Global Market Quick Take: Asia – December 11, 2024

Key points: 

• Macro: US CPI on tap, Bank of Canada expected to cut 50bps 
• Equities: Alphabet gained 5.6% due to quantum computing breakthroughs 
• FX: AUD slumped on RBA’s dovish tilt, CAD in focus 
• Commodities: Arabica coffee futures peak since 1972 amid Brazil drought concerns. 
• Fixed income: U.S. auctioned $58B 3-year notes at 4.117% yield 

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Disclaimer: Past performance does not indicate future performance. 

 Macro:  

• US data was mostly second-tier but signalled a goldilocks scenario. Small business NFIB optimism index rose to its highest since 2021, showing some post-US election exuberance. Meanwhile, unit labour costs for Q3 were revised lower to 0.8% from 1.9%, undershooting the expected 1.5% revision.
• The RBA kept its benchmark rate unchanged at 4.35% while saying it was “gaining some confidence” that inflation is moving toward target. This was taken as a dovish outcome. This comment saw the Australian dollar fall while swap traders boosted bets on a February cut to 70% from 50% the previous day. 
• US CPI preview: After mixed jobs data last week, focus is back on inflation this week. Consensus expects core inflation to remain steady at 0.3% MoM for a 4^th straight month in November, with the YoY print at 3.3% for a 3^rd straight month. A higher-than-expected US CPI reading might not prevent a rate cut at next week’s FOMC meeting, but it could influence the anticipated rate cuts priced for FOMC meetings from March 2025 onward, potentially guiding the direction of the USD. 
• Bank of Canada preview: The BoC is widely expected to cut rates on Wednesday 11th December, with the consensus looking for another 50bps rate cut, but with a risk of a smaller 25bp move. Labor data last week mostly spurred bets of a larger cut, with unemployment rate rising to 6.8%. 

Equities:  

• US - S&P 500 and Nasdaq 100 fell 0.3%, and the Dow Jones dropped 0.4%, ahead of a consumer inflation report that could affect Federal Reserve policy. Indices remain near record highs amid optimism for a "soft landing" and potential Fed rate cut in December.
• Oracle shares fell 6.7% after missing revenue expectations amid cloud sector competition. Nvidia declined 2.7% due to a Chinese antitrust probe, highlighting U.S.-China tech tensions. Conversely, Alphabet rose 5.6% following breakthroughs in quantum computing, and Tesla gained 2.9% as analysts increased price targets.
• GameStop reported a third-quarter profit of $17.4 million, reversing a $3.1 million loss from last year, due to cost-saving measures like store closures and selling higher-margin goods. Shares rose over 2% in extended trading, despite challenges from online competitors like Amazon and eBay.
• China – HSI fell 0.5% on Tuesday, reversing morning gains due to profit-taking after recent highs. The decline followed weak Chinese export data. Attention shifts to the upcoming Central Economic Work Conference.
• Earnings – Adobe, Macy’s 

FX: 

• The US dollar was bid ahead of the inflation print due today and commodity currencies underperformed. 
• AUDUSD reversed the post-China stimulus gains from earlier in the week and dropped back below 0.64 as RBA abandoned its hawkish stance and joined the chorus of dovish central banks across G10. NZDUSD however slumped harder, falling back to 0.58, its lowest levels in over a year. AUDNZD rose back to 1.10.
• USDJPY tested 152 again, with markets expecting the BOJ to stay on hold in December as Deputy Governor Himino’s speech has been scheduled for mid-January. This is seen as a signal for a later rate hike as the BOJ wants to improve its communication strategy.
• CAD in focus ahead of BOC today expected to cut 50bps. USDCAD broke to new highs of 1.4195 yesterday.  

Commodities:  

• WTI crude oil futures rose 0.32% to $68.59 in a volatile session, as the market anticipates tomorrow's OPEC monthly report and EIA weekly inventory data.
• Gold prices increased by 1.2% to $2,718, despite the dollar strengthening ahead of tomorrow's CPI inflation data.
• Arabica coffee futures hit a high since 1972, exceeding $3.40 per pound, due to supply concerns from Brazil's severe drought. Volcafe reduced Brazil's production forecast by 11 million bags. 

Fixed income:  

• Treasury yields rose slightly, with the 10-year yield at 4.23%. The U.S. sold $58B in 3-year notes at 4.117% yield, below the previous 4.152%. The bid-to-cover ratio was 2.58, with primary dealers taking 15.11%, direct 20.71%, and indirect 64.18%. 

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