Global Market Quick Take: Asia – October 17, 2023

US Equities: Wall Street ended the day higher as risk sentiment improved amid efforts from US and its allies to contain the spread of the Middle East conflict. The S&P 500 was up 1.1% while NASDAQ 100 rose 1.2% despite the higher Treasury yields. Most big tech rose, excluding Apple which was under pressure due to worries of weaker iPhone 15 sales in China. Lululemon rose 10% with its expected addition to S&P 500, replacing Activision Blizzard.

Fixed income: Treasuries were one-again in bear-steepening mode as the safe haven bid eased. Fed speak could continue to be a key driver this week before the blackout period ahead of the November FOMC meeting. 2-year yields were up 4.5bps while 10-year rose 9bps.

China/HK Equities: China and HK stocks remained in negative territory to start the week amid concerns from US expanding tech curbs. Both Hang Seng and CSI 300 dropped 1%. China’s the PBoC also left the 1-yr MLF rate on hold at 2.5%, in line with the consensus, likely setting up another month of no change for LPRs on Friday.

FX: The dollar was weaker on Monday as it reversed last week’s gains on hopes of a diplomatic push in the Middle East. NZDUSD reversed all of yesterday’s gain as Q3 CPI came in below expectations, and dropped back below 0.59 as we wrote in our FX note yesterday – test of YTD low at 0.5859 likely. AUDUSD traded above 0.6340 and EURUSD rose above 1.0550. USDJPY still stuck around 149.50 despite a jump higher in yields, with 150 serving as a clear intervention threat area.

Commodities: Oil prices dropped by over 1% as fears of an escalation in Israel conflict retreated. Report suggesting that the US may ease sanctions on Venezuela also underpinned. Gold eased slightly from highs of $1932.90 on Friday amid profit taking. Base metals, especially copper and iron ore, could be looking ahead to China’s data dump on Wednesday.

Macro:

• US Empire State manufacturing index fell less than expected in October to -4.6 from 1.9 prior and -6.0 expected. New orders and shipments dropped to -4.2 (prev. +5.1) and +1.4 (prev. +12.4), respectively.
• Fed’s Harker said a ‘resolute, but patient’ stance is appropriate, and that the Fed can hold rates steady absent a sharp turn in the data. Goolsbee told the FT that improving inflation was a trend not a blip.
• NZ CPI came below expectations. Q3 CPI came in at 5.6% YoY, down from 6.0% YoY prior and 5.9% expected. This was also lower than RBNZ’s projection of 6.0%. Falling inflation could provide comfort to RBNZ, and probability of another rate hike by the end of the year dropped from over 30% to 10%.

Macro events: RBA Minutes, German ZEW Survey (Oct), US Retail Sales (Sep) exp 0.3% MoM vs. 0.6% prior, Canada CPI (Sep) exp. 4.0% YoY vs. 4.0% prior

In the news:

• Diplomats renew calls for Gaza aid; Iran warns Israel (Reuters)
• Biden Set to Visit Israel Wednesday to Show Solidarity With Ally (Bloomberg)
• Country Garden Enters Final Hours to Avoid First Bond Default (Bloomberg)
• Ford chair warns extended strike will boost Tesla, Toyota and China (FT)
• Netflix may hike prices after success of password-sharing crackdown (Reuters)

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