Global Market Quick Take: Asia – December 16, 2024

Key points:

• Macro: China’s credit data was underwhelming; activity data comes next
• Equities: Nasdaq 100 is up 0.76% led by Broadcom (+24%)
• FX: Yen slumped 2.4% last week on receding BOJ rate hike bets
• Commodities: Gold declined for two straight days as yield rally continued
• Fixed income: Yield curve between 3-month and 10-year uninverts

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Disclaimer: Past performance does not indicate future performance.

Macro:

• China’s November credit data was underwhelming, signaling little impact from stimulus measures and an urgency to boost private demand. New aggregate financing amounted to 29.4 trillion yuan in Jan-Nov period, below consensus expectation of 29.8 trillion yuan. M2 money supply was at 7.1%, lower than 7.5% in October and expected. Activity data will be on tap today, and consensus expects retail sales to grow 5% in November from 4.8% previously and industrial production to rise by 5.4% YoY from 5.3% previously.
• There were several ECB speakers on the wires, and most tilted dovish after ECB’s dovish rate cut last week. Villeroy said that more rate cuts are to come, while Kazaks said the direction of rates is clearly down, and the neutral rate is closer to 2% than 3%, noting a significant reduction in rates is still necessary. Escriva said it is logical to have further cuts in coming meetings, while Holzmann said Thursday's decision was good. Vasle stressed a meeting by meeting, data dependent approach, and Centeno said that gradualism is the most important word.
• On watch today: UK, Eurozone and US PMIs

Equities: 

• US - Dow dropped 86 points, extending its losing streak to seven sessions, its longest since 2020. Nasdaq 100 rose 0.76% let by Broadcom which is up 24% on positive earnings momentum.
• Palantir, MicroStrategy and Axon Enterprise will join the Nasdaq 100 index before the open on 23 December 2024 while Moderna, Super Micro Computer and Illumina will leave.
• Japan - Nikkei 225 dropped 0.95% on Friday, reversing previous gains. Domestically, improved sentiment among large Japanese manufacturers boosted expectations of a hawkish Bank of Japan, though uncertainty remains about a rate hike in December or January.
• China - HSI fell 2.1% on Friday following a strong prior session, impacted by major sector losses. On Saturday, the director of the PBOC's research bureau announced that China plans to lower interest rates and reserve requirements next year.

FX:

• The US dollar traded mixed on Friday, but was up on the week as safe-haven yen and Swiss franc led the decline.
• USDJPY rallied back to 153.50 levels from 150 at the start of last week and BOJ rate hike bets receded after Reuters reports that several members of the committee seem to favour a hold at the December meeting and a Deputy Gov speech scheduled for mid-Jan seen as a precursor to a likely move at the January meeting.
• CHF declined on Swiss National Bank’s surprise 50bps rate cut, as did EUR following a dovish 25bps rate cut from the ECB. EZ PMIs are up today, and last month’s release had sent the EURUSD down to 1.0350 on EZ growth concerns and divergence from US and UK. EURCHF has risen to 0.9375, a near 1-month highs.
• AUDUSD saw a recovery mid-week on better-than-expected employment data from Australia, but the gains erased quickly and pair trades below 0.64 on underwhelming China stimulus.

Commodities:

• Oil prices steadied after a weekly rise, as the US signaled tighter sanctions on Russian crude and China pledged economic support. Brent crude remained above $74, and West Texas Intermediate was near $71.
• Gold steadied near $2,650 an ounce after a two-day drop, as the Fed's final interest rate decision of the year loomed. Mixed US data, including rising inflation and jobless claims, contributed to a 2.6% decline.

Fixed income:

• Treasuries declined, ending one of their toughest weeks this year, with yields up by 5 to 7 basis points across maturities. The 2s10s and 5s30s yield curve spreads steepened for the sixth day in a row. Yield curve between 3 month and 10 year has now uninverted for the first time since 8 November 2022. Breakeven inflation rates for TIPS rose, supported by a 1.8% increase in WTI crude oil futures, while swaps outperformed Treasuries. This week, the Treasury will issue a $13 billion 20-year reopening on Tuesday.

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