Asia Day Ahead: China’s data in focus, Brent prices finding support while gold nears resistance

Market Recap

Wall Street pared earlier losses to end the day flat (DJIA +0.04%; S&P 500 -0.01%; Nasdaq -0.25%), but buyers continued to find some reservations from the sharp rise in Treasury yields overnight. A blowout read in US retail sales (0.7% month-on-month versus 0.3% forecast) has prompted a move in the 10-year yields back near its multi-year high at 4.83%, with stronger-than-expected US consumer spending casting some hawkish repricing in rate expectations for the December meeting and beyond. Likewise, the two-year yields are back above 5.20%, which marked a new 17-year high.

Nevertheless, corporate earnings optimism, validation for a continued rate pause in November and improved seasonality serve as key catalysts for buyers to push for a fourth-quarter rally. Further earnings outperformance were revealed from Bank of America and Goldman Sachs overnight, with the former tapping on higher-than-expected net interest income while the latter offered a more optimistic guidance for capital market activities. Morgan Stanley will be up today, along with Netflix's and Tesla's earnings after-market.

Perhaps one to keep on the radar may be Brent crude prices, which have been finding support off its Ichimoku cloud support on the daily chart lately. A blast at a Gaza City hospital on Tuesday brought some finger-pointing on both sides, which seems to put any cooling in the Israel-Palestine conflict less likely. Any inaction to recent diplomatic efforts could see the conflict drag for longer, while the risks of further escalation remain on the table. For now, the broader upward trend for Brent crude prices may remain as long as the Ichimoku cloud support holds, with any upside to place its September high on watch for a retest.

Asia Open

Asian stocks look set for a muted open, with Nikkei -0.27%, ASX -0.07% and KOSPI -0.15% at the time of writing. Key focus this morning will be on a series of economic data out of China, which includes its 3Q23 gross domestic product (GDP) figure, along with September industrial production and retail sales. China’s upcoming GDP is expected to improve from the previous quarter at 1% versus 0.8%. Further, retail sales are expected to mark its second straight month of recovery to 4.9% from previous 4.6%. On the other hand, fixed asset investment is expected to stay flat at 3.2%, while industrial production may come in lighter at 4.3% from previous 4.5%.

A stronger-than-expected showing in the data may support further signs of stabilisation in economic conditions, although overall recovery momentum may still be tepid. While any positive surprises may bode well for Chinese equities, a trend of improving data may still be needed to drive more sustained moves. For now, a breakdown of the key 12,300 support for the China A50 index continues to point to a downward trend in place, while its daily relative strength index (RSI) struggles to move above its key 50 level. The 12,300 level will serve as immediate resistance to overcome while a move to a new low this week may place the 11,800 level in sight for a retest.

On the watchlist: Gold prices inching towards key resistance

Safe-haven flows amid geopolitical tensions in the Middle East have remained the dominant catalyst for gold prices, with the yellow metal gaining more than 6% over the past two weeks while staying firm despite a sharp rise in Treasury yields overnight.

The risks of further escalation in the conflict may be supportive of prices for now, but the US$1,945 level may prove to be a crucial resistance to overcome. This level is where its Ichimoku cloud zone stands on the daily chart and previous three interactions with the zone had not been met with a successful upward break. A successful move above the US$1,945 level may support a move to retest the psychological US$2,000 level next, while on the other hand, another failed attempt could keep the broader downward trend intact with the formation of a new lower high.

Tuesday: DJIA +0.04%; S&P 500 -0.01%; Nasdaq -0.25%, DAX +0.09%, FTSE +0.58%