Global Market Quick Take: Asia – October 3, 2024

Key points:

• Equities: Meituan was up 14.6% yesterday as Hang Seng rally continues
• FX: Japanese yen plunged 2% on PM Ishiba’s dovish shift
• Commodities: Oil halts rally after EIA data
• Fixed income: Treasury yield curve steepens with long end higher
• Economic data: US ISM services PMI and jobless claims

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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:

• Stock market today: Dow ekes out gain, but rising Middle East tensions weigh (Investing)
• Demand for NVIDIA's Blackwell is 'insane' - Jensen Huang (Yahoo)
• Levi Strauss considers possible sale of Dockers brand, shares tank 10% (Investing)
• Morning Bid: Yen rattled by Japan PM's 'unseemly' rate comments (Reuters)
• Tesla discontinues most affordable Model 3 variant in US, website shows (Investing)
• Tesla stock drops 3% after Q3 deliveries fall short of estimates (Yahoo)
• Rally in oil prices loses steam on mixed day for global stocks (Yahoo)

Macro:

• US ADP jobs report was hotter than expected, rising by 143k, above the 120k consensus and accelerating from the prior (revised up) 103k. On wages, the median change in annual pay for job stayers eased to 4.7% from 4.8% Y/Y, while job changes eased to 6.6% from 7.3%. The report shows that hiring continues but pay growth is slowing, and this has offered some further pushback to Fed easing expectations, but focus remains on the non-farm payrolls print that will be out on Friday.
• Japan’s Prime Minister Shigeru Ishiba said the economy isn’t ready yet for further interest rate hikes, following a first meeting with Bank of Japan Governor Kazuo Ueda on the first full day of his new administration. This comment adds to the case of a patient BOJ normalization path.

Macro events: Swiss CPI (Sep), EZ/UK/US Final Services and Composite PMIs (Sep), US Durable Goods R (Aug), US ISM Services PMI (Sep), US Initial Jobless Claims, Mainland China market holiday

Earnings: Constellation Brands, Angiodynamics

Equities: US stocks closed slightly higher on Wednesday as investors remained cautious due to escalating tensions in the Middle East. The S&P 500 ended nearly flat, while the Dow Jones gained 39 points and the Nasdaq inched up by 0.1%. Meanwhile, Hang Seng Index continues to make new highs, gaining 6.2% in the Asia session, with consumer and property names outperforming. Meituan was up 14.6% yesterday while Longfor Group rose 24.7%. ADP jobs data revealed stronger-than-expected growth, with 143,000 private-sector jobs added in September, prompting investors to look forward to Friday’s jobs report for more insights into the economy and the Fed’s interest rate decisions. Nike shares fell 6.8% post earnings after withdrawing its full-year outlook, and Tesla dropped 3.5% following weaker-than-expected deliveries numbers (462,890 vs 463,310).  Defense and energy stocks continue to be in focus with rising geopolitical tensions. You can refer to the defence theme page for inspiration.

Fixed income: Treasuries declined influenced by a larger-than-expected rise in the September ADP employment change and an upward revision to August's data, as well as rising oil prices during the US morning session. Yields retreated from their session highs as oil prices reversed most of a 3.8% surge. Yields ended the day 3 to 6 basis points higher across the curve in a bear-steepening move, with the 2s10s and 5s30s spreads widening by 3 basis points and 2 basis points, respectively. The 10-year yield settled around 3.785%, closer to the higher end of its daily range of 3.722% to 3.815%. Most of the losses occurred shortly after the ADP data release, with futures block trades, particularly those involving 2-year and 5-year contracts, contributing to a steeper yield curve.

Commodities: WTI crude futures rose overnight due to concerns about Israel's potential response to Iran's missile attack. Despite no significant changes in OPEC+ production expectations, the anticipation of increased production starting December 1st and an EIA crude oil inventory report showing a build instead of a projected draw led to a midday decline in futures. WTI crude November contract closed near its low but still gained 0.39% to $70.10, while Brent increased by 0.46% to $73.90. Gold fell by 0.17% to $2,658, and silver rose by 1.19% to $31.83. The decline in precious metals was the third in four sessions, mainly due to profit-taking after recent gains and a stronger US Dollar.

FX: The Japanese yen plunged 2% against the US dollar on reports that the supposedly hawkish new Japan PM Ishiba commenting that the economy is not ready for an additional rate hike. This has added weight to Bank of Japan Governor Ueda’s cautious stance on further normalization, at a time when markets are also seeing a pushback on Fed’s rate cut expectations after a hawkish tilt in Fed Chair Powell’s comments earlier in the week and upbeat labor market data from JOLTS job opening to ADP jobs survey last night. The US dollar gained, mostly on the back of yen’s losses. Activity currencies generally outperformed, led by Norwegian krone, while New Zealand dollar lagged the pack on the back of increasing rate cut expectations from the Reserve Bank of New Zealand.

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

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