Global Market Quick Take: Asia – August 7, 2024

In the news:

• Indexes end with strong gains, rebounding from global market sell-off (Reuters)
•  Super Micro current quarter guidance tops estimates, but Q1 earnings fall short (Investing)
•  United Overseas Bank (SGX:U11) Has Announced That It Will Be Increasing Its Dividend To SGD0.88 (Yahoo)
•  Airbnb stock slumps as consumer headwinds weigh on travel demand (Investing)
•  Reddit forecasts quarterly revenue above estimates on strong ad spend (Investing)
•  New Zealand's Q2 jobless rate rises to 4.6%, wage inflation up slightly (Investing)
• Rivian sticks to flat production outlook for 2024, expects deliveries dip in Q3 (Investing)

Macro:

• The Reserve Bank of Australia (RBA) delivered a hawkish hold at its August 6 meeting. The cash rate was kept unchanged at 4.35%, as expected, but there was an emphasis on upside risks to inflation. While markets have removed the odds of another rate hike from the RBA after the softer Q2 CPI last week, there were no clear signals from the meeting for the markets to start considering rate cuts. To read our analysis further on the RBA decision and what this means for the AUD, go to this article titled ‘AUD: Hard to Buy in RBA’s Hawkishness’.
• New Zealand’s Q2 labor market report came in slightly hotter-than-expected. Jobless rate rose less than forecast to 4.6% (vs. 4.7% exp) from a upward revised 4.4% in Q1. Employment rose 0.4% from the previous three months, beating an estimated 0.2% decline, while annual wage inflation slowed for a fifth straight quarter. This reduces the odds of an RBNZ rate cut next week, which is now 60% priced in.

Macro events: BoC Minutes, German Trade Balance (Jun) and Industrial Output (Jun), Chinese Trade Balance (Jul)

Earnings: Shopify, Walt Disney, Novo Nordisk, Sony, Robinhood, Oxy

Equities: US equities staged a robust recovery on Tuesday, rebounding after a three-day slump that erased a significant portion of the market's 2024 gains. The S&P 500 and Nasdaq each climbed 1%, while the Dow Jones added 293 points as investors took a breather from recession fears. Japanese stocks also had a standout day, soaring 10.2%, their best performance since October 2008. All sectors ended in the green, with real estate and technology leading the gains. Among mega caps, Nvidia rose 4.3%, Microsoft gained 1.1%, Meta advanced 3.8%, and Tesla added 0.9%. Palantir Technologies spiked 10.4% after surpassing analysts' expectations, Uber Technologies jumped 10.9% on strong Q2 results, and Caterpillar rose 3% after beating forecasts. The CBOE Volatility Index also settled lower, falling 35% to around 25. This comes after it had surged by as much as 180% to 65 on Monday before easing yesterday as stocks began to recover this morning. In extended trading, Airbnb fell 14% after reporting second quarter earnings that missed estimates and warned that demand is slowing.

Fixed income: Treasuries concluded with curve-steepening losses as long-end yields rose by about 10 basis points. Yields increased across the curve, with the 10-year benchmark closing 10 basis points higher. The recovery of a significant portion of Monday's stock market losses reduced the demand for Treasuries as a safe haven. Yields slightly retreated from their highs after a 3-year note auction attracted strong demand, improving the outlook for the 10- and 30-year auctions on Wednesday and Thursday. The amount of money parked by investors at a major Federal Reserve facility fell below $300 billion for the first time since 2021. U.S. overnight indexed swaps are pricing in around 100 basis points of easing by the end of the year. Meanwhile, New Zealand's 2-year yield rose by 11 basis points, buoyed by better-than-expected employment data.

Commodities: WTI crude oil futures rose to $73.5 per barrel on Tuesday, bouncing back from a six-month low amid renewed supply concerns and market recovery. Heightened fears of supply disruptions stem from escalating Middle East tensions, particularly Iran’s threats against Israel and the US. Additionally, production at Libya’s Sharara oilfield has been reduced due to protests, further exacerbating supply worries. The U.S. Energy Information Administration (EIA) reported a global inventory drop of about 400,000 barrels per day in the first half of the year, with an expected decline of 800,000 bpd in the second half. Despite lowering its price forecasts due to economic concerns, the EIA expects prices to reach $85–$90 per barrel by year-end. Meanwhile, the Baltic Exchange's main sea freight index, which tracks rates for ships transporting dry bulk commodities, rose for the third consecutive day on Tuesday, climbing approximately 0.5% to a one-week high of 1,685 points.

FX: The US dollar remained in a narrow range on Tuesday as the equity market sell-off cooled after a dramatic two-day move. There was no key data out in the US, but Fed’s Daly’s comments that rate cuts will be coming in the next few months helped repair the sentiment. This saw the Japanese yen settling in a narrow range after sharp gains in the last few days amid carry trade unwinding. Japan's MOF, FSA and BoJ held a meeting on market volatility, but telegraphed little in terms of details. The British pound weakened and the Euro followed as well, but the Australian dollar was stronger after a hawkish hold from the Reserve Bank of Australia. We see a bearish setup for the Aussie dollar from here, however, unless the global risk-on sentiment can return. Kiwi dollar was higher this morning on the back of firmer jobs data, but gains were flimsy.

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

For a global look at markets – go to Inspiration.