Summary: Equities saw a choppy trading overnight in pre-CPI moves, but ended lower despite slowing inflation expectations from NY Fed survey and some banks calling for aggressive Fed rate cuts next year. Boeing was the standout and Xi-Biden talks will be in focus today. Dollar was softer but USDJPY got in close sight of 152 while crude oil steadied after steep losses last week as OPEC tried to sabotage sentiment.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: In a quiet session preceding the CPI on Tuesday and retail sales on Wednesday, the S&P 500 edged down by 0.1% and the Nasdaq 100 slid by 0.3%. Boeing surged by 4% after a 95-aircraft order from Emirates Airline, along with a Bloomberg story suggesting that China may announce a resumption of the purchase of 737 Max jetliners when Xi and Biden meet on Wednesday.
Fixed income: Treasury yields fell by 1-3bps across the curve in a low-volume session. Some initial weaknesses emerged ahead of the estimated $30 billion corporate bond issuance this week. The market reversed later in the day following declines in the 1-year and 5-year inflation expectations in the New York Fed’s survey of consumer expectations, and traders adjusted positions before the CPI release on Tuesday. The 2-year yield dropped by 3bps to 5.03% and the 10-year yield shed 1bp to 4.64%.
China/HK Equities: After a lackluster morning session, stocks rallied into the close, with the Hang Seng Index gaining 1.3%, and the Hang Seng Tech Index surging 2.3%. Headlines suggesting conciliatory stances on both sides ahead of the Xi-Biden meeting on Wednesday somewhat contributed to an improvement in market sentiment. Industrial and healthcare stocks outperformed, and Internet names also rallied ahead of earnings from Meituan on Tuesday, Tencent on Wednesday, Alibaba, and JD.COM on Thursday. Over the weekend, Alibaba and JD.COM reported positive year-over-year growth in their gross merchandise value (GMV) during the three-week Singles Day promotion period, although specific details were not provided. China’s State Post Bureau stated that parcel volume grew 23% year-over-year from November 1 to 11. However, Syntun, a database tracking retail sales in China, indicated that e-commerce sales (in value) grew only 2% year-over-year during the Singles Day promotion period. In mainland bourses, the CSI300 slid 0.2%.
FX: The dollar index traded a notch softer with the slippage in Treasury yields. Despite that, Japanese yen weakened again, taking USDJPY in close sight to 152 but suspected intervention saw the pair drop to 151.20 before returning to trade around 151.60 subsequently. Japan’s top currency diplomat Kanda was forced to resign yesterday for non-payment of taxes, which could mean speculators may test further upside. AUDUSD rose back towards 0.64 amid hawkish leaning RBA commentary while GBPUSD is testing the upside break of 1.2280 amid PM Sunak's latest Cabinet reshuffle and UK’s wage data will be on watch today. Kiwi underperformed taking AUDNZD to 1.0850.
Commodities: Crude oil prices rebounded after a sharp selloff in the last week on erasing the war premium and increasing demand concerns. However, OPEC on Monday raised its oil demand forecast saying the oil market fundamentals remain strong and blaming speculators for the recent drop in crude prices. In its monthly oil market report for November, OPEC slightly revised upwards its forecast for world oil demand growth in 2023 to 2.46 million barrels per day (bpd), up 20,000 bpd from last month's estimate. It said China’s crude oil imports are very healthy and Asian refining margins are strong. Meanwhile, Copper jumped despite China’s credit data remaining modest and focus now turns to US CPI data today for the commodity complex.
Macro:
Macro events: IEA OMR; UK Average Earnings/Unemployment (Oct/Sep), German ZEW (Nov), US NFIB (Oct), US CPI (Oct), Japan GDP (Q3)
Earnings: Home Depot, Meituan, Hon Hai Precision, Delivery Hero, Vodafone, Mitsubishi UFJ, Summitomo Mitsui, Nu Holdings, Sea
In the news:
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