Global Market Quick Take: Asia – October 17, 2024

Key points:

• Equities: Morgan Stanley gains 6.5%, most in 4 years after strong earnings
• FX: Aussie dollar trades near five-week low
• Commodities: Oil remains under pressure at 2-week low; Precious metals surge
• Fixed income:  UK Bonds outperforms on soft inflation data
• Economic data: Australia employment, ECB rate decision, US retail sales

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The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.

Disclaimer: Past performance does not indicate future performance.

In the news:

• Amazon goes nuclear, to invest more than $500 million to develop small modular reactors (CNBC)
• Morgan Stanley shares pop 7% after beating estimates for third-quarter profit and revenue (CNBC)
• Japan visitors spent $39 billion through September, breaking annual record (Reuters)
• Spanish blue chips close at highest since 2010 (Reuters)
• Bitcoin hits highest level since July, boosting other coins and crypto-related stocks (CNBC)
• Lucid shares tumble following public offering of nearly 262.5 million shares (CNBC)

Macro:

• Japan's trade balance shifted to a deficit of JPY 294.24 billion in September 2024, compared to a surplus of JPY 60.56 billion in the same month the previous year. This marked the third consecutive month of a trade deficit and was worse than market forecasts of a JPY 237.6 billion shortfall. Exports unexpectedly fell by 1.7% to JPY 9,038.20 billion, the first decline since November 2023, missing the expected 0.5% rise. Meanwhile, imports grew by 2.1% to JPY 9,332.55 billion, marking the sixth consecutive month of growth but falling short of the 3.2% forecast.
• U.S. export prices dropped by 0.7% MoM in September 2024, surpassing market expectations of a 0.4% decline and following a revised 0.9% decrease in August. Non-agricultural export prices fell by 0.9%, the largest decline since October 2023, due to lower prices for nonagricultural industrial supplies, materials, and automotive vehicles, which outweighed increases in prices for capital goods, consumer goods, and nonagricultural foods. Conversely, agricultural export prices rose by 0.6%, driven by higher prices for nuts, other food preparations, meat, wheat, and corn, despite lower soybean prices. For Q3, export prices fell by 1.1%, marking the largest three-month drop since December 2023. YoY, export prices decreased by 2.1%, the most significant drop since January.
• Housing starts in Canada rose by 5% over a month to 223,808 units in September 2024, falling short of market expectations of 237,500 units, as reported by the Canada Mortgage and Housing Corporation (CMHC). The seasonally adjusted annual rate (SAAR) of urban housing starts increased by 6% to 210,002 units, with multi-unit urban starts rising by 6% to 163,400 units and single-detached urban starts up by 5% to 46,602 units. Rural starts had a monthly SAAR estimate of 13,806 units.
• UK CPI fell to 1.7% in September 2024, the lowest since April 2021, down from 2.2% in the previous two months and below the 1.9% forecast. Transport costs, especially air fares and motor fuels, were the main downward drivers, with petrol prices dropping to 136.8 pence per litre from 153.6 pence a year earlier. Prices also declined for housing, utilities, and furniture, while rising more slowly for recreation, culture, restaurants, and hotels. Services inflation decreased to 4.9% from 5.6% in August. The only significant upward pressure came from food and non-alcoholic beverages, which rose by 1.9%.

Earnings: Netflix, Blackstone, Intuitive Surgical, TSMC, Infosys, Disco, Axis Bank

Equities: Stocks in the US ended mostly higher on Wednesday, partially rebounding from the previous session's losses. The S&P 500 rose by 0.5%, the Dow Jones advanced by 337 points to reach a new record high, while the Nasdaq 100 saw a slight gain of 0.1% as the chip sector continues to underperform. Morgan Stanley reported rising 6.5% after surpassing earnings and revenue expectations. Additionally, Abbott gained 1.5% with stronger-than-expected quarterly results. Conversely, Intel declined by 1.4% following a review call from the Chinese cyber association. Nvidia recovered by 3.1% after slumping 4.5% the prior day, influenced by ASML's lowered sales forecast.

Fixed income: Treasuries advanced with the yield curve slightly flattening due to significant block trades. Positive momentum was set following weaker-than-expected UK inflation data for September. Declines in oil prices after Tuesday's selloff further pressured cash yields. US yields had fallen by 1 to 2 basis points across the curve, with the long end outperforming. The US 10-year yield settled around 4.02%, while gilts outperformed by 8 basis points for the day. UK bonds outperformed as traders adjusted expectations for Bank of England policy easing after the CPI data, anticipating a ~24 basis point rate cut next month and ~42 basis points by year-end. Additionally, Japan’s Ministry of Finance announced an auction of ¥400 billion in bonds with maturities of 15.5 to 39 years.

Commodities: Gold continued its upward trend, increasing by 0.42% to reach $2,673, while silver climbed 0.6% to $31.69. This movement aligns with the decline in Treasury yields, benefiting from a slight reduction in risk appetite as markets evaluated the Federal Reserve's policy outlook. Meanwhile, WTI crude oil futures fell by 0.27% to $70.39, and Brent crude edged down by 0.04% to $74.22, following a 4% decline in the previous session amid continued uncertainty over the Middle East conflict. According to the API's Weekly Statistical Bulletin, U.S. crude oil inventories decreased by 1.58 million barrels for the week ending October 11, 2024, following a significant increase of 10.9 million barrels the previous week. This marks the sixth draw in the past eight weeks, contrary to market expectations of a 2.3 million barrel build. Cocoa futures near $7,900 per tonne due to West African flooding, delaying harvest and raising supply concerns.

FX: A Bloomberg index of the dollar climbed to a 10-week high as major currencies, led by the Mexican peso, weakened amid traders' concerns over Donald Trump's tariff plans. The pound fell after a weaker-than-expected UK inflation report, with GBPUSD dropping as much as 0.7% to 1.2980, its lowest since August 20. EURUSD declined by 0.4% to 1.0855, reaching a fresh two-month low and extending its decline for a third consecutive day. Norway's krone led G-10 losses, with USDNOK rising around 1% to 10.9286. NZDUSD fell as much as 0.7% to 0.6040, its lowest level since August 19, before recovering some losses. Additionally, the Australian dollar traded near a five-week low.

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