Global Market Quick Take: Asia – September 24, 2024 Global Market Quick Take: Asia – September 24, 2024 Global Market Quick Take: Asia – September 24, 2024

Global Market Quick Take: Asia – September 24, 2024

Macro 6 minutes to read
APAC Research

Key points:

  • Equities: Tesla climbed 4.9% ahead of its robo taxi launch on Oct 10
  • FX: The euro plunged across the board on PMI weakness
  • Commodities: Gold continues to break all-time highs
  • Fixed income: 3 month Treasury yield continues to fall
  • Economic data: RBA decision, German Ifo, US consumer confidence

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

0924 

Disclaimer: Past performance does not indicate future performance.

 

In the news:

  • Biden proposes banning Chinese vehicles from U.S. roads with software crackdown (CNBC)
  • Euro zone business activity unexpectedly contracts in September, PMI shows (Reuters)
  • Indian shares continue to scale new peaks after U.S. rate cut (Reuters)
  • UniCredit boosts its stake in Commerzbank, applies to own up to 29.9% of the German bank (CNBC)
  • Biohaven Surges After Delaying Progression By Up To 70% In A Rare Disease (IBD)
  • Trump Media plummets 10% as post-lockup selloff picks up steam (CNBC)
  • Fed officials leave door open to another large interest-rate cut (BT)

Macro:

  • PMI data was weaker across the board, but weakness in Europe, particularly in Germany, was the most alarming. German manufacturing PMI for September slipped to 40.3, its lowest levels in a year, from 42.4 in August. This signaled structural manufacturing woes for Germany. Meanwhile, France’s services PMI also reverted back to contraction at 47.4 from August’s Olympics-driven surge to 53.1. Overall, Eurozone composite PMI fell to 48.9 in September from 51.0 in August. UK’s PMIs also slowed but still remained in expansion and looked far more robust than the Eurozone’s with manufacturing PMI at 51.5 and services at 52.8 from 52.5 and 53.7 respectively in August. US manufacturing flash PMI for September also unexpectedly fell to 47.0 from 47.9 (exp. 48.5), while services declined less than forecast to 55.4 (exp. 55.2, prev. 55.7), which meant composite marginally dipped to 54.4 from 54.6.
  • Fed speakers generally supported the 50bps rate cut decision from last week and remained open to more such jumbo moves if labor market deteriorated sharply. Kashkari noted that the balance of risks have shifted towards risk of further labor market weakening and higher unemployment. Atlanta Fed President Bostic said that the economy is normalising more quickly than previously thought, so monetary policy needs to as well. Goolsbee stated that many additional rate cuts will likely be needed over the next year, stressing the need for rates to be lowered "significantly".

Macro events: RBA Policy Announcement; German Ifo (Sep), US Consumer Confidence (Sep), Richmond Fed (Sep), Fed’s Bowman, BoJ's Ueda, BoC's Macklem

Earnings: AutoZone, KB Home and Thor Industries

Equities: The S&P 500 rose by 0.3%, while the Dow Jones gained 0.1%, both achieving new record highs on Monday after last week's rally driven by the Fed's first rate cut in four years, set at 50 basis points. The Nasdaq 100 also edged up by 0.3%. Investors closely analyzed comments from several policymakers to understand the rationale behind the Fed's significant rate cut. Fed officials, including Raphael Bostic, Neel Kashkari, and Austan Goolsbee, expressed support for the recent cut and hinted at the possibility of further reductions in the coming months. Among stocks, Intel shares jumped 3.4% following reports of potential multibillion-dollar investments from Apollo Global Management. Tesla climbed 4.9% as investors anticipated the upcoming robotaxi launch and third-quarter sales figures. However, concerns over economic growth persist, with US manufacturing data hitting a 15-month low and job market indicators showing signs of weakening.

Fixed income: Treasuries ended with minimal changes, and the yield curve steepened after volatile trading during U.S. hours driven by Federal Reserve commentary and a sharp decline in oil prices. Initially, yields rose when two Fed officials indicated a high threshold for further half-point rate cuts. The market rebounded as oil prices plunged, supported by haven demand before Iran’s president signaled a willingness to ease tensions with Israel. Treasury yields had returned to nearly unchanged levels from the belly to the long end, with 2-year yields declining by about 1 basis point, which steepened the 2s10s spread by just over 1 basis point for the day. Fed swaps showed little price movement, continuing to price in around 75 basis points of rate cuts over the two remaining policy meetings this year.

Commodities:  WTI crude oil futures fell 0.89% to $70.37 per barrel, and Brent Crude futures declined 0.79% to $73.90 per barrel, influenced by concerns over weak demand from China and an unexpected slowdown in European manufacturing. The eurozone reported a surprising contraction in business activity, with stagnation in services and further deterioration in manufacturing output. Conversely, Nymex front-month natural gas surged 7.4% to $2.613 per mmBtu, reaching its highest level in nearly three months. Gold prices hit new record highs, rising 0.26% to $2,628.72, while silver dropped 1.55% to $30.69. Iron ore prices with 62% iron content fell below $90 again due to demand uncertainties and high inventories. Recent economic reports from China continue to indicate a challenging recovery.

FX: The relative weakness in European PMI was discussed in the Weekly FX Chartbook yesterday and turned out to be the key theme in FX markets yesterday. This made euro the underperformer among the major currencies as markets increased the odds of an October ECB rate cut. Euro’s weakness was most pronounced against the activity currencies kiwi dollar and Australian dollar, and it also fell over 0.6% against the British pound amid the odds of diverging economic and policy dynamics. Germany’s Ifo will be in focus today given risks of a recession signaling need for faster rate cuts from the ECB. The weakness in euro also filtered through to other European currencies, particularly the Scandies. The Australian dollar will be on in focus today with the RBA expected to leave rates unchanged and potentially keep a hawkish stance with risks of a recession still at bay. China’s central bank has also cut policy rates yesterday, and a press conference from the PBoC is eyed today, given more stimulus measures could further boost commodity currencies.

 

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

For a global look at markets – go to Inspiration.

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