Global Market Quick Take: Asia – December 7, 2023

US Equities: A 4% decline in crude oil asserted pressure on energy stocks and saw the S&P Energy sub-index drop by 1.6% while lifting the share prices of airlines and cruise operators. The extension of the decline in long-term Treasury yields boosted homebuilders. On the other hand, mega-cap technology stocks showed weakness, with Nvidia falling 2.3% and Amazon sliding 1.6%. The S&P500 finished the session 0.4% lower at 4,549 and the Nasdaq 100 fell 0.6% to 15,788.

Fixed income: The 10-year Treasury yield fell 6bps to 4.10%, marking the lowest level since August. This decline was attributed to a weaker-than-expected ADP employment report, a downward revision in Q3 unit labor costs, and a sharp drop in crude oil prices. Meanwhile, the 2-year yield ticked higher by 2bps to 4.59%, resulting in an 8bps flatter 2-10-year yield curve, now at -49.

China/HK Equities: The Hang Seng Index paused its recent decline, bouncing 0.8%, driven by technology hardware, Hong Kong conglomerates and property developers, and Chinese consumer discretionary. Lenovo surged 10% following an analyst raising price target amid an improved PC outlook. Swire Pacific jumped 17.2% after unveiling buyback plans. The CSI300 edged up 0.2%.

FX: The dollar held its ground despite the sharp fall in the 10-year Treasury yield as yields in other G10 bonds declined as well. USDJPY is nearly unchanged at 147.10 and EURUSD was 0.3% lower at 1.7770. The Norwegian Krone, NOK underperformed as crude oil prices plummeted.

Commodities: WTI crude oil tumbled 4.3% to $69.50, its lowest level since June due to concerns about the large supply from US producers and scepticism over OPEC+ members’ resolve to deliver on production cuts. Brent crude fell 3.9% to $74.30. Gold ticked higher by 0.4% to $2,027.

Macro:

• The US ADP employment report was softer than expected, with a job gain of 103k in November (consensus 130k) and a downward revision to 106k from the previously reported 113k in October. Job gains were mainly in trade and transportation industries and education and health services. Employment in manufacturing fell by 15k.
• US Q3 unit labor costs were revised down to a large decline of -1.2% Q/Q annualized from previously reported -0.8%. Nonfarm productivity was revised up to 5.2% Q/Q annualized from 4.7%.
• Bank of Canada, as the market expected, kept its target for the policy overnight rate unchanged at 5% and guidance little changed.
• Moody’s affirmed Hong Kong’s Aa3 rating but changed the outlook to negative from stable. The decision to change the outlook to negative is to reflect the change in China’s rating outlook the day before. Hong Kong’s Aa3 rating is one notch above China due to Moody’s assessment of Hong Kong’s significant credit strengths.
• Moody’s also affirmed Macao’s Aa2 rating but changed the outlook to negative from stable.
• Moody’s change outlooks on 22 Chinese local government financing vehicles (LFGVs), eight Chinese banks, 18 Chinese infrastructure SOEs, 15 other SOEs and three private enterprises, including Alibaba and Tencent, to negative from stable.

Macro events: US Jobless Claims (weekly), US Consumer Credit (Oct), US Manheim Used Vehicle Index (Nov), Germany Industrial Production (Oct), Italy Industrial Production (Oct), Eurozone GDP (Q3), Japan Economic Coincident Index (Oct), China Imports, Exports & Trade Balance

In the news:

• BOJ's deputy governor highlights benefits of ending ultra-easy policy (Reuters)
• The Bank of England stepped up warnings about hedge funds shorting US Treasury futures, that suggests a jump in the so-called basis trade, which is where investors seek to exploit price differences between futures and bonds (Bloomberg)
• Nvidia’s CEO Still Plans to Sell High-End Chips in China (WSJ)
• Apple moves towards India-made iPhone batteries in push away from China (FT)
• Global Airlines Set for Record Revenue With Pandemic in Past (Bloomberg)
• ByteDance offers investors share buyback, valued at $268 bln-sources (Reuters)

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

For a global look at markets – go to Inspiration.