Global Market Quick Take: Asia – November 12, 2024

Key points:

• Macro: UK jobs data, German CPI and a slate of Fed speakers on the radar
• Equities: Coinbase is up 19.7% to reach 2-year highs on crypto moves
• FX: EUR under pressure due to tariff threat and German political instability
• Commodities: Gold and silver fell due to strong dollar and risk sentiment
• Fixed income: Treasury cash trading is set to restart after a three-day weekend

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Disclaimer: Past performance does not indicate future performance.

Macro:

• China’s credit growth disappointed with aggregate financing was up 1.4 trillion yuan vs.  expectations of 1.5 trillion yuan, and an increase of 1.8 trillion yuan in October 2023. Government bond sales accounted for more than three-quarters of all new financing but both corporate and household loan demand remained weak. Confidence is still weak and stimulus remains tepid, and China seems to be preserving the ammunition for when Trump takes over.

• Japanese PM Shigeru Ishiba announced a US$65 billion (10 trillion yen) plan to boost Japan’s chip and AI industries, aiming for completion by fiscal 2030. The plan seeks to secure Japan's chip supply chain amidst global trade tensions, with a focus on mass production of next-gen chips. Key beneficiaries include chip foundry venture Rapidus and AI chip suppliers; Rapidus aims to produce advanced chips in Hokkaido from 2027 with partners IBM and Imec. No deficit-covering bonds will be issued to finance the plan; details on funding sources remain unspecified. The plan is part of a broader economic package, targeting 50 trillion yen in public and private investment in chips over the next decade.
• On tap today: Fed SLOOS, OPEC MOMR; German CPI (Final), ZEW (Nov), UK Unemployment/Weekly Earnings (Sep), US NFIB (Oct). Fed speakers: Waller, Barkin, Kashkari, Harker

Equities: 

• US – S&P 500 closed above 6,000 for the first time as equities continued rallying on Trump optimism. Tesla gained a further 9% while Coinbase gained 19.7% on the back of bullish moves in crypto.
• Grab Holdings gained 11.8% in after-hours trading as they reported Q3 earnings that beat forecasts and raised 2024 revenue forecast to $2.76b to $2.78b.
• China - HSI dropped 1.45% nearing a three-week low after China announced a debt-relief package without fiscal stimulus. All sectors fell amid rising China-US tensions. Inflation hit a four-month low, and producer price deflation worsened.
• Europe - DAX gained 1.2% on Monday, rebounding from a 0.8% drop, in line with other European markets. Investors are monitoring the impact of Donald Trump's policies and Germany's political scene, including Chancellor Olaf Scholz's potential early confidence vote before Christmas.
• Nikkei - Nikkei 225 edged up 0.08% to 39,533 as BoJ's policy meeting summary revealed divisions on future rate hikes amid global uncertainties and yen volatility. Despite this, the bank plans to raise the interest rate to 1% by the second half of fiscal 2025.
• Earnings – Shopify, Home Depot, Sea Limited, Hertz, Spotify, Occidental, Mara Holdings

FX:

• The USD extended its gains further at the start of the new week with Trump 2.0 continuing to show further runway in the markets. Newsflow was sparse due to US Veteran’s Day holiday, and the bond market was also closed offering no signal for the dollar.
• Despite no direction from Treasuries, yen weakened again as USDJPY returned higher to test the 154 handle once again hit by the latest BoJ SOO continuing to highlight a lack of urgency for immediate hikes. However, pair is crawling back lower to 153.50 in early Asian trading this morning.
• EURUSD broke below 1.07 and EURGBP also printed fresh lows since 2022 as the macro commentary for the Eurozone continues to centre on the tariff risks stemming from a Trump Presidency as well as political instability in Germany.
• Commodity currencies held up better, but AUDUSD could not move back above 0.66 and NZDUSD was also below 0.60.

Commodities:

• Gold dropped 2.5% to a one-month low of $2,618 due to a strong dollar and a shift to risk assets after Trump's election. Expectations of higher tariffs and inflation pressured gold, with the Fed expected to lower rates to 4% by late 2024.
• Silver fell 2% to $30.68, a nearly two-month low, due to increased risk sentiment and disappointing fiscal support from China, reducing demand for bullion.
• WTI crude oil fell 3.3% to just above $68 due to China's underwhelming economic stimulus, Trump's pro-drilling stance after his election win, and a strong US dollar increasing oil costs for other currency holders. Brent crude settles below $72.
• US natural gas futures rose over 10% to $2.9/MMBtu as storm Rafael disrupted Gulf production, halting over 25% of oil and 16% of gas output. European natural gas futures rose to €43.8/MWh, the highest since November 2023, due to colder weather and 93% storage levels, with slight supply increases from Norway and Russia.
• Copper futures fell to $4.22 per pound, pressured by a strong US dollar and weak Chinese fiscal support, with limited impact on demand. Expectations of higher US interest rates under Trump added pressure.

Fixed income:

• Treasury futures slightly increased as cash trading is set to resume after the three-day weekend. Meanwhile, the Bank of Japan will conduct its regular market operations by purchasing bonds across the yield curve.
• Bunds are experiencing a bull steepening as money markets forecast a lower ECB terminal rate, driven by concerns that German economic growth might slow if opposition parties seek to block the supplementary budget, which involves additional net new debt.

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