Global Market Quick Take: Asia – September 12, 2023

US Equities: Tesla surged 10.2% after a major US investment bank upgrading the stock, assigning an additional USD500 billon to the valuation for a supercomputer that Tesla is developing. Meta gained 3.3% on news that the company is developing a powerful AI system (WSJ). The Nasdaq 100 added 1.2% to 15,461 while the S&P 500 climbed 0.7% to 4,487.

Fixed income: The 3-year auction tailed by 1bp (i.e. awarded yield 1bp higher than the level at the auction deadline) and kept traders cautious ahead upcoming hefty supply in 10 and 30-year auctions and corporate issuance and CPI data on Wednesday. The 2-year ended unchanged while the 10-year closed at 4.29%, 2bps cheaper from Friday.

China/HK Equities: The Hang Seng Index pared much of the sharp loss in the morning and recovered to end the day 0.6% lower at 18,096. The initial nearly 2% decline was driven by an earnings miss by Sun Hung Kai Properties and departure of the head of the cloud division and former CEO Daniel Zhang from Alibaba. The stronger-than-expected bounce in China’s loans and aggregate social financing data, released during the lunch break, triggered a sharp recovery. Southbound flows however registered a large net sale of HKD10.3 billion by mainland investors. In A-shares, the CSI300 added 0.7%.

FX: The retreat of the US dollar brought strong gains across the G10 board, led by AUD and JPY.

• AUDUSD broke above 0.64 to highs of 0.6449 before settling around 0.6430, while Japanese yen saw strong gains on the back of weekend Ueda comments that brought forward expectations of policy normalization.
• USDJPY dropped to lows of 145.91, coinciding with fresh recent peaks in JGB yields, before a rebound back to 146.50+ levels as US CPI is awaited.
• Yuan also strengthened with USDCNH taking a look below 7.30 from highs of 7.36 amid verbal warnings from authorities, better-than-expected credit data as well as the continued appreciation bias in PBoC’s daily fixings.

Commodities:

• Crude oil held onto its gains near the recent highs with Brent still close to $90/barrel despite a small sell-off in Monday’s session. However, Monday’s price action came despite a weaker USD. With focus still on supply tightness concerns, today’s OPEC and EIA monthly reports will be on watch.
• Strong performance in metals led by iron ore up 3.5% and copper up close to 2.5% with China credit data boosting sentiment and a strong move in the yuan as well.
• Gold finding is hard to clear $1930 hurdle and the move in yields remains key with hefty corporate supply and US CPI ahead.

Macro:

• China’s new Yuan loans in August surged more than expected to RMB 1,360 billion. This increase is attributed to greater regulatory encouragement for banks to lend and favorable seasonal factors. This, together with the front-loading of local government bond issuance, brought aggregate social financing to RMB 3,120 billion in August, up from July's RMB 528.5 billion.
• US NY Fed inflation expectations rose higher for one-year to 3.6% from 3.5%, while the long-term five-year also rose 0.1ppt to 3.0% from 2.9%. However, the three-year expectations dipped to 3.8% from 3.9%.

Macro events: US NFIB small business survey (Aug), US 10-year T-note auction ($35 billion), UK payrolls (Aug), Germany ZEW survey (Sep)

Company Events: Apple's iPhone 15 launch

In the news:

• China’s PBoC asks banks to get approval for dollar purchases over USD50 million (Reuters)
• EU Commission cuts euro zone growth forecast as Germany in recession (Reuters)
• Representatives from eight core member institutions of the China National Forex Market Self-regulatory Mechanism met on Monday to discuss about maintaining the stability of the renminbi (Xinhua).
• Strong demand pushes Arm to close IPO order book early (FT)
• Qualcomm strikes new Apple deal on 5G chips (FT)
• US and Vietnam unveil billions in semiconductor and AI deals (FT)

Earnings events: Oracle plunged 9% in extended-hour trading after reporting slower growth in cloud sales (Bloomberg).

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