Asia-Pacific Market Update
Asian stocks traded mixed following volatile sessions across global markets on Tuesday. U.S. indices staged a recovery from earlier risk-off sentiment driven by geopolitical tensions. The ASX 200 pulled back from record highs, with losses contained by light newsflow and a quiet macro calendar. The Nikkei 225 traded indecisively despite better-than-expected Japanese trade data, while gains in Seven & I Holdings and Kadokawa boosted sentiment on M&A headlines. Chinese markets, including the Hang Seng and Shanghai Composite, swung between gains and losses as the PBoC left benchmark Loan Prime Rates unchanged, meeting expectations after last month’s cuts.
Key Data:
- Japanese Trade Balance: -JPY 461.2B (vs. -JPY 360.4B expected).
- Japanese Exports YY (Oct): +3.1% (vs. +2.2% expected).
- Japanese Imports YY (Oct): +0.4% (vs. -0.3% expected).
European Equities
European equity futures indicate a positive open, with Euro Stoxx 50 futures up 0.4%, rebounding after Tuesday’s 0.8% decline. Investors are closely watching German PPI, UK CPI, and ECB President Lagarde’s comments for direction on inflationary trends and monetary policy. Sentiment remains cautious as geopolitical tensions persist, while earnings from Nvidia later today could influence global tech sentiment.
US Market Outlook
U.S. equities mostly closed higher on Tuesday despite early risk-off trade driven by Russia’s escalatory rhetoric and Ukraine’s first ATACMS strike inside Russian territory. Haven assets like Treasuries, gold, and the dollar initially rose but later reversed as sentiment improved. The S&P 500 gained 0.4%, led by tech-heavy Nasdaq’s 0.71% rise, while small caps outperformed with the Russell 2000 up 0.8%.
Notable Developments:
- Trump Cabinet Appointments: Howard Lutnick was named Commerce Secretary, while Linda McMahon was tapped for Education Secretary. Kevin Warsh and Marc Rowan remain in contention for Treasury Secretary, with an announcement expected soon.
- Fed Commentary: Fed’s Schmid stated now is the time to dial back policy restrictiveness as inflation nears the 2% target.
Fixed Income
Treasury markets saw a lackluster session as haven demand faded after Tuesday’s geopolitical-driven flight to safety.
- 10-Year UST: Traded sideways, with yields steady ahead of Fed commentary and a 20-year auction.
- Bunds: Consolidated near recent lows as markets await German PPI data and 30-year bond supply.
- JGBs: Traded beneath the 143.00 mark despite solid Japanese trade data, supported by a quiet session in Asia.
Commodities
- Crude Oil: Prices were rangebound after a choppy Tuesday session. Inventory data showed a larger-than-expected crude build (+4.8M barrels) and a surprise gasoline drawdown (-2.5M barrels).
- Gold: Edged marginally higher, reclaiming ground above the $2,600/oz level amid geopolitical uncertainty.
- Copper: Held steady, supported by improving risk sentiment from the U.S. but capped by cautious trading in Asia.
Currencies
- DXY: The Dollar Index strengthened slightly in rangebound trade, buoyed by geopolitical risks and a risk-off tone early Tuesday.
- EUR/USD: Failed to sustain moves above 1.0600 as attention shifted to ECB comments from Lagarde and de Guindos.
- GBP/USD: Firmed near 1.2700 as investors awaited UK inflation data. BoE rhetoric had minimal impact on the pound.
- USD/JPY: Gradually strengthened, breaching resistance at 155.00, as Japanese Finance Minister Kato reiterated a commitment to stability in currency markets.
- Antipodeans: The AUD and NZD maintained sentiment-driven gains, but upside was limited by cautious trading and a lack of macro catalysts.
Crypto
Bitcoin remained indecisive, pulling back slightly from its record high above $94,000. Reports emerged that President-elect Trump is considering crypto lawyer Teresa Goody Guillen to lead the SEC, signaling regulatory shifts for the sector.
Notable Headlines
Geopolitics
- Middle East:
- Israel’s army reported Hezbollah launched 75 rockets from Lebanon on Tuesday.
- The U.S. continued negotiations for a ceasefire proposal, though large gaps remain between Israel and Lebanon.
- Saudi Arabia condemned Israel’s military actions in Lebanon and reiterated calls for regional stability.
- Russia-Ukraine:
- President Biden approved the provision of antipersonnel mines for Ukraine as part of ongoing military support.
- The U.S. Embassy in Kyiv warned of a potential significant air attack and recommended shelter preparations for U.S. citizens.
- Reports suggested North Korean troops are participating alongside Russian forces in Ukraine, with shipments of weaponry also confirmed.
Economic Developments
- China:
- The PBoC maintained Loan Prime Rates (1Y at 3.10%, 5Y at 3.60%).
- Officials plan a Friday briefing to outline measures for stabilizing foreign trade.
- UK:
- Prime Minister Starmer is set to visit Saudi Arabia and the UAE to secure investments.
- The Resolution Foundation suggested UK employment numbers may be understated by 1 million, contradicting official ONS figures.
Notable Events Today
- Data Releases: German PPI, UK CPI, Eurozone Negotiated Wage Rates (Q3).
- Central Bank Commentary: ECB’s Lagarde and de Guindos, BoE’s Ramsden, and Fed speakers Barr, Cook, Bowman, and Collins.
- Earnings: Nvidia, Lowe’s, and Medtronic.
Markets will also monitor geopolitical developments in the Middle East and Ukraine, alongside U.S. Treasury Secretary announcements.
