Market Daily

Fixed Income Market Updates

EUROPEAN AT1

European bank AT1s was slightly weaker. Bond prices were 0.125-0.25 points lower. There was more selling in the long end as investors worry about Trump’s inflationary policy. Going forward, we expect the sector could be under some selling pressure as the valuation is not cheap. But any meaningful correction will be a good opportunity to add, particularly the ones with short call date.

ASIA INVESTMENT GRADE (IG)

Asia IG consolidation continued. Overall market flows were mixed and quiet. Private bank clients are skewed towards buying whereas institutional investors were reducing fixed income exposures. In China-HK, we saw good demand on good quality names such as Meituan, AIA, and CK Hutchison. Outside of China, short-dated Korea IG papers were popular. In India IG, Adani continued to outperform and we saw more demand in its short-dated papers. Overall, we expect Asia IG trading activities will be low as we approach year-end.

ASIA HIGH YIELD (HY)

Asia HY remained slow. China HY property traded with a slightly better tone with Dalian Wanda rebounding 0.5 points higher. However, the sector is losing momentum after the weaker-than-expected credit data in China. We expect China HY will stay weak until we see more updates on government policy stimulus. Outside of China, India HY was mostly unchanged across various bonds. 

Forex Market Updates

USD

The US Dollar rose to a more than six month high against a basket of other major peers before retracing slightly on Tuesday as traders continued to pile into the greenback on expectations that Trump’s proposed tariffs will push up prices and leave the Fed less room to cut interest rates. On the data front, a survey of US Small Business Optimism came in well above estimates, while the USD was also supported by bullish comments on the US economy from Fed policymaker Barkin, who also said that “the Fed is in position to respond appropriately regardless of how the economy evolves”.

The Dollar Index could see more near term strength, with USD bulls likely to target the 106.50 level.

EUR

The Euro's post-US election slump continued on Tuesday amid rapidly growing concerns about the outlook for the Eurozone economy, with some banks even seeing the possibility of a decline below parity should the Trump 2.0 administration deliver stiff global tariffs and aggressive fiscal easing. Elsewhere, ECB policymaker Rehn said that a December rate cut is likely and that further reductions are possible given that the central bank sees downside risks to the Eurozone economy, emphasizing that the “growth and productivity outlooks are weak” in the common market.

The common currency is likely to trade heavy moving forward, with 1.0525 the next level of support.

GBP

The British Pound fell to three-month lows yesterday on the back of a disappointing UK jobs report which showed that regular wage growth cooled in 3Q2024 to its lowest level in more than two years, while the unemployment rate ticked higher to 4.3%. Some analysts say that the easing in private sector wages suggest that the BoE will continue to cut rates gradually, although BoE Chief Economist Pill said that the data also showed that inflationary pressures in Britain remained too high for the BoE’s 2% inflation target.

Sterling looks poised to see more near term losses towards immediate support around 1.2660.

XAU

Gold prices fell for the third consecutive session, touching one-month lows in the face of a stronger USD, optimism about US economic growth under a second Trump presidency and a broader market pivot into riskier assets following last week’s US elections. Some analysts say that this recent pullback in the precious metal is just a corrective move in a longer term bullish market, and that the expected inflationary effects of Trump’s proposed tariffs, combined with ongoing geopolitical uncertainty, should drive gold prices higher again further out.

The precious metal could weaken towards 2550 on a firm break below technical support around the 2600 handle.