Global Market Quick Take: Asia – December 1, 2023

US Equities: Stocks finished mixed. Salesforce surged 9.2% after the customer relationship management software company reported Q3 results and guidance, beating estimates. This contributed to propelling the Dow Jones Industrial 1.5% higher on Thursday. Meanwhile, the Nasdaq 100 slid 0.3%, dragged down by weakness in Nvidia (-2.9%) and Alphabet (-1.8%). The S&P 500 added 0.4% to 4,568.

Fixed income: The decline in yields was stalled and Treasuries retreated after San Francisco Fed President Daly said she was “not thinking about rate cuts at all”. Market reactions to the initial claims and core PCE prints both were in line with projections, and an improvement in the Chicago PMI was muted. The 2-year yield climbed 4bps to 4.68% and the 10-year yield rose 7bps to 4.33%. The curve initially flattened but reversed to finish 3bps steeper (2-year vs 10-year) at -35bp. On Friday, investors will focus on Powell speaking and the ISM Manufacturing data.

China/HK Equities: China and Hong Kong stocks edged up modestly despite the disappointing PMI data. The Hang Seng Index gained 0.3%, lifted by telcos, information tech, and utilities. Tencent added 3.2% following analysts’ opinions that the tech giant would benefit from ByteDance’s reportedly withdrawal from mobile game development. Contrary to that, Bilibili plummeted 11% after warning about lower-than-expected revenues. The CSI300 added 0.2%, helped by consumers and pharmaceuticals.

FX: Dollar jumped higher on Thursday despite a softer PCE report, suggesting a dovish fatigue in the markets and potentially fuelled by relatively hawkish Fed speakers balancing Waller dovishness earlier in the week. Kiwi still held up its gains, as NZDUSD traded close to 0.6160, while AUDUSD reversed earlier gains coming on the back of additional China stimulus hopes after PMIs underwhelmed, and slipped slightly to test the 0.66 handle support which has held up for now. EURUSD plunged back below 1.09 amid softer inflation and 1.0855 support will be in focus. GBPUSD also gave up the 1.27 handle and slipped to 1.2620-levels and 1.26 support will be key. A reversal higher in Treasury yields also put a floor on yen gains, and USDJPY rose back to 148+ levels.

Commodities: OPEC+ agreed to a deeper 1mb/d cut to add to Saudi’s current voluntary cut being extended into 2024. However, oil traders were unimpressed as this was already baked in the price with gains of about $5 since the start of the week. The absence of a comprehensive breakdown with only a select number of countries detailing their reduction also failed to convince the market that the cartel discord has been resolved. Angola rejected the new quota and will produce above the target. Market tightness will now depend on how demand outlook shapes up. Copper extended its gains despite China’s downbeat PMI as supply concerns underpinned, while Gold pared back some of its recent gains on yield and dollar rebound.

Macro:

• US headline PCE rose 3.0% YoY, coming in below expected 3.1% and previous 3.4%. Core exhibited a cooling trend as well, coming in as expected at 0.2% MoM (prev: 0.3%) and 3.5% YoY (prev: 3.7%). Personal income rose 0.2% in October, in line with expectations but cooler than the prior 0.4% gain while consumption also saw a notable easing, to 0.2% from 0.7%, in line with analyst forecasts.
• China's manufacturing PMI and non-manufacturing PMI both decelerated, sliding from 49.5 to 49.4 and from 50.6 to 50.2, respectively, in November. The most significant disappointment was observed in the services PMI sub-index, which fell below 50 for the first time this year, reaching 49.3. This signals an exhaustion of the pent-up demand that followed the post-reopening period.
• US jobless claims ticked higher to 218k from 211k previously, but came in beneath the 218k expected. Surge in continuing claims – which rose 86k to 1927k – suggested that US labor market is likely cooling.
• Fed speakers turned more balanced after dovish Waller earlier in the week. Williams (voter) said the Fed is at or near the peak for interest rates, but did caveat that if inflation pressures persist, the Fed could hike again. Mary Daly (2024 voter) leaned hawkish, saying it is still too early to know if the Fed is done hiking rates.
• Eurozone CPI fell to 2.4% y/y in November, which was below 2.7% pencilled in by consensus, this was the slowest annual pace since July 2021. Market is now pricing in a 25bps rate cut by April next year compared to June earlier, and against expected Fed rate cut in May.

Macro events: Japan Jobs data, China Caixin Manufacturing PMI, Canada Labour Market report, Canada Manufacturing PMI, US ISM Manufacturing PMI. Fed speakers include Barr, Goolsbee, Powell and Cook. ECB speakers include Elderson and Lagarde.

Earnings: Bank of Montreal

In the news:

• Salesforce shares jump as strong cloud demand drives stellar results (Reuters)
• OPEC+ Production Cuts Fail to Convince Oil Traders (Bloomberg)
• Occidental Petroleum in Talks to Buy Permian Producer CrownRock (WSJ).
• China Evergrande seeks to avoid liquidation with last-ditch debt plan (Reuters).
• Hong Kong a step closer to keeping stock and derivatives markets open during typhoons, issues consultation paper on ending shutdowns from July (SCMP)

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

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