Global Market Quick Take: Asia – June 21, 2024 Global Market Quick Take: Asia – June 21, 2024 Global Market Quick Take: Asia – June 21, 2024

Global Market Quick Take: Asia – June 21, 2024

Macro 6 minutes to read
APAC Research

Key points:

  • Equities: S&P 500 ended 0.2% lower after reaching new high
  • FX: USDJPY back at 159 as Japan added to US monitoring list for currency manipulation
  • Commodities: Precious metals and oil gained
  • Fixed income:  US 10-year Treasury yield rose, despite softer economic data
  • Economic data: UK retail sales, US/EZ/UK PMIs

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


Disclaimer: Past performance does not indicate future performance.

In the news:

  • Bank of England keeps rates at 5.25% in ‘finely balanced’ decision; traders lift bets for August cut (CNBC)
  • US Adds Japan to Currency Watchlist as Trade Partners Struggle With Stronger Dollar (Bloomberg)
  • Accenture says strong AI demand to power 2024 revenue growth (Yahoo)
  • A marathon, not a sprint: Apple’s AI push faces big challenges in China (CNBC)
  • Trump Media plummets 15% as DJT stock sell-off deepens (CNBC)
  • Oil companies flare more natural gas, defying effort to eliminate practice (Reuters)
  • Guzman Y Gomez surges 37% in hottest Australian IPO in three years (Reuters)

Macro: 

  • US jobless claims came in at 238k for the latest week, slightly lower from the previous 243k (revised higher) but higher than expected, and continued to signal that job market is loosening but not at a rapid pace to send recession signals. Philly Fed also disappointed with headline falling to 1.3 from 4.5, its lowest reading since January, and short of the consensus of 5.0. The inflationary gauge of prices paid and prices received, however, lifted to 22.5 (prev. 18.7) and 13.7 (prev. 7.7), respectively.
  • Fed’s Kashkari said that it will probably take a year or two to get inflation back to 2%, noting wage growth might still be a bit too high to get back to 2% right now.
  • The Swiss National Bank delivered a second consecutive, and surprise, rate cut – taking its policy rate to 1.25%. Concerns over the strength of the Swiss franc likely underpinned, and the SNB policy rate is now very close to neutral.
  • The Bank of England held its benchmark rate at 5.25% with a 7-2 vote split again. However, there was no sense of concern from the persistently high services inflation, and it was stated that the MPC’s decision to hold rates was finely balanced, hinting at readiness for future cuts. The market has priced in 62% odds of an August rate cut.
  • Japan’s inflation for May picked up, but remained below expectations. Headline CPI was out at 2.8% YoY from 2.5% previously while core inflation nudged higher to 2.5% from 2.2%. While the report is a mixed bag, it does not rule out the case for policy normalization from the Bank of Japan at the July meeting especially with yen under further downward pressure and intervention flexibility being evaded by the US putting Japan on the “monitoring list” for currency manipulation.

Macro events: UK Retail Sales (May), EZ/UK/US Flash PMIs (Jun), Canada PPI (May)

Earnings: Camax, Factset

Equities: The S&P 500 ended the day 0.2% lower after reaching a new high of 5,500 earlier. Similarly, the Nasdaq also retreated by 0.8% from its previous record levels, reflecting a decline in the performance of tech mega caps. However, chip giant Nvidia saw earlier gains diminish and fell by 3.5%, closing below Microsoft and losing its position as the world's largest company by market cap. Meanwhile, Microsoft and Apple experienced declines of 0.1% and 2.1%, respectively. Investors capitalized on the sector's strong momentum and took profits, while also speculating on the sustainability of mega caps leading the AI rally and their impact on major stock indices. This comes as economic data suggests that the US economy is showing signs of vulnerability to higher interest rates by the Fed, with initial unemployment claims remaining near a 10-month high in mid-June and declines in housing starts, building permits, and retail sales in May.

Fixed income: The yield on the US 10-year Treasury note rose above 4.27% after hitting a nearly three-month low of 4.21% on June 18th, despite softer economic data. Initial unemployment claims remained high, housing starts and building permits declined unexpectedly in May, and retail sales excluding autos also contracted. This data suggests that the US economy may be less resilient to higher interest rates by the Federal Reserve.

Commodities: Gold gained and silver surged above $30 per ounce due to weaker-than-expected US economic data. This has led to speculation that the Federal Reserve may cut interest rates twice this year. However, signs of slowing industrial demand for metals have dampened investor sentiment, with industry groups in China calling for reduced production of solar panels due to overcapacity. Oil gained following EIA inventory data showing a draw of more than 2.5 million. Additionally, forecasts for increased summer travel and ongoing geopolitical risks in the Middle East are also contributing factors.

FX: The US dollar strengthened on Thursday, supported by higher Treasury yields, in contrast to the dovish outcomes from the Swiss National Bank and the Bank of England meetings. The Swiss franc (CHF) underperformed as the SNB unexpectedly cut rates. The USDCHF rose above its 200-day moving average at 0.8892, while the EURCHF remained below this level. The CHF also saw significant declines against the Norwegian krone (NOK) due to the Norges Bank's hawkish stance. Sterling faced downside pressure, slipping towards one-month lows against the US dollar, and next up will be GBPUSD testing the 100-day moving average at 1.2640. The Japanese yen also weakened to its lowest levels since the intervention in early May, with USDJPY at the 159-level, as the US Treasury added Japan to its monitoring list for currency manipulators, indicating limited potential for intervention.

 

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