Global Market Quick Take: Asia – December 13, 2023

US Equities: The S&P500 rose 0.5% to 4,644, and the Nasdaq 100 added 0.8% to 16,354, reaching new highs for the year. Eight of the 11 S&P500 sectors gained, while energy fell 1.4% amid a nearly 4% plunge in crude oil prices. Oracle plummeted 12.4% after reporting weaker-than-expected revenue. Broadcom surged 4.2% after a major investment bank called for a buy, citing AI tailwinds. Besides the FOMC, investors have their eyes on Adobe’s quarterly results, scheduled to release today for a gauge of the AI business landscape.

Fixed income: After choppy initial reactions to the in-line CPI report, investors took note of the still strong core services ex-shelter print and saw the 2-year yield 2bps higher to 4.73%. The 10-year yield, while bouncing from the day’s lows, managed to finish 3bps lower at 3%. The demand in the $21 billion 30-year auction was robust. All eyes are now on the Fed's economic projections and post-FOMC communication.

China/HK Equities: The Hang Seng Index rallied 1.1% in a light-volume session. Hansoh Pharmaceutical surged 6.9%, topping the performance with the market benchmark index. Chinese property developers bounced, with China Resources Land adding 5.9%, Longfor up 4.9%, and Country Garden up 8.2%. The CSI300 added 0.2%, also led by property developers. The readout from the Central Economic Work Conference, released in the evening, reiterated the Chinese authorities’ pledge to resolve the risks in the property sector.

FX: Dollar pushed lower despite inflation coming in a bit mixed but much of the upside was driven only by a few categories and may be unlikely to unnerve the Fed. Japanese yen was the outperformer, USDJPY saw a sharp drop to 144.74 before rising back above 145.50. Sellers however returned in Asia morning and pair was back below 145.40 as Q4 tankan survey signalled a stronger Q4 GDP and sticky prices. Other currencies were in smaller ranges with Fed and other central bank announcements awaited. EURUSD back to test the 1.08 handle while GBPUSD reversed a drop to 1.2520 and is now back at 1.2570. AUDUSD slumped on US inflation report, falling below 0.6550 as AUDNZD also moved below 1.07. China is also seen to be skipping a big demand stimulus coming out of a key meeting, which could turn AUD momentum bearish.

Commodities: Crude oil plunged to its lowest level in five months amid further signs of robust supply. The weekly average of Russia’s seaborne crude exports jumped to their highest level since early July. About 3.2mb/d were shipped from Russian ports, according to Bloomberg’s tanker tracker data. The Energy Information Administration also raised its estimate for the US supply. In its latest Short Term Energy Outlook report, it raised its forecast for supply in 2023 by 30kb/d to 12.93mb/d from its previous report. Focus turns to OPEC’s monthly market report due today, as well as the Fed decision. Gold gave up earlier gains following the US inflation data and was back around $1980.

Macro:

• US November CPI was broadly in-line with expectations with only a minor beat on the headline MoM which rose 0.1% vs. expectations of remaining flat but YoY was 3.1% as expected. Core was in-line with expectations at 0.3% MoM and 4.0% YoY. A small number of categories drove bulk of the gains, and this print continues to put an emphasis on the end of the Fed’s rate hike cycle but a complete dovish turn still appears to be unlikely.
• China concluded the Central Economic Work Conference, which set the agenda for economic policies in 2024 on Tuesday. Among other priorities, the conclave emphasized: 1) Developing new industries and business models through technological innovation, 2) Expanding domestic consumption and investment, 3) Deepening reforms, 4) Opening up the economy, 5)Preventing and resolving risks, including those in the property sector, local government debts, and small to medium-sized financial institutions, 6) Rural development, 7) Integration of cities and rural areas, 8) Green and low-carbon emissions, 9) Improving people’s livelihood. These priorities are essentially familiar rhetoric in recent years. Investors are likely to adopt a wait-and-see attitude pending further policy developments.
• UK’s wage growth missed expectations with payrolls turning negative at -13k for Nov from 39k previously and 5k expected. Wage growth came in below expectations as well, although still stuck in the 7% range. However, data serves as a reminder that BOE can cut sooner than expected.
• Argentina depreciated the peso by 54% to an official rate of 800 per dollar and announced a swath of spending cuts as part of new administration’s shock therapy program. The move was welcomed by the IMF and expectations are building for another round of devaluation soon.

Macro events: FOMC, BCB, OPEC MOMR, UK GDP (Oct), EZ IP (Oct), US PPI (Nov)

Earnings: Adobe,

In the news:

• China Puts Focus on Industrial Policy, Skips Big Demand Stimulus (Bloomberg)
• Global EV sales hit new record in November - Rho Motion (Reuters)
• Sweden Posts Sharp Home-Price Plunge as Rates Hit Global Markets (Bloomberg)
• Japan Large Manufacturer Sentiment Improves Ahead of BOJ Meeting (Bloomberg)

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

For a global look at markets – go to Inspiration.