Global Market Quick Take: Asia – January 4, 2024

US Equities: Mega-cap technology stocks retreated for the second day in a row, dragging the Nasdaq 100 down by 1.1% to 16,368 and the S&P 500 0.8% lower to finish at 4,705. Tesla plunged 4%, and AMD fell 2.5%, while Nvidia, Intel, and Adobe each dropped by over 1%. The energy sector outperformed amid a rally in the crude oil price. Small-cap stocks also extended losses, with the Russell 2000 index falling 2.7%.

Fixed income: After rising to test the 4% mark and briefly reaching 4.01%, the 10-year Treasury yield reversed and finished the choppy session 1 bp lower at 3.92%. The reversal was triggered by the December FOMC minutes, which showed that several participants suggested the Fed should start discussing the conditions for slowing down the pace of quantitative tightening.

China/HK Equities: The sluggishness in economic recovery and policy uncertainty has been keeping investors cautious. The correction overnight in the US certainly did not help. The apparent effort to calm both private enterprises and investors' nerves, as reported by the media, by removing an official for scaring the mobile game industry propelled Tencent and NetEase about 1% higher. However, it was not sufficient to lift the general market sentiment. The Hang Seng Index declined 0.9%, and the CSI300 slid 0.2%.

FX: The dollar traded mixed as it extended its gains against JPY, EUR, and AUD but weakened modestly against GBP. USDJPY rose 0.9% to 143.29 overnight in New York and is currently trading around 142.80 this morning in Asia, near the mid-point of the recent 140-145 range.

Commodities: Explosions in Iran, resulting in over 100 casualties at an event commemorating an Iranian general killed in a US drone strike four years ago, along with the shutdown of the largest oilfield in Libya due to protests, triggered a rally in crude oil prices. Brent crude futures rose by 3.1% to $78.25, and WTI crude gained 3.3% to $72.70. Meanwhile, gold shed 0.8% to $2,041.

Macro:

• The US JOLTS job openings unexpectedly fell to 8,790k in November from the revised upward figure of 8,852k in October, slightly below the projected 8,821k from the Bloomberg survey. The hiring rate decreased from 3.7% to 3.5%.
• The US ISM manufacturing index picked up to 47.4 in December from 46.7 in November, surpassing the median forecast of 47.1. Notably, the production sub-index increased to 50.3 from 48.5, and the employment sub-index improved to 48.1 from 45.8.
• The most important message from the US December FOMC minutes released yesterday was that several participants indicated that the Fed “would slow and then stop the decline in the size of the balance sheet when reserve balances are somewhat above the level judged consistent with ample reserve.”  They suggested the FOMC “begin to discuss the technical factors that would guide a decision to slow the pace of runoff”.  In other words, the Fed will start discussing reducing the size of quantitative tightening. The minutes did not provide new information about the timing of the first rate cut.

Macro events:  US jobless claims (weekly), US ADP private employment (Dec), S&P Global US services PMI(Dec, final), France CPI (Dec), Germany CPI (Dec), UK mortgage approvals (Nov).

Earnings: Walgreens Boots, Lamb Weston, Conagra Brands, RPM.

In the news:

• Over 100 dead in Iran explosions at event honoring general killed by U.S. drone strike (CBS)
• Apple dominates global premium smartphone market in 2023, but Huawei gains ground on the back of its new 5G handsets (SCMP)
• Samsung Places AI at Forefront as 2024 Phone Launches Kick Off (Bloomberg)
• The West Badly Needs More Missiles—but the Wait to Buy Them Is Years Long (WSJ)
• China’s largest bubble tea makers Mixue and Guming apply for Hong Kong IPO (SCMP)

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