Global Market Quick Take: Asia – November 13, 2023

US Equities: Mega-cap technology and semiconductor stocks propelled the market higher, boosting the S&P 500 by 1.6% to 4,415 and the Nasdaq 100 by 2.3% to 15,529. Nvidia gained 3%, marking its 8th consecutive day of increases. Microsoft added 2.5%, extending its rise for the 10th day. The PHLX Semiconductor index surged 4%, driven by TSMC, Rambus, KLA, Lam Research, Applied Materials, Microchip Tech, Broadcom, and AMD. The US is scheduled to release CPI on Tuesday, and PPI and retail sales on Wednesday.

Fixed income: Yields edged up 3 to 4 bps across most of the curve, except the 30-year, which finished Friday unchanged. The 2-year yield concluded at 5.06% and the 10-year yield last traded at 4.65%. The U of Michigan’s Sentiment survey showed that 1-year, as well as 5-10-year inflation expectations, climbed more than expected and caused front-end yields higher late New York morning. The long end of the curve sold off about 3bps 30 minutes before the close after Moody’s changed the outlook on U.S. sovereign’s Aaa ratings to negative from stable, citing “downside risks to the US’ fiscal strength have increased”.

China/HK Equities: Stocks tanked again last Friday as sentiment dipped on earnings disappointments and weaknesses in overseas markets overnight. SMIC plunged 6.8%, and Hua Hong Semiconductor plummeted nearly 16% after the two leading Chinese chip makers reported Q3 results below estimates. EV names slid as Li Auto fell 6.5%, despite reporting earnings that beat estimates. The Hang Seng Index dropped by 1.8%, and the CSI300 fell by 0.7%. This Wednesday will be in investors' focus as President Xi and President Biden meet in San Francisco, and China is scheduled to release October industrial production, retail sales, and fixed asset investment, along with announcing the 1-year Medium-term Lending Facility Rate policy.

FX: The US dollar oscillated within a narrow range against the G10 currencies, except the Norwegian Krone (NOK) which strengthened by 1% after a hot CPI print that increased the likelihood of rate hikes from the Norges Bank. USDJPY added 0.1% to 151.52, approaching a test of the high of 151.72 two weeks ago and then the 151.95 high in October last year.

Commodities: Gold, silver, platinum, and copper slid around 1% to 2% on Friday. The more hawkish comments from Powell at the IMF conference and diminishing fears of escalation in the Middle East continued to dominate trading. Spot gold fell 1% to as low as 1,933 before finishing the week at 1,939. In the energy space, crude oil rebounded over 2%, with WTI and Brent crude front-month futures reaching $77.35 and $81.70, respectively.

Macro:

• Moody’s changed the outlook on the US Government ratings to negative from stable and affirmed the long-term ratings at Aaa. The rating agency said “the downside risks to the US' fiscal strength have increased and may no longer be fully offset by the sovereign's unique credit strengths. In the context of higher interest rates, without effective fiscal policy measures to reduce government spending or increase revenues, Moody's expects that the US' fiscal deficits will remain very large, significantly weakening debt affordability. Continued political polarization within US Congress raises the risk that successive governments will not be able to reach consensus on a fiscal plan to slow the decline in debt affordability.”
• The University of Michigan Sentiment Index fell more than expected to 60.4 from 63.8. However, both the 1-year and 5-10-year inflation expectations increased by 20 bps to 4.4% and 3.2%, respectively, contrary to street forecasts of a decline. The 5-10-year inflation expectation reached the highest level since March 2011.
• San Francisco Fed President Daly (non-voter) said if inflation “continues to move sideways, and the labor market and GDP growth remain solid or strong”, then the Fed will probably have to raise rates. Meanwhile, Atlanta Fed President Bostic (non-voter) said the Fed will get to the 2% inflation target without having to raise rates again.
• ECB President Lagarde said the current level of interest rates, if sustained for long enough, will bring inflation back to 2% and the ECB will not cut rates, at least not in “the next couple of quarters.”
• Japan’s October PPI came in this morning at 0.8% Y/Y (vs consensus 0.9%) or -0.4% M/M (vs consensus 0.0%), lower from the previous month's 2.2% (revised up fromv2.0%) and -0.2% (revised up from -0.3%). On Wednesday, Japan is scheduled to release Q3 real GDP which is expected to contract 0.1% Q/Q or 0.4% annualized Q/Q.

Macro events: NY Fed survey consumer expectations, US CBO’s monthly budget review

Earnings: British American Tobacco, ANZ, Mizuho Financial, Johnson Controls, Sun Life, Tyson Foods, Samsonite

In the news:

• Alibaba, JD.com withhold Singles’ Day sales tally for second year, but strike positive tone amid economic headwinds in China (SCMP)
• ANZ Shares Drop as Profit Misses Estimates, CEO Cautions (Bloomberg)
• US carries out air strikes in Syria against Iran-linked facilities (Reuters)

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

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