Asia Day Ahead: Singapore’s GDP surprise, Gold prices back at psychological level

Market Recap

The Federal Open Market Committee (FOMC) minutes overnight largely reaffirmed the Federal Reserve (Fed)'s more cautious tone around tightening, which kept expectations well-anchored for further rate hold over coming meetings. But given the lack of mention of rate cuts in the minutes, some market participants may wonder if they have gotten ahead of themselves by pricing for the Fed to cut rate as early as May next year. That may account for the slight profit-taking overnight (DJIA -0.18%; S&P 500 -0.20%; Nasdaq -0.59%), while the upcoming US holiday this week may also drive some market participants to the sidelines.

Nevertheless, US Treasury yields struggled to tap on the minutes for a move higher, although the US dollar (+0.26%) did see some firming after its recent sell-off. But having broken below its key 200-day moving average (MA) this week, recent gains in the US dollar may just be an attempt to retest the 200-day MA. Any failure to overcome it ahead may still validate its current downward bias and pave the way to retest the 102.00 level next.

After-market, Nvidia’s 3Q results brought another strong set of numbers – a more than two-fold increase in revenue from a year ago and more than four-fold increase in earnings per share provides validation for strong chips demand, as companies continue to jump onto the artificial intelligence (AI) bandwagon. Its fourth quarter guidance was stronger-than-expected, but reservations were felt with the flagged impact from China (its third largest market) as a result of US chips export restrictions. That said, one may still argue that a 2% after-market drop still pale in comparison to its 250% rally year-to-date, while strong demand from other regions are able to fill China’s demand gap.

Asia Open

Asian stocks look set for a mixed open, with Nikkei+0.59%, ASX +0.06% and KOSPI -0.56% at the time of writing. This morning’s economic calendar saw a beat in Singapore’s final 3Q gross domestic product (GDP) figure, with a 1.4% expansion quarter-on-quarter coming in stronger than the estimated 1.1%. Along with an estimated 1%-3% economic expansion in 2024 from the 1.0% in 2023, the overall guidance may calm some nerves around recession by pointing to a potential growth turnaround ahead.

Singapore’s inflation data will be on watch tomorrow, with expectations for core pricing pressures to stay unchanged at the 3% level likely to keep the Monetary Authority of Singapore (MAS) on further wait-and-see into 2024, in line with the stance from major central banks.

That said, for the Straits Times Index (STI) , the index remains locked in a broad consolidation pattern since March 2021, as its value-focused composition failed to tap on the ongoing traction towards global growth stocks as much. Near-term, the series of lower highs and lows since July this year still points to some exhaustion from the bulls, with further downside likely to leave the key psychological 3,000 level on watch ahead.

On the watchlist: Gold prices back to retest its key psychological US$2,000 level once more

Despite some pushback against rate cuts from the US FOMC minutes overnight, an initial sell-off in gold prices in the aftermath of the minutes release was quickly reversed, as gold prices continue to hover around its key psychological US$2,000 level. Its weekly relative strength index (RSI) has managed to defend its key 50 level at the start of the month, along with a bullish crossover presented on its weekly moving average convergence/divergence (MACD), which point towards building upward momentum.

A successful move above its October 2023 high may reaffirm its upward bias, where prices could head to retest its year-to-date high at the US$2,050 level next. On the other hand, failure to overcome the US$2,000 level ahead may call for a breather towards the US$1,940 level, which may serve as a potential double-top formation neckline to hold.

Tuesday: DJIA -0.18%; S&P 500 -0.20%; Nasdaq -0.59%, DAX -0.01%, FTSE -0.19%