 20-year bond auction for Monday and a $15 billion 10-year TIPS for Tuesday.

China/HK Equities: The Hang Seng Index dropped by 1.4%, and the CSI300 slid 1% amid a faster decline in new and existing home prices in China in October, with investors digesting earlier news that the USD 771 billion US Federal Retirement Thrift Investment Board decided to exclude China- and Hong Kong-listed stocks. Furthermore, Presidents Xi and Biden held a 4-hour meeting but did not resolve any of the pressing economic and technological frictions. Technology hardware, healthcare, and EV stocks dragged. Meanwhile, Tencent edged up 0.7%, and JD.COM gained 2% following reporting solid Q3 results. After the Hong Kong market closed, Alibaba reported broadly in-line quarterly results, but its ADS sold off by 9.2% (5.2% below Hong Kong close) on the announced share disposal plan by Jack Ma’s family trust, scrapping the Cloud spinoff, and weak Cloud revenue growth. Hang Seng Index futures extended losses by 1.5% overnight.

FX: The US dollar steadied on Thursday despite dovish tilt in US data but the softer Treasury yields brought USDJPY 1 big figure lower to 150.40 and settled around 150.70. EURUSD rose to attempt a break of 1.09 but slumped back to 1.0850-levels. AUDUSD broke back below 0.65 on higher unemployment rate suggesting some cracks in the labor market, but 0.6460 support held up. AUDNZD moved back towards 1.0850. GBPUSD still around 1.24 while NOK underperformed amid a sharp slide in oil prices. EURNOK moved above 11.85.

Commodities: Crude oil was dumped again, falling close to 5% with Brent reaching $77 without any clear data driving it. The $75 oil has previously sparked a response from OPEC, and the cartel meets on November 26, when they will consider how to respond to weakening oil prices and concerns that a potential stumble in global growth could hold back demand. Gold surged to two-week highs of $1985+ as US jobless claims pointed towards weakening labor market further reinforcing that the rate hike cycle has ended.

Macro:

• Prices of new homes in 70 Chinese cities fell by 0.38% M/M in October, exceeding the 0.30% decline in September and marking the most significant drop since February 2015. In October, 56 out of the 70 cities witnessed a decrease in new home prices. Similarly, existing home prices experienced a faster decline of 0.58% in October, compared to the -0.48% decline in September. Last month, 67 out of the 70 cities monitored reported a decline in existing home prices.
• US initial jobless claims were 231k vs. 220k expected and 218k previously (and highest in 12 weeks). Continuing claims 1,865k vs. 1,843k expected and 1,833k previously. Overall the data is consistent with some softening in labour market conditions.
• Cleveland Fed President Mester (2024 voter, hawkish), in a CNBC interview, said policy is in a good and balanced place, saying she hasn't decided whether a further rate hike is needed. When asked if she would pencil in another hike in the December 'Dot Plot', said she doesn't know yet. Governor Cook (voter) believes that a soft landing is possible, noting that risks are two-sided and the Fed must balance the risk of not tightening policy enough against risk of doing too much.
• Australia’s jobs surged in October by 55k vs. 7.8k in September and 24k expected. The unemployment rate rose to 3.7% from 3.6% due to higher participation.

Macro events: UK Retail Sales, EZ CPI (Final), US Housing Starts

Earnings:

• Walmart reported adjusted EPS of $1.53, a 0.8% increase from a year ago, surpassing the median forecast by 1%. Revenue increased by 5.2% Y/Y to $160.8 billion, exceeding the consensus estimate by about 1%. Same-store sales grew by 4.9% Y/Y, above the consensus of 3.2%. However, the grocery giant fell 8.1% after its CFO informed analysts that there was a sharper falloff in sales during the last two weeks of October.

   

• Alibaba reported FY24Q2 revenue of RMB 224.8 billion, a 9% Y/Y increase, in line with consensus estimates. However, Taobao and Tmall group gross merchandise value (GMV) contracted by 2% Y/Y, and customer management revenue (CMR) increased by only 3% Y/Y, below the consensus forecast of 4%. Non-GAAP net income of RMB 40.2 billion, a 19% Y/Y rise, and non-GAAP EPS of RMB 15.63, a 21% Y/Y increase, were both broadly in line with consensus estimates. Nevertheless, investors were disappointed with the announced plan of Jack Ma’s family trust to dispose of 10 million American Depository Shares (ADS). One ADS represents eight ordinary shares. Additionally, concerns arose about the abrupt termination of the full spinoff plan of the Cloud Intelligence Group. Alibaba stated, "the recent expansion of U.S. restrictions on [the] export of advanced computing chips has created uncertainties for the prospects of Cloud Intelligence Group." Furthermore, the slower-than-expected 2% Y/Y increase in Cloud revenue adds to investors’ scepticism.

In the news:

• Biden vows not to decouple from China while deepening Indo-Pacific ties (Nikkei Asia)
• U.S. Executives Get No Reassurance From Xi on Tougher China Business Environment (WSJ)
• Finland to close four Russia border crossings to stop asylum seekers (Reuters)
• Intel jumps to 17-month high after Mizuho analyst upgrade (Reuters)
• Alibaba scraps cloud business spin-off citing US chip export ban (Reuters)
• Apple Plans to Make It Easier to Text Between iPhones and Androids (Bloomberg)
• Walmart tumbles 8% on cautious holiday outlook for consumer spending (FT)
• Spain PM Sánchez wins second term as amnesty uproar grows (FT)

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

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