Global Market Quick Take: Asia – October 16, 2023

US Equities: US stocks sold-off on Friday amid deteriorating consumer sentiment data from the UoM survey and the risks of escalation in the Middle East conflict soured sentiment. This overshadowed upbeat quarterly earnings from some of the largest U.S. banks. Big tech sold off, bringing NASDAQ 100 down 1.2% while S&P 500 was down 0.5%. Wells Fargo rose 3% and JPMorgan closed up 1.5%, but Citigroup lost steam, ending down 0.2%. Boeing ended down 3% amid issues in quality of 737 Max aircraft.

Fixed income: Treasuries bull-flattened on Friday amid safe-haven demand from the Middle east conflict, despite the overhang of disappointing auctions last week. The jump in oil prices however saw Treasuries easing late in the session, however Fed Harker’s comments and softer UoM survey supported.

China/HK Equities: HK stocks were down 2.3% on Friday while CSI 300 slid over 1% after China’s September inflation data showed concerns about weak demand. Relief from reports that China is considering forming a state-backed stabilization fund to shore up confidence in the stock market was short-lived. Markets will likely react to geopolitical worries as well as reports that US will tighten curbs on China’s access to advanced chipmaking.

FX: Risk aversion seen in the FX markets on Friday amid concerns of widening conflict in Gaza. Dollar extended gains, as did Swiss franc. EURCHF slid below 0.95 to dip to its lowest level in over a year, although bid in JPY was far more contained as USDJPY still trades above 149.50. Risk currencies were hit badly on Friday and NZDUSD plunged below 0.59 handle, although a recovery was seen this morning on reports of opposition’s win in the weekend elections, as we discussed in this FX note.

Commodities: Oil prices jumped higher by over 5% on Friday amid concerns of escalating tensions in the Middle East and especially with Iran’s foreign minister saying that others in the region were prepared to act. Gold also jumped over 3% to break to highs of ~$1930 on safe haven demand and due to the respite coming from long-end yields. Silver jumped 4% to over $22.50.

Macro:

• US headline prelim UoM for October fell to 63.0 from 68.1, and way beneath the expected 67.0 driven by a fall both in conditions and expectations to 66.7 (prev. 71.4, exp. 70.3) and 60.7 (prev. 66.0, exp. 65.7), respectively.
• Fed’s Harker (2023 voter) said the Fed is likely to be done with rate hikes and he supports a higher for longer interest rate stance, but can't say for how long.
• Impending Israeli invasion into Gaza continued to spur risk aversion on Friday and into this morning. Key focus remains on how this affects the Middle East region and whether Iran is drawn into the conflict.
• Deflation fears returned in China, with September CPI at 0% YoY (vs 0.1% YoY and 0.2% expected) and PPI showed a larger-than-expected decline of 2.5% YoY (-3.0% last and -2.4% expected). More details here.

Macro events: US Empire State Manufacturing exp -6.0 vs. +1.9 prior, China PBoC MLF exp 2.5% vs. 2.5% prior.

In the news:

• US Will Tighten Curbs on China’s Access to Advanced Chip Tech (Bloomberg)
• New Zealand Opposition Wins Election as Labour Ousted From Power (Bloomberg)
• US Banks Brace For New Rules, Loan Losses After Earnings Windfall (Bloomberg)
• Polish nationalists PiS on brink of losing power, exit poll shows (Reuters)

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