Global Market Quick Take: Asia – November 19, 2024

Key points:

• Macro: Trump 2.0 cabinet nominations remain in focus, Canada’s CPI on tap
• Equities: Tesla gained 5.6% after easing regulation on self-driving vehicles
• FX: JPY remains weak despite softer USD, AUD outperforms
• Commodities: Oil rose 3% on supply concerns, Norway halt, Ukraine tensions
• Fixed income: Block purchases in 2-year and long-bond futures offset weakness

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Disclaimer: Past performance does not indicate future performance.

Macro:

• Trump 2.0 cabinet announcements remain in focus as a clear gauge of the agenda starting January. After getting the China hawks in key trade roles and emphasising tariff policy, Trump has picked the CEO of Liberty Energy Chris Wright, a vocal advocate of oil and gas development, as the Energy Secretary. Trump team is also considering pairing former Fed governor Kevin Warsh in the Treasury secretary role with Scott Bessent as director of the White House’s NEC, as well former Congressman Sean Duffy was tapped for Transportation. We discuss more about Trump’s cabinet cabinet nominations in this article.
• Bank of Japan’s Governor Ueda held a press conference yesterday but avoided giving any clear signals on the potential for a December rate hike. This was interpreted by the market to be less dovish than expected as there was a clear lack of urgency on further policy normalization.
• There was a slew of ECB speak but the highlight came from Makhlouf who stated that evidence would need to be "overwhelming" for him to back a 50bps rate cut next month. Money markets are currently pricing in a 25% chance of a 50bps cut in December, although rate expectations are likely be further fine-tuned by Friday's flash PMI data.
• On tap today: EZ Indicator of Negotiated Wage Rates (Q3), EZ HICP (Final), US Building Permits/Housing Starts (Oct), Canadian CPI (Oct). Speakers: ECB’s Elderson; BoE's Bailey, Lombardelli, Mann, Taylor; Fed's Schmid.

Equities: 

• US - S&P 500 gained 0.4% and Nasdaq 100 climbed 0.7% as the market recovered from the sell off late last week. Super Micro shares soared 40% to $30 in postmarket after hiring BDO USA as auditor and submitting a compliance plan to Nasdaq.
• Tesla surged 5.6% on a report that President-election Donald Trump’s team plans to introduce a federal framework for regulating self-driving vehicles.
• Hong Kong - HSI rose 0.8%, ending a six-session losing streak after China encouraged companies to boost share prices through various strategies. Gains were limited as Morgan Stanley downgraded Hong Kong shares to "underweight" from "market weight”.
• Europe - European markets ended Monday lower, with Stoxx 50 down 0.2% and Stoxx 600 down 0.1%. Retail stocks fell 0.9% while mining rose 0.6%. Novo Nordisk, ASML, and Hermes declined, whereas SAP, Nestle, and LVMH gained modestly.
• Earnings – Xpeng, Walmart, Lowe's and Medtronic

FX:

• The US dollar unwound gains further amid profit-taking as Trump trade momentum slowed and continued to get more nuanced as we discussed in this article. Data flow remains thin and focus is on Fed and ECB speakers this week before PMIs are out on Friday.
• Japanese yen slipped despite a softer dollar, and BOJ governor Ueda’s clear lack of urgency on tightening policy further weighed. USDJPY rose to highs of 155.36 before reversing back to sub-154.50 levels in early Asian session.
• AUDUSD outperformed, rising back above 0.65 and RBA minutes are on tap today.
• EURUSD also attempted a move back above 1.06 as ECB speakers didn’t clear emphasize a possible 50bps cut in December, but pair failed to cross over. GBPUSD rose to 1.2680 and the focus this week will be on UK CPI, retail sales and PMI figures.
• USDCAD reversed sharply after hitting the 1.41 psychological level with oil prices up 3% on a mix of geopolitical worries and Trump’s cabinet announcements. Canada’s CPI on tap today.

Commodities:

• WTI crude oil futures rose by 3.2% to $69 due to concerns over tightening supply, following a production halt at Norway's Johan Sverdrup oilfield and heightened Russia-Ukraine tensions after the U.S. allowed Ukraine to use its weapons against Russia. Brent crude surged 3.2% above $73.
• Gold rose 1.9% to $2,611, recovering from its largest weekly decline since 2021, as the US dollar rally paused and safe-haven demand increased due to Ukraine war developments, including Biden's approval for Ukraine to use long-range US weaponry. Silver climbed above $31.
• European natural gas futures rose above €46 per megawatt-hour due to colder weather forecasts and reduced Norwegian supplies, raising concerns about demand and reserves below 91% full.

Fixed income:

• Treasuries rose reversing losses as block buyers offset yield increases, continuing Friday's trend. Despite an oil rally and over $11 billion in issuance, yields fell 1-4 basis points, with intermediates leading.
• In September, foreign holdings of US Treasuries increased for the fifth month. Japan's holdings fell by $5.9 billion to $1.12 trillion, and China's decreased by $2.6 billion to $772 billion.

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