Global Market Quick Take: Asia – December 17, 2024

Key points:

• Macro: US PMIs rebound driven by services, retail sales on tap today
• Equities: Nasdaq 100 reaches new highs, while Dow Jones falls 8 straight days
• FX: Yen weakens past 154/USD
• Commodities: Gold and oil down overnight
• Fixed income: 2-year Treasury yield rose to its highest level in nearly three weeks

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US services PMI hit its highest levels since October 2021 at 58.5, while manufacturing was at 48.3. Composite employment nudged above 50 for the first time since July, while new orders were at their highest level since April 2022. Price data was pretty stable, sending a Goldilocks message once again ahead of the Fed decision this week where a 25bps cut is baked in, but 2025 path looks highly uncertain.
• Eurozone PMIs also saw some improvement, mainly driven by services that rose to expansion territory at 51.4 while manufacturing was unchanged at 45.2 with both German and France manufacturing PMIs slipping further but Germany’s services PMI in expansion. Meanwhile, UK’s manufacturing PMI slipped to 47.3 from 48 in November, while services rose to 51.4 from 50.8.
• Canada’s political mess comes into focus as finance minister Chrystia Freeland resigned from Trudeau’s cabinet because of differences over how to prepare for Trump administration. Dominic LeBlanc was named finance minister later, and a blow-out fiscal deficit was delivered later with C$62 billion of deficit for 2023-24 vs C$40 billion expected in April, breaching fiscal anchor of maintaining 2023/24 deficit at or below $40.1 billion. There are growing calls for PM Trudeau to resign.
• On tap today: UK Unemployment Rate (Oct), German Ifo (Dec), German ZEW (Dec), US Retail Sales (Nov), Industrial Production (Nov), Canadian CPI (Nov)

Equities: 

• US - The Nasdaq 100 rose by 1.3%, surpassing the 22,000 mark for the first time. Tesla's shares increased by 6%, Broadcom climbed 11.2% following its achievement of a $1 trillion market valuation last week, and Apple and Alphabet both reached new all-time highs, rising by 1.1% and 3.6%, respectively, while Super Micro Computer dropped 8.2% as it prepared to exit the index.
• On the contrary, the Dow Jones Industrial Average has declined for eight consecutive days, losing 0.25%, primarily driven by a 4.22% drop in UnitedHealth Group.
• Japan - Nikkei 225 edged down on Monday, continuing losses from the previous session. Investors are focused on the Bank of Japan's upcoming policy decision, with markets split on whether interest rates will rise or stay the same. Last week, BOJ officials indicated that more time is needed to assess recent economic data. In other news, SoftBank has announced to invest $100b in the US over the next 4 years.
• German - DAX closed 0.5% lower on Monday, continuing its decline from Thursday's record high. Auto giants faced pressure after Chancellor Olaf Scholz lost a planned confidence vote, paving the way for national elections in February following the coalition's end in November.
• Hong Kong – HSI fell 0.9% on Monday, its lowest since December 6, due to a slowdown in China's retail trade and weak domestic demand. All sectors declined, led by tech, property, and consumer stocks, but losses were limited by a rise in US futures ahead of the Fed's interest rate decision.

FX:

• The USD traded mixed with gains in GBP and NZD leading the G10 board and JPY and CHF declining the most.
• USDJPY broke 154 and rallied for 6th day on speculation BoJ will maintain current policy at upcoming meeting. Hike probability is at 16% for Dec while it stands around 65% for Jan. This comes as the Fed is expected to cut in December even if the 2025 path is uncertain.
• USDCAD hit new 4.5 year highs at 1.4271 on news that Finance Minister Freeland has resigned and calls for PM to resign. However, pair recovered later to trade below 1.4240.
• GBPUSD heading for another test of 1.27 after rallying from 1.2620 overnight on PMIs leading to reduced BOE easing bets. Labour data test in the day ahead and moving averages come in at 1.28+ levels.

Commodities:

• Gold futures fell by $5.80 to $2,670 an ounce, down from earlier highs of $2,683.40, as markets anticipated the Federal Reserve's policy meeting, expecting a third rate cut totaling 100bps this year and insights on the 2025 outlook.
• Oil prices also declined, with WTI crude dropping $0.58 (0.81%) to $70.71 per barrel and Brent falling $0.58 (0.78%) to $73.91 per barrel.

Fixed income:

• Treasuries saw minor fluctuations as earlier gains were reversed, driven by a couple of futures block sales of the Ultra 10-year contract. In the Treasury options market, demand for upside protection increased. In fed funds futures, activity leaned towards buying in anticipation of Wednesday's Fed interest-rate decision.
• The Department of the Treasury is set to sell $13 billion in bonds due in November 2044, whereas the Ministry of Finance will auction ¥1 trillion of a reopened bond maturing in September 2044.

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