Global Market Quick Take: Asia – November 4, 2024

Key points:

• Macro: Weak NFP, Harris leads Trump in the Red state of Iowa
• Equities: Berkshire Hathaway sold Apple shares, increased cash reserves significantly
• FX: JPY and MXN gain as Trump trade is starting to unwind
• Commodities: Oil rose on Tehran-Israel tensions, despite weekly decline
• Fixed income: 10-year Treasury yield hits 4-month high

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US non-farm payrolls came in significantly weaker than expected but it was largely ignored by the markets as the downside from one-off factors like hurricanes, storms and Boeing strike was hard to isolate and focus remains on the US elections this week. Headline jobs rose by just 12k in October, well short of the expected 100k and down from the prior (revised down) 223k, with two month net revisions at -112k (prev. +72k). The unemployment rate was unchanged at 4.1%, and wages rose 0.4% M/M, above the 0.3% forecast and prior but Y/Y was in line at 4.0%.
• Headline US ISM Manufacturing PMI eased to 46.5 from 47.2, missing the 47.5 analyst consensus. The highlight of the report however was the notable increase in the Prices Paid, which rose to 54.8 from 48.3, returning to expansionary territory and above consensus forecasts.
• US Vice President Harris leads former US President Trump in Iowa at 47% vs 44% in a new Des Moines Register/Mediacom Iowa Poll as she picked up support from women in the ruby-red state which Trump had won in 2016 and 2020. Furthermore, PredictIt odds shifted over the weekend in favour of a Harris election victory.
• On tap today – EZ Manufacturing PMI Final (Oct), US Employment Trends (Oct), Factory Orders (Sep)

Equities: 

• US - US stocks rose Friday, driven by strong Amazon and Intel earnings despite a weak jobs report. Boeing, Chevron, and Microsoft gained, while Apple fell. Investors await the Fed meeting and U.S. election for potential volatility.
• ExxonMobil's Q3 2024 earnings were $1.92 per share, beating expectations. Year-to-date earnings fell to $26.1 billion from $28.4 billion due to lower refining margins and gas prices, offset by record liquids production and higher high-value product sales.
• Berkshire Hathaway reduced its Apple holdings by 25% in Q3, selling 100 million shares, and boosting cash reserves to a record $325.2 billion. Despite selling over 600 million shares in 2024, Apple remains its largest stock holding.
• Europe - European markets rose Friday, with STOXX 50 up 1% and STOXX 600 up 1.1%, easing weekly losses. Strong Amazon and Intel earnings boosted sentiment, while banks led gains. Maersk shares jumped 4.4% after target price upgrades by Barclays and JPMorgan.
• Japan - Nikkei 225 fell 2.63% as the yen strengthened, impacting Japan's export-heavy industries. Technology stocks suffered, with significant losses from Advantest, Disco, and others. Despite daily losses, the index ended the week with small gains. Markets close Monday.
• Hong Kong – HSI rose 0.9%, ending a two-day decline as China's factory activity improved. Gains were driven by property, consumers, and financials. However, weak Hong Kong earnings, U.S. election concerns, and EU tariffs limited gains. Li Auto sank 9.5% on a weaker Q4 revenue forecast.
• Earnings – Berkshire Hathaway B, Constellation, Marriott, Franklin Templeton, Palantir

FX:

• Despite a weak jobs report pushing the US dollar lower on Friday, the recovery was rather quick as Trump trade prevailed. But weekend Iowa poll has turned the narrative in favor of Harris as we approach the Tuesday US elections, propelling a weaker open for the US dollar in Asia.
• Japanese yen gained strongly as USDJPY slipped back to 152 from highs of 153+n on Friday amid the unwinding of the Trump trade. Another key election trade is USDMXN which reached 2-year highs on Friday but is softer this morning in Asia.
• Canadian dollar lagged the G10 pack but was still up 0.2% against the USD in early Asian trading. GBPUSD also added to Friday’s gains but remains below the key 1.30 mark. Both the Fed and BOE rate decisions are up this week, and both central banks are expected to cut rates by 25bps.
• Chinese yuan is also stronger and USDCNH is heading to 7.10 in Asia morning amid US election risks and a meeting of Chinese authorities this week likely to announce further fiscal stimulus.

Commodities:

• WTI crude rose to $69.5 and Brent crude to $73.1, marking a third consecutive day of gains despite a weekly 3% decline. The increase is due to market anticipation of Tehran's potential response to Israel's recent retaliatory strikes.
• Gold stayed at $2,750 on Friday, maintaining a 1.5% drop from the prior high, as markets evaluated safe-haven demand before U.S. elections and the Federal Reserve's policy outlook.
• Silver traded near $32.49 on Friday, close to a two-week low, as investors evaluated the Federal Reserve's policy outlook and safe-haven demand ahead of the U.S. elections.

Fixed income:

• Yields reached multi-month highs Friday, reversing earlier Treasuries gains from weak October jobs data due to risk reduction before refunding auctions, the U.S. election, and the Fed's rate decision. Treasuries cheapened against interest-rate swaps, hitting record-low spreads. The 10-year yield rose 10 basis points to 4.38%, its highest since July 5 steepening the 10y-3m spread by 14 bps to now only –11.6bps.

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