Global Market Quick Take: Asia – September 27, 2023

US Equities: The S&P 500 and Nasdaq 100 tumbled by 1.5% due to softer readings on new home sales and the Conference Board consumer confidence survey, triggering selling in consumer discretionary and information technology. Amazon, impacted by news of an antitrust lawsuit, plummeted by 4%. Elevated bond yields also continued to weigh on market sentiment.

Fixed income: Treasury yields continued to hover at elevated levels, with the 30-year yield edging up by 2bps to 4.68%, while the 2-year and 10-year yields held steady at 5.12% and 4.54%, respectively. The selling pressure was particularly concentrated in the longer end of the curve as the high yield levels attracted strong demand in the 2-year auction.

China/HK Equities: The Hang Seng Index and CSI300 sank once again. The news that Hengda Real Estate Group, the mainland unit of China Evergrande, failed to make payments of RMB4 billion in principal and interest due yesterday further dampened market sentiment. The Hang Seng Index plummeted 1.5% to 17,467, marking a new low in 2023. The CSI300 slid 0.6%.

FX: The DXY dollar index broke higher to fresh YTD highs, having taken out the 105.80 resistance, as high-end Treasury yields continued to rise. Data remained soft, helping keep the short-end yields capped but Fed member Kashkari, who is usually a dove, noting he puts a 40% probability on a scenario where Fed will have to raise rates significantly higher to beat inflation and a 60% probability of a soft landing. USDCAD rose to 1.3520 while GBPUSD slid below 1.2150 and next target at 1.20. EURUSD plunged further to lows of 1.0562 while USDJPY is hovering close to the 150-mark and verbal jawboning continues to have little effect.

Commodities: The message on higher-for-longer was felt in the crude market as oil prices dipped earlier in the session with WTI falling to lows of ~$88/barrel and Brent going below $92. API inventory data also showed a crude build of 1.586 million barrels last week vs. expectations of a 1.65 million drop, but oil prices recovered later. Gold tests $1900 amid yield surge and Copper down to fresh 4-month lows at $3.62.

Macro:

• US consumer confidence fell for a second consecutive month to 103.0 from 108.7 (upwardly revised from 106.1) and beneath the expected 105.5. Present Situation Index marginally rose to 147.1 (prev. 146.7), while the Expectations Index declined further to 73.7 (prev. 83.3), falling back below 80 - the level that historically signals a recession within the next year. Inflation expectations for the 12 months ahead were unchanged at 5.7% in September.
• New home sales in the US fell 8.7% to 675k from 739k (upwardly revised from 714k), shy of the consensus 700k.
• Fed's Kashkari has published an essay where he says there is a 60% chance of a soft landing with a 40% chance the Fed will have to hike 'significantly higher'.

Macro events:  BoJ Minutes (Jul), US Durable Goods (Aug)

In the news:

• FTC Sues Amazon, Alleging Illegal Online-Marketplace Monopoly (WSJ)
• Foreign brands including Tesla to face scrutiny as part of EU probe into China car subsidies (FT)
• Senate leaders agree on a short-term spending bill, aiming to avert a shutdown, extending government funding until November 17, pending House approval (CNN).

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