Global Market Quick Take: Asia – December 15, 2023

US Equities: Stocks lost some of the post-FOMC momentum with Russell outperforming but S&P 500 was up a modest 0.3% while NASDAQ 100 was down 0.2%. Hot retail sales and a slip in jobless claims took out some of the air from Fed’s dovish stance. Adobe was down 7% following disappointing earnings, but semiconductor stocks jumped to an all-time high with Intel rising to fresh 52-week highs. Rivian was up 13% on AT&T deal and Occidental Petroleum jumped 3% on Buffett push.

Fixed income: Treasuries extended gains after the dovish FOMC a day before, although the pace weakened with relatively hawkish ECB and BOE, as well as hot US retail sales and lower jobless claims. 2yr yields ended down by ~4bps while 10yr yields slipped over 9bps. Today’s focus turns to flash PMIs which may serve as a test of the saft landing hopes.

China/HK Equities: While most of the Asian markets were higher on Thursday post-FOMC, CSI 300 still closed down by 0.5% with credit data showing a weaker-than-expected expansion in November and eyes turning to activity data due today which may show an improving headline due to base effects but underlying trends could continue to be a concern. HSI opened higher but lost momentum in the day, still closing in gains of 1%.

FX: The dollar extended its post-FOMC slump, which was aided by a relatively hawkish BOE and ECB pushing their currencies higher. EURUSD jumped higher to test 1.10 from sub-1.09 at Thursday’s open, and 76.4% fibo retracement level at 1.1080 is in focus. GBPUSD pierced through the 1.27 handle, and touched highs of near-1.28 with 1.2881 being in focus. USDNOK slid to 10.4471 on Norges Bank rate hike, while USDCHF saw only a modest gain to 0.8630-levels. AUDUSD rose to trade around the 0.67 handle while NZD rose to 0.6240. USDJPY was seen at lows of 140.97, and a break below 140 could open the doors to 137-138 levels.

Commodities: The sharply lower USD boosted the commodity sector. Crude oil prices rose over 3% with Fed pivot signalling demand outlook could get supported. The IEA hiked its 2024 world oil demand growth forecast by 120k BPD to 1.1mln BPD, albeit cutting its 2023 forecast by 90k BPD to 2.3mln BPD. Gold was steady around $2040 while Silver cleared the barrier at $24. Copper took a look above $3.90 but China activity data may be key test today.

Macro:

• As expected, the ECB opted to stand pat on rates while the Governing Council has decided that reinvestments under PEPP will run at current levels during H1 (vs. previous guidance of “at least until the end of 2024), after which, it intends to reduce the PEPP portfolio by EUR 7.5bln per month on average. Lagarde, in her press conference, said that the committee members did not talk about rate cuts and they are in a data-dependent mode. Inflation projections were downgraded to 5.4% from 5.6% for 2023, 2024 cut to 2.7% from 3.2% and 2025 held at 1.9%. On the growth front, 2023 and 2024 projections were cut with GDP next year seen at just 0.8% with the 2025 forecast held steady at 1.5%.
• The BOE also opted to stand pat on rates via a 6-3 vote with hawkish dissent once again. The central bank noted that economic developments have been muted, and overall language remained firm. Comments like “it was too early to conclude that services price inflation and pay growth were on a firmly downward path” suggested that the BOE leaned relatively hawkish for now.
• US retail sales came in hot and bodes well for Q4 GDP growth, but there were some downward revisions to October. Headline rose 0.3%, above the -0.1% expected although the prior was revised down to -0.2% from -0.1%. The Core (ex-autos) retail sales rose by 0.2%, above the -0.1% forecast and accelerating from downwardly revised unchanged print (initially +0.1%).
• US jobless claims for the week ending 9th December fell to 202k from 221k, short of the expected 220k. Continued claims (w/e 2nd Dec) ticked higher to 1.876mln from 1.856mln, but beneath the forecasted 1.887mln.
• The Swiss National Bank also maintained the policy rate at 1.75% and the emphasis on selling foreign currency removed. There was no clear guidance for the next move but inflation is seen back below 2% for 2024. However, Chairman Jordan underscored the FX tweak and more pertinently said that December’s discussion did not cover rate reductions and that further ahead the current forecasts do not see any tightening.
• Norges Bank defied consensus by triggering the hike that they flagged in November's meeting as "likely" to occur in December. The rate hike was primarily driven by NOK depreciation, and the statement does not rule out further tightening.

Macro events: Quad Witching, UK GfK (Dec), China Retail Sales (Nov), EZ/UK Flash PMIs (Dec), EZ Trade (Oct), US NY Fed Manufacturing (Dec)

Earnings: Darden Restaurants

In the news:  

• AT&T to buy Rivian electric vehicles in pilot deal to cut cost, emissions (Reuters)
• Yellen to Visit China Again in 2024, Focusing on ‘Difficult’ Topics (Bloomberg)
• Berkshire Hathaway buys Occidental Petroleum shares worth about $588.7 mln (Reuters)
• Costco posts upbeat first-quarter results on strong demand for cheaper groceries (Reuters)

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

For a global look at markets – go to Inspiration.