Global Market Quick Take: Asia – November 8, 2024

Macro 6 minutes to read
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APAC Research

Key points:

  • Macro: Fed and Bank of England cut rates by 25bps
  • Equities: US equites hit new highs with S&P 500 closing in on 6,000
  • FX: Commodity currencies outperformed, with NOK also gaining on Norges Bank’s hold
  • Commodities: Copper rises over 4% on China stimulus hopes
  • Fixed income: Powell keeps December rate cut possibility open

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Disclaimer: Past performance does not indicate future performance.

 

Macro:

  • The Federal Reserve cut rates by 25bps to 4.50-4.75%, in line with market pricing and analyst expectations, and also in a unanimous decision. The statement saw some changes, it removed language that it "has gained greater confidence that inflation is moving sustainably toward 2 percent". Fed Chair Powell noted the economy is strong, labour market remains solid, and that inflation has eased substantially. He also kept his options open again, noting they can move more quickly or they can move more slowly, depending on how the economy reacts. The Fed Chair was also asked about the recent movement in yields post the Trump victory, he said it is too early to say where bond rates settle, noting financial conditions only tighten when rates are high for long, and they are not yet at the stage where bond rates need to be taken into policy consideration.
  • The Bank of England also cut rates by 25bps as expected to 4.75%. The decision to do so was made via an 8-1 vote split with arch-hawk Mann the lone dissenter in voting for an unchanged rate. The accompanying MPR saw an upgrade to 2025 and 2026 inflation forecasts with the BoE noting that the UK budget is “provisionally expected to boost inflation by just under 0.5ppts at peak between mid 2026 and early 2027”.
  • US jobless claims marginally rose to 221k (w/e 2nd Nov) from 218k, in line with expectations, which saw the 4wk average tick lower to 227.25k (prev. 237k). Meanwhile, continued claims (w/e 26th Oct) lifted to 1.892mln (prev. 1.853mln), above the forecasted 1.875mln.
  • Sweden’s Riksbank cut its Rate by 50bps, as expected, to 2.75%, and maintained communication from September that the policy rate may also be lowered in December and H1 2025. Norway’s Norges Bank, however, left its Key Policy Rate at 4.5%, as expected, noting the "policy rate will most likely be kept at 4.5% to the end of 2024", where guidance currently puts the first cut in Q1 2025.
  • China’s export surged in October to the fastest rate since July 2022, extending a months-long boost to the economy. Exports rose 12.7% from a year earlier to USD 309 billion, while imports fell 2.3% to USD 213 billion, leaving a trade surplus of USD 96 billion, the third-highest month on record
  • Germany’s Chancellor Scholz has called for a rare snap election after dismissing finance minister and FDP head Christian Lindner, who had refused to suspend rules limiting new government borrowing. There will be a mid-January confidence vote, with elections to follow in March (originally set to happen by September of next year).

Equities: 

  • US - US equities hit new all time highs, with S&P 500 gaining 0.74% and Nasdaq 100 up 1.54% as stocks ride on the election results momentum and Fed cutting 25bps.
  • Airbnb reported mixed Q3 earnings that fell short of estimates as EPS came in at $2.13 vs est of $2.14 on revenue of $3.73b. Even though an optimistic Q4 forecast initially drove the stock up by as much as 13%, it has now fallen by 4% in after-hours trading.
  • Hong Kong – HSI surged 2% to 20,953, driven by sector gains and positive sentiment from China's 12.7% export growth. Investors anticipate potential stimulus post-legislative session, while regulators urge lenders to lower interbank deposit rates to boost the economy.
  • Singapore - STI rose 2% to 3,673, the highest since October 2007, following Wall Street's rally. The STI gained for the fourth consecutive session, driven by tech, healthcare, and banking stocks, with notable gains from DBS Group (6.4%), OCBC (3.9%), UOB (3.4%).

FX:

  • USD pared some of its post-election gains as the Fed cut rates and avoided any signals of disruption to its rate cut policy from the election outcome. The preliminary University of Michigan survey numbers for November are out today and economic resilience will continue to be tested.
  • Leading the gains against the USD in G10 was NOK after its central bank decided to keep rates unchanged despite. Commodity upswing also underpinned, also pushing AUD and NZD higher. USDNOK saw a sharp decline to over 3-week lows at 10.82 and 50DMA comes in at 10.76. AUDUSD surged above 0.6650, but the 100DMA at 0.6692 stalled the gains. NZDUSD also pushed above 0.60 handle.
  • Despite lower yields and weaker USD, yen’s gains were relatively more measured. USDJPY moved back to the 153 handle from 154.50

Commodities:

  • WTI crude oil futures rose 0.9% to $72.36, rebounding from a drop due to Trump's win and a Fed rate cut. Hurricane Rafael's impact is minimal, with potential price pressures from sanctions on Iran and Venezuela and Middle East tensions.
  • Gold traded above $2,700 after the Fed's rate cut. Fed Chair Powell said the election won't affect decisions soon. Markets expect higher rates due to Trump's policies. Gold fell 3% as Trump's win boosted the dollar, reducing safe-haven demand. Silver rose 2.7% to above $32.
  • Copper futures rose 4.3% above $4.43 per pound on optimism that US tariffs might lead to Chinese stimulus measures. China's widening trade surplus and potential increased spending also supported prices, despite earlier fears of higher tariffs under Trump.

Fixed income:

  • Treasuries gained significantly, partially recovering from election-related losses. The 7-year sector rose by 12 basis points, and shorter- and longer-term yields fell by at least 5 basis points. Yields hit session lows after Fed Chair Powell's news conference, maintaining uncertainty about a December rate cut, priced at 65% in swap contracts.
  • Gilts showed strong performance in the mid-section of the curve following the Bank of England's anticipated 25 basis point rate cut. In contrast, bunds lagged due to German Chancellor Olaf Scholz facing a no-confidence vote, potentially leading to an early election.

 

For a global look at markets – go to Inspiration.

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