Global Market Quick Take: Asia – December 18, 2023 Global Market Quick Take: Asia – December 18, 2023 Global Market Quick Take: Asia – December 18, 2023

Global Market Quick Take: Asia – December 18, 2023

Macro 5 minutes to read
APAC Research

Summary:  The rally in equities and bonds faded on Friday amid a pushback to Powell pivot from some Fed members including Williams. PMIs also continued to highlight a divergence in US and Eurozone economies, pushing EUR back to 1.09 as dollar recovered slightly. German Ifo will be in focus today. Hang Seng rose over 2% on China easing property curbs, although commodities came under some pressure but Gold still holding up above $2k.


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

US Equities: The Nasdaq gained 0.5% to close at 16,623, marking an all-time high, while the S&P500 was nearly flat. Costco surged 4.5% after reporting earnings beating estimates and announcing a special dividend. Intel added 2.2% after announcing new microchips for PCs and data centres.

Fixed income: The 2-year Treasury yield rose 6bps to 4.44% after Fed officials pushed back on discussion of imminent rate cuts. However, yields at the long end of the curve continued to decline, with the 10-year yield falling 1bp to 3.91% and the 30-year yield down 3bps to 4.01%.

China/HK Equities: The Hang Seng Index surged 2.4% to 16,792 last Friday after Shanghai and Beijing eased down payment requirements, mortgage rate floors and some other rules for home purchases. CR Land and Longfor gained around 6%. JD.COM surged 7%. China’s activity data was mixed in November with industrial production improving more than expected but retail sales and fixed asset investment disappointed. The rally waned somewhat in the afternoon amid chatters speculating that the recent Central Economic Work Conference had set the fiscal deficit target for 2024 at 3%, lower than market’s anticipation. The CSI 300 pared all the gains in the morning to close 0.3% lower.

FX: Another down-week for the US dollar as Fed Chair Powell adopted a dovish tone but other major central banks such as ECB and BOE stuck a relatively hawkish tone, although trends reversed slightly on Friday amid some pushback from Fed officials. A surprise rate hike from Norges Bank pushed NOK to be the outperformer on the G10 board. USDNOK moved below 10.50 for the first time in four months. BOJ comes next, and USDJPY traded flat around 142 with risk of a pushback on hawkish expectations likely to threaten a move back towards 145. EURUSD returned to sub-1.09 levels after failing at the 1.10 resistance and 200DMA at 1.0830 may be a key test, watch German Ifo due for a release today. GBPUSD was also back at sub-1.27 levels although AUDUSD held on the 0.67 handle.

Commodities: Dollar gains on Friday amid the Fed members’ pushback to the Powell pivot weighed on the commodity complex. Oil prices however closed higher for the week for the first time in 8 weeks amid risk on following the dovish FOMC and attacks on ships in the Red Sea. Gold also pared some gains on Friday but ended the week higher and continues to hold up above $2k begging the question whether a Santa rally could come. Copper remains in focus amid supply concerns and China easing property curbs, and China’s LPR announcement will be key this week.

Macro:

  • Fed’s Williams pushed back on the Powell pivot by saying that "we aren't really talking about rate cuts right now”, a clear divergence from Powell’s comment at the FOMC press conference last week when he said that the committee had discussed rate cuts. Later in the day, Fed's Bostic also came out considerably less dovish, suggesting just two rate-cuts in 2024, and likely after Q3. Fed's Goolsbee was dovish, but also less so than the market and the dots, saying that he expects rates to be lower next year than they are right now, but not significantly. Probability of a Q1 rate cut decline from 90% to less than 80%.
  • US flash PMIs for December showed that the economy picked up some momentum as looser financial conditions helped to boost demand, business activity and employment in the services sector. The improvement in services PMI to 51.3 from 50.8 previously offset the increasing weakness in manufacturing with its PMI coming in lower at 48.2 from 49.4. Composite PMI therefore increased slightly to 51.0 from 50.7.
  • Eurozone PMIs however escalated recession concerns. The composite flash PMI fell by 0.6pt to 47.0 in December with the manufacturing falling (by 0.5pt) to 44.1, and the services activity index falling (by 0.7pt) to 48.1. UK growth momentum however continued to pick up, particularly with services PMI expanding to 52.7 from 50.9 even as manufacturing cooled to 46.4 from 47.2.
  • In November, China’s industrial production grew 6.6% Y/Y, higher than October’s 4.6% and median projection of 5.7%. The improvement was broad-based as outputs in manufacturing, mining, and utility sectors accelerated to 6.7%, 3.9%, and 9.9% Y/Y from prior month’s 5.1%, 2.9% and 1.5% respectively. However, the strength can be attributed to a low base last year when many large cities were locked down. Retail sales growth accelerated to 10.1% Y/Y in November from 7.6% in October, again helped by a low base. The increase however was below the median forecast of 12.5%. The growth in fixed asset investment came in at 2.9% Y/Y in November, higher than the prior month’s 1.3% but below the median forecast of 4.1%. Property investment contracted 10.8% Y/Y in November while infrastructure investment grew 5.4% Y/Y and manufacturing investment grew 7.1% Y/Y.
  • Secondary home prices fell month-on-month in all the 70 largest Chinese cities while new home prices declined month-on-month in 59 of these cities.

Macro events: Fed’s Goolsbee, German Ifo, ECB’s Lane & Schnabel.

In the news:

  • Costco Earnings Beat Estimates, Company Announces Special Dividend (WSJ)
  • Tang Xiao’ou, the CUHK professor and founder of the artificial intelligence giant SenseTime, dies at age 55 (SCMP)
  • HKEX names Bonnie Chan as its first woman chief executive, succeeding Nicolas Aguzin as head of Asia’s third-largest stock market (SCMP)

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

For a global look at markets – go to Inspiration.

Disclaimer

The Saxo Bank 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 Bank 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 Bank 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 Bank 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 Bank 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 Bank 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/legal/disclaimer/saxo-disclaimer)
- Full disclaimer (https://www.home.saxo/en-mena/legal/disclaimer/saxo-disclaimer)


Boulevard Plaza, Tower 1, 30th floor, office 3002
Downtown, P.O. Box 33641 Dubai, UAE

Contact Saxo

Select region

UAE
UAE

Trade responsibly
All trading carries risk. Read more. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more

Saxo Bank A/S is licensed by the Danish Financial Supervisory Authority and operates in the UAE under a representative office license issued by the Central bank of the UAE.

The content and material made available on this website and the linked sites are provided by Saxo Bank A/S. It is the sole responsibility of the recipient to ascertain the terms of and comply with any local laws or regulation to which they are subject.

The UAE Representative Office of Saxo Bank A/S markets the Saxo Bank A/S trading platform and the products offered by Saxo Bank A/S.