Global Market Quick Take: Asia – November 11, 2024

Key points:

• Macro: Disappointing stimulus measures from China's NPC
• Equities: Tesla surges 8.2% to reach trillion-dollar market cap
• FX: EURUSD and EURGBP faces downside pressures on Trump trade
• Commodities: Commodities fell on weak Chinese stimulus and strong U.S. dollar
• Fixed income: Yield curve flattens and Treasuries are closed for US holiday

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Disclaimer: Past performance does not indicate future performance.

Macro:

• The prelim reading for the University of Michigan headline in November rose to 73.0 from 70.5 and above the expected 71.0. Current conditions ticked lower to 64.4 (prev. 64.9), while expectations soared to 78.5 (prev. 74.1), the highest figure since July 2021. Inflation expectations were mixed, with 1yr ahead dipping to 2.6% (prev. 2.7%), the lowest since December 2020, while the long-run expectations modestly lifted to 3.1% from 3.0%. 
• China’s inflation numbers for October came in below expectations as deflation persisted amid lack of demand recovery. Headline CPI at 0.3% YoY vs. 0.4% previous and expected and PPI at -2.9% YoY from -2.8% YoY previously and -2.5% YoY expected.
• China’s stimulus measures also fell short of expectations on Friday. The government laid out plans on restructuring local government debt to ensure spending, but there was little in terms of further stimulus on the other struggling parts of the economy -- most notably housing and consumer demand.
• Canada’s employment data trailed expectations as net employment rose by 14.5k, below the expected 25k, while the labour participation rate eased to 64.8% its lowest level since Jan 21, and the Unemployment Rate unexpectedly remained at 6.5% (expected to rise to 6.6%). This could open up the room for the Bank of Canada to go for a bigger rate cut again in December after a 50bps cut in October to 3.75%.

Equities: 

• US- S&P 500 rose by 0.4% to new record high, surpassing the 6,000 mark for the first time as Tesla continues its surge, up 8.2% to $321.22.
• The U.S. has ordered TSMC to suspend certain AI shipments to China effective today.
• China - Hang Seng index dropped 225 points (1.1%) to 20,728 on Friday due to losses in key sectors. Caution prevailed ahead of China's briefing post-legislative session. Analysts called for direct fiscal stimulus amid concerns of potential tariff hikes if Trump wins a second term.
• Earnings – Grab, Monday.com, Zeta, ICL, Luminar

FX:

• The USD resumed its uptrend on Friday and the DXY index finished the week 0.7% higher despite the Fed’s rate cut, as US economy resilience and Trump trades continued to rule the market narrative. Monday is US Federal holiday for Veteran’s Day and bond markets will be closed, although stock markets will be open.
• Commodity currencies, including AUD, NOK and NZD, were the underperformers on Friday and markets were disappointed by China’s stimulus announcement post NPC. AUDUSD broke below 0.66 and 200 DMA at 0.6630 will be a key resistance level now.
• On the week, EURUSD underperformed as Trump trade appears to be a key headwind for the region. EURUSD made several attempts to break below the 1.07 handle and immediate support is seen at 1.0668. EURGBP slipped below 0.83 and made a fresh low this morning since April 2022. BOE’s less dovish outcome from last week after the stagflationary UK budget announcement also underpinning.
• Yen trades mixed with USDJPY pinned around 153. USDCNH is back closer to 7.20 after China’s stimulus announcement underwhelmed.

Commodities:

• WTI crude oil futures fell 2.7% to $70.38 due to reduced supply concerns from Hurricane Rafael and disappointment over China's stimulus measures. Despite deflationary trends, U.S. sanctions on Iran and Venezuela offered support, with a weekly gain of 1%. Brent crude dropped 2.3%.
• Silver dropped 2.3% to $31.31 per ounce, nearing a one-month low, due to concerns over future demand following disappointing Chinese stimulus and expectations of higher U.S. interest rates.
• Copper futures fell 2.3% to $4.3 per pound as markets were disappointed by China's lack of direct stimulus and the U.S. dollar's strength, driven by expectations of higher interest rates, pressured demand for industrial metals.

Fixed income:

• On Friday, Treasury markets were mixed, causing a notable flattening of the 2s10s yield curve post-election. Traders unwound positions as they exited steepeners and shorts. Speculation that the Fed might pause rate cuts in January or December led to front-end weakness, with the OIS-implied probability of a cut dropping to 60%. Front-end yields rose by 5 to 6 basis points, while long-end yields fell by 4 to 5 basis points.

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