Market Daily

Equity Market Updates

Samsung Electronics (005930 KS)

Samsung on Wednesday reported preliminary sales and operating profit numbers that missed market estimates, with operating profit at KRW107.4tln vs. KRW108.7tln expected, while sales stood at KRW195tln vs. KRW201.9tln expected. The profit miss was largely due to tighter margins in consumer electronics due to higher component prices.

MARKET CONSENSUS: 44 BUYS, AVERAGE TP KRW493253.03

Shell (SHEL LN)

Shell on Wednesday reported record refining margins in Q3 as disruption to fuel supplies from the Middle East and Russia tightened the market. The oil major specifically flagged a USD42-a-barrel refining margin for the period, up from USD24 in Q2 and far exceeding the previous high in 2022.

MARKET CONSENSUS: 16 BUYS, 9 HOLDS, AVERAGE TP GBp3958.44

Micron (MU US)

A Taiwan union representing workers at Micron said on Wednesday that it had secured authorisation from its members to strike over a dispute concerning the company's bonus scheme, escalating a labour conflict at the chipmaker's largest manufacturing hub. Micron is the latest chipmaker to face labour unrest as employees seek a larger share of the AI boom.

MARKET CONSENSUS: 58 BUYS, 4 HOLDS, AVERAGE TP USD1615.38

HSBC (5 HK)

HSBC is reportedly planning sweeping job cuts across its UK wealth management business, including a sharp reduction in financial advisers and specialist staff as part of a broader push to integrate AI. The bank is currently in a consultation period on the proposed changes, adding that affected employees are expected to leave by the end of the month.

MARKET CONSENSUS: 13 BUYS, 6 HOLDS, 4 SELLS, AVERAGE TP HKD170.87

Earnings Announcements

Global Indices Changes (%)

Fixed Income Market Updates

European Bank coco (AT1)

European Bank CoCos leaked wider with prices down 0.375pt to 0.50pt, primarily tracking the broader market's softer sentiments. Nonetheless, flows were generally muted and balanced. French and Italian banks' AT1 CoCos were back at the forefront as the underperformers in the space, in line with their respective sovereigns. Most of the pressure remained on duration (i.e., long call dates), especially those with legacy low coupons. We think investors will likely remain cautious and very selective until a clearer direction emerges ahead.

Asia Investment Grade (IG)

Asia IG credit spreads tried to tighten during the day but ended up mostly unchanged at market close amid light volumes. Demand remains on the short-dated papers though there were some buying interests on the 10-year to 30-year papers of Japanese financials in small clips. While periods of rates volatility may keep investors more discerning in chasing and adding meaningful risks, investors will also be able to take advantage of opportunities to rebalance portfolio positioning.

Asia High Yield (HY)

Asia HY performance were mixed with bonds mostly closing unchanged or +/- 25 cents. Hong Kong property New World Development continued to see most of the action with its ongoing exchange offer. Softbank curve also continued to rally, ending the day about 50 cents across its senior bonds. We anticipate new issue supply to be muted in the Asia HY space for the time being.

Forex Market Updates

USD

The US Dollar rose against a basket of other major currencies overnight, recovering all of its previous day’s losses even as minutes from the September FOMC meeting revealed that policymakers were divided over the rationale for raising interest rates. Some voters saw a hike as a required step to keep the impact of energy and other price shocks at bay, but a more hawkish core viewed it as necessary to guard against emerging demand-driven inflation. Since the September meeting, comments from many Fed policymakers have been supportive of more rate hikes, with Fed official Schmid saying yesterday that the central bank still needs to tighten monetary policy further to lower inflation even if higher long-term Treasury yields are weighing on activity in some parts of the economy. Markets are currently seeing a 21% chance of a Fed rate hike later this month, rising to 82% in December.

Elevated Treasury yields and firm Fed rate hike expectations could see the Dollar Index extend gains towards 102.70 moving forward.

JPY

The Japanese Yen saw largely sideways price action on Wednesday after new BoJ policymaker Ayano Sato said that she supports the idea of raising interest rates in several stages, highlighting awareness even among dovish board members of the need to combat inflation risks. Sato also explained why she was one of the two dissenters against the central bank’s decision to hike rates last month, saying that she voted for a hold because she felt that consumption lacked momentum and that underlying inflation was not picking up pace. Nevertheless, Sato acknowledged that risks to the price outlook were “somewhat skewed to the upside” due to rising oil prices from the Middle East conflict. Elsewhere, data showed that real wages in Japan rose 1.5% in August from a year earlier, marking the eighth consecutive month of gains and pointing to a continued recovery in wage growth. Analysts said that the solid wage data supports the case for the BoJ to continue on a policy tightening path moving forward.

US-Japan rate differentials look poised to keep USDJPY supported above 156.40 in the near term.

GBP

The British Pound weakened against a broadly stronger USD yesterday but scaled 16-month highs against the Euro as France's fiscal concerns continued to weigh on the common currency. Like yields on French sovereign debt, long-end UK gilt yields have also risen sharply recently and touched their highest level since the 1990s last week. On the data front, British house prices were flat in September after recording their first annual fall since 2023 in August. While the BoE has kept interest rates unchanged since the outbreak of the US-Iran war seven months ago, UK mortgage rates have risen sharply due to rising market borrowing costs for lenders and expectations of future BoE hikes. Markets currently see an 81% probability of the BoE raising rates by 25bps in November.

Sterling could see further weakness moving forward, with the year-to-date low at 1.3140 coming into view.

XAU

Gold prices tumbled to two-month lows on Wednesday, briefly extending recent weakness below the $4,100 handle in the face of a strong USD and elevated US Treasury yields. Minutes from last month’s Fed meeting showed that the FOMC voted unanimously for a hike, with most policymakers also expecting that another round of policy tightening would be appropriate by the end of the year. Recent comments from Fed officials have also underscored the central bank’s commitment to bringing inflation under control. Meanwhile, oil prices rose amid continued Middle East supply risks as well as an escalation in hostilities between the Iran-aligned Houthis and Saudi-backed government forces in Yemen. Separately, data released by the PBoC showed that China’s central bank stepped up its gold purchases in September, extending its buying streak to a 23rd consecutive month.

Amid ongoing USD strength, the precious metal may be vulnerable to a test of key support at $4,000 over the next few sessions.

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Europe Disclaimer: 
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