Global Market Quick Take: Asia – November 21, 2024

Key points:

• Macro: Fed’s Bowman was hawkish, today’s focus on jobless claims
• Equities: Target slides 21% after missing earnings by a large margin
• FX: USD strength returned, yen in recovery mode ahead of Ueda’s speech
• Commodities: Gold surpassed $2,650 driven by Russia-Ukraine tensions
• Fixed income: Safe-haven bid for Treasuries waned after a weak 20-year auction

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Disclaimer: Past performance does not indicate future performance.

Macro:

• Fed Governor Bowman, who dissented at the September Fed decision to cut rates by 50bps, remained hawkish calling for a cautious approach, noting how she sees greater risks to the price stability mandate. Governor Cook largely kept options open in her speech, noting policy is not on a pre-set path.
• Geopolitical enthusiasm on reports that Russian President Putin is open to talking about a Ukraine ceasefire with US President-elect Trump. However, risk off was later seen in wake of Bloomberg reports that Ukraine fired a UK storm shadow missile into Russia.
• UK October CPI was up +0.6% MoM vs +0.5% expected. CPI YoY increased to +2.3% from +1.7% in September. Much of the rise can be attributed to an anticipated rise in energy costs after a +10% increase to the energy price cap.
• On tap today: US Initial Jobless Claims (w/e 16th Nov), Existing Home Sales (Oct), EZ Consumer Confidence Flash (Nov), Japanese CPI (Oct) on Friday morning

Equities: 

• US – Equities closed mixed on Wednesday, with S&P 500 closing flat, while Nasdaq 100 lost 0.1%.
• Nvidia announced earnings after the market closed that exceeded estimates, with revenue increasing by 94% year-over-year to $35.08 billion. Net income came in at $19.3b vs $9.24b a year ago. Despite sales forecasts for this quarter exceeding expectations, Nvidia's stock still dropped 1.8% in after-hours trading.
• Target fell 21% after earnings fell 12% from a year ago, missing estimates by a large margin ($2.30 vs $1.85 estimate). Revenue grew just 1% from a year ago.
• Snowflake shares rose 19% after beating Q3 estimates with 20 cents EPS and $942 million revenue. Despite a larger net loss, revenue grew 28%. Product revenue was 96% of sales, with a fiscal 2025 forecast of $3.43 billion, up from $3.36 billion.
• Hong Kong - HSI rose 0.2%, led by property and tech, as sentiment improved after China's central bank maintained low lending rates. Bloomberg News reported that 35 Hong Kong companies had a 0.1% profit increase, down from a 7.3% rise in the previous quarter, capping market gains.
• Japan - Nikkei 225 fell 0.16%, while Seven & I Holdings shares surged 6% on reports of the founding family's plan to privatize the company with over 8 trillion yen by year-end.
• Earning – Baidu, Pinduoduo, Intuit, Gap, Elastic, iQiyi

FX:

• The USD strength returned as Fed’s Governor Bowman continued to take a hawkish stance and geopolitical worries also fueled safe-haven flows. Focus is now shifting to jobless claims today and the PMIs on Friday where continued US exceptionalism will likely support further strength in the greenback.
• USDJPY rallied back above 155.50, but intervention fears below 160 remained at bay. Pair was however seen returning to 155 in early Asian hours with focus on Ueda’s speech today and Japan’s CPI due tomorrow as a key input for whether the Bank of Japan hikes rates further in December or not.
• EURUSD took another attempt at breaking 1.05 support but failed and returned back above 1.0540 as ECB Stournaras said rates will remain restrictive for some time. PMIs on Friday will be a key gauge of the size of ECB’s December cut.
• GBPUSD saw some early strength on sticky October CPI but returned back lower to 1.2650 subsequently.

Commodities:

• Gold rose above $2,650 amid concerns from the Russia-Ukraine conflict. Investors anticipate a 25bps Federal Reserve rate cut in December, lowering gold's opportunity cost. Fewer cuts are expected next year due to inflation worries, suggesting a less dovish Fed.
• WTI crude oil hovered around $69 due to geopolitical tensions and rising U.S. crude supplies. Ukraine's missile use increased Russian threats, while U.S. inventories exceeded expectations. Concerns remain about a surplus next year from slowing Chinese demand and high production.
• US natural gas futures surged over 6% to nearly $3.2/MMBtu, the highest since June, due to expected colder weather increasing heating demand.
• Arabica coffee futures rose to about $2.90 per pound, nearing 13-year highs, due to supply concerns. Brazil, the top producer, faces reduced arabica output this season due to drought.

Fixed income:

• Treasuries fell across the curve as earlier gains faded after a 20-year bond auction missed by 3 basis points. The reduced flight-to-quality bid and weaker core European rates pushed yields up by 1 to 2.5 basis points, with both ends underperforming. Bunds and gilts also saw broader losses following a weak 30-year German bond sale and UK CPI data.

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