US Equities: Megacap technology stocks had another sell-off as investors expressed disappointment with the results and comments from the previous day. The Nasdaq 100 declined by 1.9% to 14,110, and the S&P 500 dropped by 1.2% to 4,137. Microsoft, Meta, Nvidia, and Tesla each fell by 3.5% or more. On the other hand, Amazon rallied over 5% in extended hours after reporting better-than-expected earnings, attributed to margin expansion. Intel saw a jump of over 7% on upbeat guidance regarding sales growth. Nasdaq 100 and S&P eMini futures rallied around 0.5% in early Asian hours.
Fixed income: Treasuries rallied sharply across the yield curve, despite stronger-than-expected GDP growth and durable goods orders. This was partly helped by a quarterly core PCE slightly below the consensus estimate and a slightly larger-than-expected print in initial jobless claims. The $38 billion 7-year auction attracted decent demand and came with a strong result. The 2-year yield finished 8 bps lower at 5.04%, and the 10-year yield declined 11 bps to 4.84%.
China/HK Equities: Market activities were muted as investors remained on the sidelines, assessing the magnitude of the impact of recent stimulus measures and the longer-term policy trajectory that may be unveiled by the upcoming high-level meetings of the Chinese authorities, starting with the National Financial Work Conference next week. The Hang Seng Index ticked down 0.2%, while the Hang Seng Tech Index edged up 0.3%. Li Ning plummeted by 21% after missing sales estimates in the sportswear maker's retail business. Standard Chartered Bank plunged 11% due to provisions for China-related loan losses. The CSI300 finished 0.3%, driven by a rally in autos and tech in the afternoon.
FX: Strong US GDP and a dovish ECB outcome could not propel the dollar materially higher, supporting the case that upside is starting to get limited as positioning is stretched. Dollar started the Asian session on a back-foot this morning, with AUDUSD climbing above 0.6330 from lows of 0.6270 yesterday and NZDUSD touching 0.5830 after pushing below the 0.58 handle yesterday to YTD lows. EURUSD moved back above 1.0550 despite economic concerns highlighted at the ECB meeting, as much of that was priced in. USDJPY still above 150 and intervention threat looms.
Commodities: Oil prices saw another sharp drop yesterday despite US economic data staying strong and ECB loosening its hawkish posture. However, demand outlook remains weak and war premium continues to wobble, bringing volatility in crude oil prices. Gold stays supported with yields slipping, dollar range-bound and safe-haven demand underpinning.
- US Q3 GDP print was hot, rising 4.9%, above the 4.5% forecast and accelerating from the 2.1% growth in Q2 with a large jump in consumer spending to 4.0% from 0.8% in Q2. The PCE data for Q3 was slightly softer than expected at 2.4% (exp. 2.5%) and down from the prior 3.7% QoQ. Strong growth confirmed US exceptionalism story again, but business and consumer headwinds are rising fast in Q4. Initial jobless claims continued to hover around the 200k mark, printing 210k, marginally above the expected 208k and rising from the prior 200k.
- The ECB opted to call a "pause" in its hike campaign by keeping all three of its key rates unchanged. The statement reported that interest rates are at levels that, if maintained for a sufficiently long duration, will bring inflation back to its target. That reinforced market expectations that the tightening cycle may now be finished. President Lagarde in her press conference played further to this view, noting the transmission is, “increasingly dampening demand and thereby helps push down on inflation.”
- Japan’s October Tokyo CPI came in above expectations, raising the odds of BOJ tweak further next week after USDJPY rose above 150.50 yesterday and intervention efforts possibly remained limited. Headline Tokyo CPI was out at 3.3% YoY from 2.8% prior and expected, while core core CPI was at 3.8% YoY with September’s also revised higher to 3.96% YoY.
Macro events: China industrial profits (Sep), US PCE (Sep) core exp 0.3% MoM vs. 0.1% prior
Earnings: Exxon Mobil, Chevron, Sanofi, Agricultural Bank of China, China Merchants Bank, China Molybdenum, ICBC, Ping An, Postal Savings Bank of China
In the news:
- Siemens Energy shares plunged nearly 40% on Thursday, after the group said it was in talks with the German government about state guarantees following big setbacks at its wind unit (Reuters)
- Beijing is expanding its probes to include bankers and financial institutions that facilitated developers’ risky behavior, people familiar with the matter say (WSJ)
- Amazon's cloud stabilizing, shoppers cautious heading into holiday season (Reuters)
- Intel beats expectations as margins rise, manufacturing momentum builds (Reuters)
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