Global Market Quick Take: Asia – November 6, 2024

Key points:

• Macro: Eyes on US election counting
• Equities: SMCI fell 15% in after-hours trading with reduced revenue outlook
• FX: Expect volatility – Republican victory could spell USD gains and vice versa
• Commodities: Copper and Iron ore rise on China optimism
• Fixed income: Treasury yields continue to experience volatility

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US ISM Services PMI data was strong with the headline unexpectedly rising to 56.0 from 54.9, despite expectations for a decline to 53.8. Employment sub-index rose to 53.0 from 48.1, the highest level since August 2023, once again signaling the resilience of the US economy despite high levels of interest rates.
• The Reserve Bank of Australia kept its cash rate unchanged at 4.35% remaining on the hawkish side in the global central bank spectrum as it still stays away from clear signalling of rate cuts. That clearly failed to make an impact on markets especially coming on a day when markets were waiting for the US election results in a very closely-tied race, as well as announcements of further stimulus measures from China.
• China’s Caixin services PMI expanded sharply to 52 in October up from 50.3, beating forecasts amid signs of consumer demand recovery post-stimulus.

Equities: 

• US – S&P 500 closed 1.23% higher and Nasdaq 100 gained 1.3% with chipmakers leading the way as election results start streaming in.
• SMCI fell 15% in after-hours trading as their revenue outlook for the current quarter came in way below average estimates of $6.86b.
• China - HSI rose 439 points, or 2.1%reaching a two-week high. This was driven by Premier Li Qiang's comments on policy flexibility and confidence in meeting the 2024 GDP growth target. A private survey also showed China's service sector had its largest increase in three months in October.

FX:

• USD ended the day lower heading into the election counting as the unwinding of the Trump trade continued and the upbeat US data was largely ignored by the markets. Thursday brings the FOMC meeting and another 25bps rate cut is expected, but the election outcome remains key before we head to that and volatility can be expected in the day ahead.
• FX volatility has picked up early in Asia as votes are being counted and early results started to come in. USD started slightly stronger with EUR leading the decline in G10. EURUSD plunged back below 1.09 from highs of 1.0937.
• MXN was also highly volatile, and USDMXN up 0.5% in early trading with early results of Trump winning Kentucky and Indiana.
• USDJPY took an early dip below 151.40 as BOJ minutes brought back some talk of rate hikes, but gains in the yen were erased quickly and pair traded back at 152 with focus on election results.

Commodities:

• WTI crude oil futures rose to $72 due to US election uncertainties and OPEC+'s delay in increasing production.
• US natural gas futures fell over 3.5% to below $2.7/MMBtu due to expected mild weather reducing heating demand and increasing gas storage for the third consecutive week.
• Iron ore rose to $105.4 per ton, driven by China's economic recovery and potential fiscal stimulus. The property market and manufacturing expansion boosted demand prospects.
• Copper futures increased to $4.47 per pound, reaching a nearly one-month high, driven by a weaker dollar and increased confidence in Chinese government stimulus.

Fixed income:

• Treasuries ended mixed, with late gains bringing 10-year yields back to their opening levels, supported by a strong auction and better-than-expected ISM services data. Demand for upside hedges on 10-year notes remained steady. Yields were cheaper at the front end with longer tenors flattening the 2s10s and 5s30s spreads by 3.5 and 4.5 basis points, respectively.

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