Global Market Quick Take: Asia – December 9, 2024

Key points:

• Macro: US jobs report was mixed, China’s inflation numbers up today
• Equities: Lululemon soared 15.9% after exceeding revenue and earnings expectations
• FX: Yen outperforms in G10 despite USD erasing its post-NFP losses quickly
• Commodities: Oil prices fall due to OPEC+ extends output cuts and supply surplus fears
• Fixed income: U.S. Treasury yields hit six-week low post-payroll data

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Disclaimer: Past performance does not indicate future performance.

Macro:

• The US jobs report was a mixed bag, with the unemployment rate ticking back up to 4.2% versus a steady 4.1% reading expected, with the additionally negative angle that this was despite a 0.1% drop in the participation rate (more unemployed despite the slightly smaller labor force). This has edged out the relatively positive news that the Nonfarm Payrolls Change rose +227k for the month vs. +220k expected, with a +56k revision to the two prior months' data. However, market continues to expect the Fed to cut rates next week.
• Canada’s unemployment rate jumped higher to 6.8% in November, the highest since 2016, from 6.6% previously. Participation rate jumped higher to 65.1% from 64.8% and headline payrolls was above expectations at 50.5k vs. 25k expected and 14.5k prior. Market is now pricing 80% odds of a 50bps cut this week.
• Data released Saturday by the People's Bank of China revealed that it has resumed buying gold. It was the largest official buyer in the world in 2023 as it looked to be headed on a multi-year effort to diversify out of US dollars. PBOC’s holdings of gold rose to 72.96 million fine troy ounces at the end of November, up from 72.80 million troy ounces, where they have been since May.
• Data due today: China’s CPI and PPI

Equities: 

• US - On Friday, the S&P 500 and Nasdaq reached record highs, rising 0.2% and 0.8% respectively, due to a strong jobs report boosting rate cut optimism. Tech stocks like Amazon, Tesla, and Meta gained, while the Dow Jones fell 123 points, impacted by Nvidia and UnitedHealth declines.
• Lululemon shares surged 15.9% after exceeding Wall Street's expectations on both revenue and earnings. The company raised its full-year outlook, driven by strong international sales, with Q3 revenue up 9% YoY and EPS at $2.87. Ulta Beauty rose 9% after raising its annual projections. DocuSign surged 28% as it increased its full-year revenue forecast, with analysts optimistic about early contract renewals.
• Germany - DAX rose 0.1% to near a record 20,380, driven by Fed rate cut expectations, despite political concerns in France. Up 0.4% weekly and 20% year-to-date, its strength comes from global revenues and a weaker euro boosting exports.
• Hong Kong - HSI rose 1.2% to 19,789 on Friday, rebounding from the previous session's weakness, driven by optimism about potential monetary easing by China's central bank next year to support growth and combat deflation.
• Earnings for the week - Oracle, C3.ai, Gamestop, Broadcom, Costco, Adobe, Macy’s

FX:

• The USD dipped as jobs report spurred increased bets of a Fed rate cut next week, but the reaction was short-lived with US economic resilience and Trump tariffs still the key theme for markets.
• EURUSD jumped to 1.0630 on the jobs report but erased the move completely in the next hour to reverse back to 1.0560. ECB expectations for a rate cut this week have tilted back towards 25bps with fiscal and political concerns a big focus.
• GBPUSD also rose to 1.28+ before sliding back to 1.2740. Bank of England rate-setter Swati Dhingra warned that high interest rates are harming the economy by reducing consumer spending and business investment. Advocates a gradual decrease in rates to normalise economy, suggesting a long-term neutral rate between 2.5% and 3.5%.
• USDJPY moved below 149.50 and only half of the move was erased post-NFP, with yen remaining as the only outperformer vs. the US dollar on Friday in the G10 space.
• Commodity currencies underperformed, with AUDUSD taking another look below 0.64 ahead of China’s inflation print today. RBA comes next up on Tuesday and markets will be watching if the RBA tweaks its hawkish stance after the growth disappointment last week.

Commodities:

• WTI crude oil fell 1.6% to $67.2, with a weekly drop of nearly 1%, due to 2025 supply surplus concerns overshadowing OPEC+'s extended production cuts until 2026. Brent crude dropped 1.3% to $71.1.
• Gold stabilized at around $2,633 on Friday, as data indicated potential Fed rate cuts. However, physical demand from China declined, and global gold ETFs saw outflows in November after six months of inflows.

Fixed income:

• U.S. Treasury yields hit a six-week low after payroll data, with the 10-year yield down 3.3bps to 4.149% and the 2-year yield down 5bps below 4.1%. The data increased expectations for a Fed rate cut in December.

For a global look at markets – go to Inspiration.