Global Market Quick Take: Asia – October 11, 2024

Key points:

• Equities: US stocks fall on inflation report; AMD introduces new AI server chips
• FX: USD weakened after disappointing labour and increase in CPI
• Commodities: Gold and oil prices rise; inflation and demand concerns
• Fixed income:  $22 billion 30-year Treasury yielded 4.389%, the highest since July
• Economic data: German Inflation Rate, UK Monthly GDP, Canada Unemployment Rate, US PPI, US Core PPI

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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:

• US stock futures drift higher as markets digest hot CPI (Investing)
•  AMD debuts latest AI chips as it battles rivals Nvidia, Intel (Yahoo)
•  Buffett's Berkshire cuts stake in BofA to below 10% (Investing)
•  BOJ may not be as dovish as Ueda's cautious rhetoric suggests (Investing)
•  Shares of Trump media company surge to highest in six weeks (Yahoo)
•  Three Fed Officials Shrug Off CPI Report, Bostic Open to Pause (Bloomberg)
•  Gold Snaps Losing Streak Amid Inflation Questions (Barron’s)
•  Crude Oil Futures Jump on Middle East Tensions (Barron’s)

Macro:

• The US annual inflation rate slowed for the sixth consecutive month to 2.4% in September 2024, the lowest since February 2021, down from 2.5% in August but slightly above the forecast of 2.3%. Shelter prices rose less (4.9% vs 5.2%), and energy costs saw a greater decline (-6.8% vs -4%), driven by drops in gasoline (-15.3% vs -10.3%) and fuel oil (-22.4% vs -12.1%), while natural gas prices rebounded (2% vs -0.1%). Prices for new vehicles (-1.3% vs -1.2%) and used cars and trucks (-5.1% vs -10.4%) continued to fall. Conversely, inflation increased for food (2.3% vs 2.1%) and transportation (8.5% vs 7.9%). The Consumer Price Index (CPI) rose by 0.2% month-over-month, matching August's increase but exceeding the 0.1% forecast. Annual core inflation unexpectedly edged up to 3.3% from 3.2%, while the monthly core inflation rate remained steady at 0.3%, above the forecast of 0.2%.
• US weekly jobless claims rose to 258,000, surpassing the consensus of 230,000 and up from 225,000 the previous week. The four-week moving average increased to 231,000 from 224,250. Continued claims climbed to 1.861 million from 1.819 million the prior week, marking the 18th consecutive week above 1.8 million.

Macro events: US PPI, US Core PPI 

Earnings: JP Morgan, Wells Fargo, BlackRock, BNY, Fastenal

Equities: US stocks closed slightly lower on Thursday after a hotter-than-expected inflation report, adding uncertainty to the Federal Reserve's November rate decision. The S&P 500 and Dow Jones fell by 0.1% and 0.2%, respectively, while the Nasdaq also edged down. September's consumer price index rose by 0.2%, pushing annual inflation to 2.4%. Initial jobless claims hit a 14-month high at 258,000. Nvidia (up 1.6%) and Amazon (up 0.8%) helped cushion the Nasdaq's losses. Investors are also anticipating Tesla's robotaxi reveal. AMD shares fell over 4% despite unveiling new server chips designed to enhance AI processing. Hong Kong equities jumped 2.8% to 21,211 on Thursday, driven by optimism for Chinese fiscal support. Expectations include a CNY 2-3 trillion stimulus package and tax relief. Gains were led by consumer, financial, and tech sectors.

Fixed income: Treasuries ended mixed: short-term yields improved, while long-term yields declined. Despite a higher-than-expected rise in September's CPI, a significant increase in jobless claims took precedence, boosting the Fed rate-cut premium. A sharp rise in oil prices initially pushed up long-term yields, but pressure eased after a 30-year bond auction concluded with a record high indirect award. Late trading saw 2-year yields fall by about 4 basis points, while 30-year yields rose by over 3 basis points. The 2s10s and 5s30s spreads widened by around 5 basis points, below session highs reached before the auction. The $22 billion reopening of 30-year bonds yielded 4.389%, about 1.5 basis points lower than the when-issued yield. The primary dealer award was 12.2%, the lowest in a year, while the indirect award surged to a record 80.5%, offsetting a drop in the direct award to 7.4%. The market's reaction saw the long end of the yield curve outperform, with the 5s30s spread narrowing from session highs.

Commodities: Gold prices rose 0.84% to $2,629 on Thursday, rebounding from a three-week low as markets digested new economic data. US inflation eased to 2.4% in September, slightly above expectations, but rising unemployment claims supported gold by casting doubt on the labor market's resilience to high interest rates. Investors now expect the Fed to implement two additional 25 basis point rate cuts this year. Silver prices also edged higher but remained near a three-week low of $31.16. WTI crude oil futures surged 3.5% to $75.85, and Brent crude oil futures jumped 3.7% to $79.40. The increase was driven by heightened US fuel demand due to Hurricane Milton, which caused significant power outages and fuel shortages in Florida, along with concerns over Middle East supply disruptions and growing energy demand in the US and China.

FX: USD weakened due to disappointing labor market data and a modest increase in consumer prices, indicating that the Federal Reserve might continue to cut interest rates. The consumer price index (CPI) increased by 0.2% in September, marking a 2.4% year-on-year rise, the smallest since February 2021. Economists had predicted a 0.1% monthly increase and a 2.3% annual rise. The Fed has shifted its focus more towards employment, having recently reduced interest rates by 50 basis points. The dollar fell by 0.38% to 148.66 yen, partly due to comments from Bank of Japan Deputy Governor Ryozo Himino supporting further rate hikes. In contrast, the Australian dollar gained 0.14% to $0.67280, driven by an equity rally in China. Additionally, the dollar weakened by 0.12% to 7.084 against the offshore Chinese yuan, ahead of a highly anticipated news conference on fiscal policy by China's finance ministry.

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