Global Market Quick Take: Asia – September 28, 2023
APAC Strategy Team
Summary: The surge in yields, dollar and oil continued to take a toll on sentiment, but equities managed to close in green after wobbling in the day. More hawkish comments were seen from Fed member Kashkari, and focus from here turns to US PCE and shutdown risks. China and HK stocks remained supported even as Evergrande concerns sustained, and USDJPY is now even closer to 150 with intervention threat looming.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The S&P500 ended nearly flat while the Nasdaq 100 edged up 0.2%. The jump of crude oil price to its 1-year high helped energy stocks finish higher while utilities and real estate names declined. In the extended-hour trading, Micron plummeted 4.1% after guiding a larger-than-expected loss for the current quarter ending November 2023.
Fixed income: Treasuries continued to sell off, with the 10-year yield surging by 7bps to a new high of 4.61% since 2007. An unexpected increase in durable goods orders set a weak tone for Treasuries at the start of the day and the rise in crude oil price weighed on sentiments further. The demand for the USD49 billon 5-year auction was robust.
China/HK Equities: The Hang Seng Index and CSI300 gained 0.8% and 0.2% respectively after China released a 17.2% Y/Y increase in industrial profits in August and a dovish-leaning statement from the PBoC’s Q3 Monetary Policy Committee meeting. Healthcare and renewable stocks led the rally while internet and EV stocks underperformed.
FX: Further yield-driven gains brought the dollar to fresh YTD highs although higher oil prices helped NOK and CAD. Weakest on the G-10 FX board was AUD despite a higher inflation print yesterday boosting RBA’s rate hike bets and support of authorities for the yuan. AUDUSD dipped below 0.6340 and NZDUSD tested the 0.59 handle. EURUSD broke below 1.05 to lows of 1.0488 before recovering to just above the handle, while GBPUSD took a look below 1.2120. USDJPY getting even closer to 150 and intervention threat remains.
Commodities: Crude oil prices got another push from shrinking inventory data, and fresh new YTD highs were seen with WTI close to $94 and Brent in sight of $97. Inventories at Cushing Oklahoma – the biggest crude hub in the US – dropped just below 22 million barrels, close to operational minimums and lowest since the seasonal lows of 2014. Gold slipped below $1900 and the $1885 support to print fresh lows since March.
- Fed voter Kashkari, who has recently been a hawk, was on the wires again and was open to the possibility of more than one additional rate hike. He said that the FOMC may do less if a shutdown or prolonged UAW strike slows the economy, but "there is that risk" of more increases should tightening not have the intended effect. He votes on policy this year.
- Euro-area credit data showed further evidence of interest rates biting, with borrowing by companies up only 0.6% y/y in August and lending to households down to 1% y/y, both around the slowest pace in eight years.
- Australia’s August CPI rose to 5.2% y/y from 4.9%, as expected. Trimmed mean was unchanged, showing inflation remains sticky beyond the impacts of a soft base and high gasoline prices on the headline. RBA real rates remain negative and the inflation print raises expectations of another rate hike, but the quarterly inflation print due in end-October may be awaited.
- China released a 17.2% Y/Y increase in industrial profits in August and the year-to-date loss narrowed to -11.7% in August from -15.5% in July.
- The People’s Bank of China (PBoC) released a statement yesterday on its Q3 Monetary Policy Meeting that convened on September 25, pledging “steady, precise and forceful” policies and “enlarging the counter-cyclical measures through interest rates, reserve requirement ratios and other tools”.
Macro events: German HICP Prelim. (Sep) exp 4.5% y/y vs. 6.4% prior (2000 SGT), US Q2 GDP (T) exp 2.2% q/q ann vs. 2.1% prior, US jobless claims (Sep 23) exp 215k vs. 201k prior.
In the news:
- Micron projected a fiscal first-quarter loss of as much as $1.14 a share, excluding some items. Analysts had estimated a 96-cent loss (Bloomberg).
- McCarthy still lacks votes for GOP stopgap, increasing odds of a shutdown (Politico)
- Meta launches AI chatbots for Instagram, Facebook and WhatsApp (FT)
- China Puts Evergrande’s Billionaire Founder Under Police Control (Bloomberg)
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