Global Market Quick Take: Asia – June 12, 2024

In the news:

• Apple stock surges to record high after AI announcements (Yahoo)
• US stock futures steady after AI rally; Fed rate decision, CPI on tap (Investing)
• US oil futures rise after crude stocks fall more than expected (Investing)
• Nasdaq, S&P 500 post record closing highs as Apple soars (Investing)
• BOJ to keep ultra-low rates, debate fate of huge bond buying (Investing)
• Swedish fund manager to vote against Musk's $56 bln Tesla pay package (Reuters)
• Dollar hits four-week high ahead of US inflation report (Investing)

Macro: 

• The US CPI and FOMC policy decisions are key events on the market radar today. For a full preview of both, read this article from our Global Market Strategist, Charu Chanana where she outlines the expected market reaction in different scenarios for both the inflation release and the shift in Fed’s dot plot. The market focus is on disinflation progress; April's softer-than-expected inflation raised hopes for rate cuts, but the May CPI print will be crucial in confirming this trend. The Federal Reserve is expected to keep interest rates unchanged at 5.25-5.50%, but the median dot for Fed Funds rate is likely to sift hawkish to reflect two or less rate cuts this year. Chair Powell is, however, likely to balance the narrative in his press conference.
• UK labor market report came in mixed. The unemployment rate surged higher to 4.4%, the highest since 2021. Headline employment change also disappointed at -139k for 3M to Apr, while wage pressures remained sticky.

Macro events: FOMC Announcement & Press Conference, IEA OMR, China Inflation (May), Germany Final CPI (May), UK GDP (Apr), US CPI (May)

Earnings: Affimed, Vera Bradley, Broadcom, Dave&Buster’s, Torrid, Oxford

Equities: In today's trading session, the S&P 500 and Nasdaq experienced some fluctuations but ultimately rose to close near the session high with S&P 500 gaining 0.27% while the Nasdaq 100 gained 0.71%. Despite initially dipping in early trading, both indices rebounded without any economic news. Apple did well today, gaining over 7% as investors remain optimistic about an upgrade cycle after Apple announced to integrate AI features as part of its new OS. This is ahead of the US CPI tonight which is set to play a crucial role in determining the Federal Reserve's decision to cut interest rates this year.

Fixed income: Treasuries stabilized following a significant $39 billion sale, reflecting market expectations that Wednesday's inflation report could bolster the case for the Fed to cut rates this year. Demand for 10-year debt at auction was robust, with the bid-to-cover ratio reaching its highest level since February 2022, just before the tightening cycle began. Australian bonds saw slight gains early Wednesday, while Treasury and Japanese bond futures held steady ahead of key US inflation data and the Federal Reserve policy decision. Japanese 10-year note futures ended the overnight session higher, and the widening spread between June and September contracts indicated a shift in investor positions from the June contract to the September one.

Commodities: Gold initially rose before the market opened, while treasury yields and US equities fell. However, the gains were short-lived as gold failed to break through the $2,337 resistance pivot. Copper futures also declined to below $4.45 per pound, erasing the previous month's rally. This was attributed to low demand, as evidenced by a 7.1% annual drop in copper ore imports despite high prices. Iron ore prices also dropped to $107 per tonne due to weak demand in China. Additionally, Dexin China was ordered to liquidate just one year after its restructuring was approved, joining other property developers facing similar fates in China.

FX: Political instability from the French snap elections weakened the euro further, boosting the US dollar. EURUSD dropped to 1.0720, as we highlighted in this article, before a slight recovery ahead of key US inflation data and the Fed announcement today. EURGBP fell below long-standing support at 0.85 to 0.8420, with the pound steady despite mixed UK employment data. GBPUSD trades above 1.27, with markets anticipating a large Labour majority in the July 4 elections. USDJPY stays above 157 despite lower US yields overnight, and USDCHF is attempting to move back to 0.90.

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

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