Global Market Quick Take: Asia – May 20, 2024 Global Market Quick Take: Asia – May 20, 2024 Global Market Quick Take: Asia – May 20, 2024

Global Market Quick Take: Asia – May 20, 2024

Macro 6 minutes to read
APAC Research

Key points:

  • Equities: VIX tumbles below 12
  • FX: US dollar weakest in one month
  • Commodities: Silver breaks out key level $30
  • Fixed income: Treasury yield broadly gains
  • Economic data: China loan prime rates, Japan tertiary industry index

------------------------------------------------------------------ 

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

20 QT

Equities: Asian markets are poised for gains following a positive performance in US stocks, which reached new highs amid strong corporate earnings. Futures in Australia, Hong Kong, and China are up, though Japanese futures saw a slight dip. The S&P 500 and Dow Jones Industrial Average in the US continued their upward trajectory, with the Dow surpassing the 40,000 mark for the first time. On Friday, the S&P 500 Index saw a modest gain of 0.1%, with the majority of its major sectors advancing. Energy stocks led the increase, while notable rises in Alphabet Inc. and Amazon.com Inc. helped lift the benchmark index. Investors are closely monitoring China's efforts to support its troubled property sector, with some skepticism about the adequacy of these measures. There is also attention on potential trade tensions with Europe. The optimism in China's stock market has boosted the broader Asian region, with the MSCI Asia Pacific Index on a six-day winning streak. In the US, the VIX index fell to its lowest since November 2019, suggesting reduced market volatility and anticipation of potential rate cuts by the Federal Reserve.

FX: Last week, the U.S. dollar weakened by 0.7%, hitting its lowest point in over a month, as traders adjusted their expectations for a potential Federal Reserve interest rate cut as soon as September, following April's inflation data which showed a larger-than-anticipated easing. The New Zealand dollar, bolstered by persistent inflation concerns that dampen prospects for rate cuts, is poised for further gains and may approach its March peak. The kiwi recently hit a two-month high, reversing its downtrend from early 2024. Its rally could be reinforced if the Reserve Bank of New Zealand (RBNZ) challenges the market's expectations for a policy easing by year's end in its upcoming announcement. Despite traders pricing in potential RBNZ rate cuts totaling 47 basis points due to factors like weak employment data and falling business confidence, the currency's robust performance indicates a stronger economic sentiment.

Commodities: Silver and other metals experienced significant price increases, with silver jumping over 6% on Friday. The metal has surged by more than 25% this year, outperforming gold and ranking as one of the top-performing major commodities of the year.  The Bloomberg Commodity Index is heading towards its third consecutive monthly increase, a run that hasn't occurred since 2022 when core inflation rates were above 8%. The index has risen nearly 4% in May, setting it up for its strongest performance since July, and it is currently trending upwards past its 200-day moving average.

Oil prices maintained their weekly gains as attention turned to geopolitical tensions in Russia and the Middle East following recent attacks. Brent crude hovered near $84 a barrel after achieving its first weekly increase of the month, while West Texas Intermediate remained just under $80. Operations at a Russian refinery were suspended due to a Ukrainian drone strike, and a missile from Yemen's Houthi group struck a tanker en route to China in the Red Sea. Despite being up around 9% this year, partly thanks to OPEC+ supply reductions, oil prices have moderated since mid-April amid a de-escalation of geopolitical risks. Hedge funds have shown a growing bearish outlook, with money managers cutting their net long positions in Brent for a second consecutive week.

Fixed income: Treasury yields increased on Friday, but experienced an overall decline last week, with two-year Treasuries falling over 20 basis points from their April high. In early Monday trading, Australian 10-year yields also saw a rise. Despite these movements, Federal Reserve Governor Michelle Bowman indicated that cost pressures are likely to stay high for an extended period, although the expectation is for these pressures to ease eventually as interest rates are adjusted.

Ahead of a series of speeches from Federal Reserve officials, U.S. bond futures saw a slight uptick. U.S. 10-year futures inched higher by 1/32 to 109 7/32. Fed speakers, including Raphael Bostic, Christopher Waller, Philip Jefferson, Loretta Mester, and Michael Barr, are scheduled to address the public on Monday. Throughout the upcoming week, market participants will be closely monitoring key economic releases such as the May FOMC minutes, University of Michigan sentiment data, and durable goods orders to gauge the health of the U.S. economy and the potential direction of interest rates. Meanwhile, Japanese government bond (JGB) futures dipped in the last session of the previous week, closing down 16 ticks at 143.91, and Japan is set to auction inflation-linked bonds.

Macro:

  • The U.S. Leading Economic Index decreased by 0.6% in April to 101.8, reflecting a decline in consumer confidence, reduced new orders, a negative yield spread, and a drop in new building permits, indicating potential slowdown in economic growth.
  • In China, April Retail Sales increased by 2.3% compared to the consensus of 3.7%, while April Industrial Output rose by 6.7% year-on-year, surpassing the consensus of 5.5%. China's Jan-April Fixed Investment grew by 4.2% year-on-year, slightly below the consensus of 4.6%. Existing home prices in China fell by -0.94% MoM in April, resulting in a year-on-year decline of -6.79%, compared to -5.9% in March. New home prices also decreased by -0.58% MoM, leading to a year-on-year decline of -3.5%, down from -2.65% in March.

Macro events:  China loan prime rates, Hong Kong jobless rate, Japan tertiary industry index, Spain trade, Taiwan export orders, Thailand GDP

Earnings: Palo Alto Network, Zoom Video, XP Inc, Trip.com, Keysight, Li Auto, Sumitomo Mitsui Financial Group Inc, Mizuho Financial Group, Inc.

News:

  • Microsoft set to unveil its vision for AI PCs at Build developer conference (CNBC)
  • China pledges $42 billion in a slew of measures to support the property sector (CNBC)
  • Australia's Star Entertainment gets potential deal offers (Reuters)
  • US regulators reconsider capital hike for big banks, WSJ reports (Reuters)

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

For a global look at markets – go to Inspiration.

Disclaimer

The Saxo Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-hk/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo or its affiliates.

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK Limited (“Saxo”) is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo holds a Type 1 Regulated Activity (Dealing in Securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged Foreign Exchange Trading); Type 4 Regulated Activity (Advising on Securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products may result in your losses exceeding your initial deposits. Saxo does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo does not take into account an individual’s needs, objectives or financial situation. Please click here to view the relevant risk disclosure statements.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-hk/about-us/awards.

The information or the products and services referred to on this site may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and services offered on this website are not directed at, or intended for distribution to or use by, any person or entity residing in the United States and Japan. Please click here to view our full disclaimer.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc. Android is a trademark of Google Inc.