Global Market Quick Take: Asia – November 6, 2023 Global Market Quick Take: Asia – November 6, 2023 Global Market Quick Take: Asia – November 6, 2023

Global Market Quick Take: Asia – November 6, 2023

Macro 5 minutes to read
APAC Research

Summary:  US jobs numbers missed expectations, adding weight to the view that the Fed’s tightening cycle is over. Equities and bonds rallied as a result, while the dollar was sold off. AUDUSD rallied above 0.65 and stakes are high with RBA meeting tomorrow. China authorities announced measures to expand access to markets and also boost imports. Oil closed down about 5% last week while Fed’s pause brought Copper to close 1% higher.


The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

US Equities: A total of 405 companies, representing approximately 80% of the total market capitalization of the S&P 500, have reported quarterly results and a higher-than-average number of these companies have significantly exceeded estimates. This, in combination with the dovish signals from the FOMC last Wednesday and softer-than-expected figures in nonfarm payrolls and the unemployment rate, led to the S&P 500's best weekly performance in 2023. On Friday, it rose by 0.9%, concluding a five-day streak of gains that totalled 5.9% for the week. The Nasdaq 100 added 1.2% on Friday, ending the week 6.5% higher. The VIX continued to decline, reaching 14.9, down from 15.7 the day before and 21.3 a week ago. With a light earnings and economic calendar, the risk-on sentiment may propel the stocks to continue to advance. The Senior Loan Officer Opinion Survey is scheduled to release on Monday, but the FOMC members have already viewed it when they met last Wednesday.

Fixed income: The US Treasury yield curve bull-steepened following a weaker employment report, with the 2-year yield dropping by 15bps to 4.84%, while the 10-year yield slid by 9bps to 4.57%. The 30-year yield, which dipped as low as 4.67%, subsequently reversed and retraced most of the movement to settle at 4.77%, only 3bps lower than the previous close. The market is now nearly pricing in the idea that the Fed has finished raising rates, and what may follow are 100bp cuts in 2024, starting from June. We maintain the view that the Fed has completed its rate hikes, and the yield curve will continue to steepen.

China/HK Equities: The Hang Seng Index rallied by 2.5% following the post-FOMC strength in US equities. Apple's downbeat sales outlook in China and a smaller-than-anticipated rise in the Caixin China PMI Services print for October did not prevent the Hang Seng from experiencing its best one-day rise in over three months. Auto, sportswear, insurance, healthcare, and TMT hardware stocks outperformed. Kuaishou, with a surge of 5.8%, and Tencent, with a gain of 4.9%, were the top performers among Internet companies. In A-shares, the CSI300 gained 0.8%, led by robotics and semiconductors. China's Ministry of State Security alleged in an online article that some countries and individuals attempted to destabilize the confidence of international communities in investing in China.

FX: The miss in NFP and downward revision in last two months of data has raised the talk of the Fed being done. This saw the US dollar extending its slide to over 1-month lows, and Dollar Index tested the 105 support. NZDUSD climbed higher to test the 0.60 resistance and AUDUSD rose above 0.65 with RBA rate hike still in play for tomorrow. EURUSD surged above 1.07 as Lagarde said the ECB is determined to bring EU inflation down, adding that she was not worried about political backlash. USDJPY slid below 149.50.

Commodities: Oil prices fell a further 2% on Friday, closing the week down around 5% as geopolitical risk premium dissipated. Hezbollah's leader said the group doesn't plan on conducting a large-scale attack now, despite warnings for the future. This took the focus away from fundamentals where Russia announced it expects its crude oil and petroleum exports to be down by more than 300k BPD in November vs the avg. May-June level as it continues to participate fully in voluntary OPEC+ cuts and a softer US jobs report added weight to the view that the Fed may be done tightening. But China activity data remained mixed and US oil stockpiles have risen over the past two weeks. Meanwhile, prospect of an end to tighter monetary policies helped boost sentiment across the industrial metals complex with Copper up 1% last week.

Macro:

  • US non-farm payrolls missed expectations. Headline rose 150k (prev. 297k revised down from 336k) shy of the expected 180k. Meanwhile the unemployment rate ticked higher to 3.9% (prev. & exp. 3.8%) and wages rose 0.2% M/M (prev. & exp. 0.3%) and 4.1% Y/Y (prev. 4.3%, exp. 4.0%).
  • China’s Caixin services PMI for Oct came in at 50.4, edging up from 50.2 in Sept but below the median forecast of 51.0.
  • US ISM services fell to 51.8 from 53.6, and beneath the expected 53.0. Business activity and employment dropped to 54.1 from 58.8 and 50.2 from 53.4, respectively, while new orders jumped to 55.5 from 51.8 and prices paid moved marginally lower to 58.6 from 58.9.

Macro events: US Senior Loan Officer Opinion Survey, BoJ Minutes (Sep), German Industrial Orders (Sep), EZ Final Services PMIs (Oct)

Earnings: ITOCHU Corp, Vertex Pharmaceuticals

In the news:

  • Warren Buffett’s Berkshire Hathaway ended the third quarter with a record cash pile and reported a deeper net loss due to the sputtering stock market rally (WSJ)
  • China’s Li Vows to Boost Imports, Expand Market Access (Bloomberg)
  • Shipping giant A.P. Moller-Maersk is battling choppier seas, revealing a 94% profit plunge in the third quarter (Reuters).
  • DBS Q3 profit rises 16% to S$2.59 billion; declares S$0.48 per share dividend (Business Times)
  • South Korea to Ban Short-Selling of Stocks Until June 2024 (Bloomberg)
  • Chinese companies account for 6 of top 10 in cybersecurity patents while IBM remains No. 1 (Nikkei)
  • Meituan and eight other companies’ AI Large Language Models (LLMs) got approval from the Chinese regulators to go public (TMTPost)

 

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