Global Market Quick Take: Asia – December 3, 2024

Key points:

• Macro: US ‘goldilocks’ ISM manufacturing while France’s political troubles deepen
• Equities: Super Micro Computer jumped 28.7% after no misconduct found
• FX: EURUSD implied volatility jumps to highest level since March 2023
• Commodities: Precious metals fell due to stronger dollar
• Fixed income: December swaps priced 70% chance of 25 bps cut

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Disclaimer: Past performance does not indicate future performance.

Macro:

• The US ISM Manufacturing PMI rose to 48.4 from 46.5 and above the 47.5 consensus. New orders returned to expansion, rising from 47.1 to 50.4 while production rose to 46.8 from 46.2, prices fell to 50.3 from 54.8 and employment rose to 48.1 from 44.4. It was a goldilocks report that boosted sentiment on the state of the US economy.
• Fed’s Chris Waller stated he leans towards supporting a cut in December, although added that one could argue a case for skipping a rate cut and that he will be watching data closely to decide. Waller is an influential member and his dovish-leaning comments sparked market optimism. Other Fed members like John Williams and Raphael Bostic also hinted at a December Fed rate cut.
• Marine Le Pen’s far-right party pledged to topple French PM Michel Barnier’s government after he used a constitutional tool to push through parts of his budget bill without a parliamentary vote. Reuters reported that a no-confidence vote may be likely Wednesday. If the no-confidence vote passes (and nothing is certain in French politics) Barnier would have to tender his resignation. However, Reuters reports that "Macron may ask him and his government to stay on in a caretaker role to handle day-to-day business while he seeks a new prime minister, which could well happen only next year."

Equities: 

• US - The S&P 500 and Nasdaq 100 closed at record highs to begin December, with gains of 0.2% and 1.1% respectively driven by large-cap tech stocks. Applied Materials climbed 4.9%, Tesla added 3.4% and Meta gained 3.2%. In contrast, the Dow Jones underperformed, falling by 128 points.
• Super Micro Computer surged 28.7% following the independent special committee's validation of its financial reports. They found no misconduct or fraud, but recommended the firm appoint a new chief financial officer and chief compliance officer.
• Europe - DAX hit a record high, driven by strong performances from major companies, despite Volkswagen strikes and political instability in France. The CAC 40 rose after budget concessions, aiding French stocks' recovery. Luxury stocks gained, while financials struggled. Stellantis shares plunged after CEO Carlos Tavares resigned unexpectedly.
• Earnings - Salesforce Inc, Marvell Technology and Bank of Nova Scotia

FX:

• The dollar index rallied, weakening most G10 currencies. The euro fell 1.1% against the dollar amid France's political crisis, with three-month implied volatility at 8.2% approaching its highest close since March 2023.
• The yen outperformed, while the Swedish krona, Norwegian krone, Danish krone, and euro were weakest.
• GBPUSD dropped 0.7% to 1.2651 as UK house prices rose significantly.
• USDJPY fell 0.2% to 149.55, with the yen the only currency to gain against the dollar in November.

Commodities:

• Gold fell 0.15% to $2,639 due to a stronger dollar. Despite a 28% increase this year from lower Fed rate cut expectations, the dollar's rise ahead of key jobs data and Trump's warning to BRICS against supporting dollar alternatives, with a threat of 100% tariffs, contributed to the slump. Silver dropped 0.37% to $30.51.
• WTI crude oil futures stabilized at $68, driven by positive economic data from China, as traders anticipated the upcoming OPEC+ meeting. Brent crude hovered near $72.
• European natural gas futures rose to €48.7/MWh due to colder weather forecasts and supply concerns. Reserves are at 85%, down from 95% last year. Rising oil prices and geopolitical tensions further drive the rally, prompting increased EU storage targets.

Fixed income:

• Treasuries were mixed as the yield curve flattened, briefly reinverting the 2s10s spread and lowering 30-year yields to their lowest since October 17. Short-term yields eased late after Fed Governor Christopher Waller hinted at a December rate cut. December swap contracts priced in an 18 basis point reduction, over a 70% chance of a quarter-point cut. The earlier curve flattening lacked a clear catalyst, possibly due to a heavy corporate new issue calendar and/or Friday's month-end index rebalancing during a shortened holiday session.

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