Global Market Quick Take: Asia – March 6, 2024

US Equities: Nvidia, adding 0.9%, was the lone gainer among the Magnificent Seven stocks, which slid between 0.5% and 3.9% and wiped out more than 230 billion market capitalization from the US equity market. Apple shed 2.8% on a report that iPhone sales fell 24% in the first six weeks of the year in China. The weakness in this group of heavyweights dragged down the S&P 500 and the Nasdaq 100 by 1.8% and 1.0% respectively. Bucking the market decline, Target surged 12% after reporting results beating analysts’ forecasts.

Hong Kong/China Equities: The economic targets for 2024 aligned with expectations, but the absence of positive surprises led to a sell-off of Hong Kong stocks. After the Government Work Report, the Hang Seng Index fell by 2.6%, while the Hang Seng TECH Index plummeted by 4.3%, with all 30 constituent stocks finishing lower. Digital health services providers, e-commerce, AI, and new energy vehicle stocks were among the biggest losers. In contrast, mainland A-share indices showed resilience, with the CSI 300 adding 0.7%. Despite modest index gains, over 4,300 A-share stocks declined, signaling a puzzling market scenario. Notably, significant trading volume increases occurred in major ETFs, suggesting National Team intervention to support the market. While National Team buying may continue to support key A-share benchmarks and their top constituent stocks throughout the remainder of the Two Sessions, the overall A-share market and the Hong Kong market appear poised for retracement to the downside, particularly in the aftermath of the Two Sessions. To delve deeper into the contrasting performance of the Hang Seng Index and the CSI300, refer to this Saxo article.

After the Hong Kong market closed, NIO revealed a 6% Y/Y increase in Q4 revenue, reaching RMB17.1 billion, slightly surpassing previous guidance and market expectations. Despite improvement from the previous year, the EV manufacturer reported a loss of RMB4.9 billion after adjustments, missing analysts' forecasts of RMB4.4 billion according to Bloomberg. Gross margins, though better than a year ago, declined by 0.5 points Q/Q to 7.5% in Q4. Looking ahead to Q1, NIO forecasts deliveries of 31-31k vehicles and revenue of RMB10.5-11.1 billion. NIO's American Depositary Shares (ADS) gained 2.8% overnight. Today, JD.com and JD Logistics are set to report.

Fixed income: Ahead of Fed Chair Powell’s semi-annual testimony to Congress before the House Financial Services Committee today and after a soft ISM Services survey, Treasury yields fell across the yield curve. The 2-year yield shed 4bps to 4.56% while the 10-year yield dropped by 6bps to 4.15%.

FX: Forex markets remain subdued, with action only seen in non-traditional FX pairs reflecting Gold and Bitcoin that touched record highs but pared gains subsequently. Bitcoin (XBTUSD) has retreated back to 60k after seeing record highs at 69k+ as traders locked in gains. Gold (XAUUSD) still seen close to $2130 after record highs of $2140+ overnight. Yen strengthened as well with yields slipping on soft ISM services data, but USDJPY could only go down to 150. Chair Powell’s testimony will be in focus today, and any downplaying of hot inflation prints could be a dovish reading. EURUSD hit highs of 1.0876 on dollar weakness following ISM release, but is turning back lower towards 1.0850 now as 50DMA offered resistance. GBPUSD also rallied to highs of 1.2735 but is seen back at big figure now. CAD underperformed ahead of Bank of Canada announcement today, with USDCAD testing 1.36 handle. A dovish surprise, although less likely unless Fed changes course, could bring 61.8% fibo retracement at 1.3623 in USDCAD in focus.

Commodities: Gold momentum extended further, taking the yellow metal to a fresh record high, and any dovish hints from Powell today could mean further gains may be on the radar. Super Tuesday confirming Trump’s Republican nomination could also support Gold as geopolitics become a big focus and central bank buying will be expected to ramp up further. Oil prices ended the day lower as China’s GDP growth target remained modest and none of the announcements so far have been able to spark optimism. Private US crude inventories also rose by 400,000 barrels last week and official numbers will be on watch now.

Macro:

• US ISM Services fell to 52.6 in February from 53.4 and beneath the expected 53.0. Internally, prices paid encouragingly fell to 58.6 from 64.0 and business activity lifted to 57.2 (prev. 55.8). Employment dipped back into contractionary territory (48.0 from 50.5) while new orders rose to 56.1 (prev. 55.0).
• Super Tuesday is still underway in the US, with voters in 16 states and one territory at the polls. President Joe Biden and former President Donald Trump hold commanding leads in the polls of their parties’ voters. There are 865 Republican delegates up for grabs today — a total that could propel former President Donald Trump to an insurmountable lead in the GOP contest. Former U.N. Ambassador Nikki Haley is trying to remain competitive but has found herself trailing Trump in nearly every poll headed into Super Tuesday. On the Democratic side, President Joe Biden is also likely to coast to victories, with 1,420 delegates on the line. Critics of his handling of the Israel-Hamas war have tried to build support for “uncommitted” votes in states where that appears on the ballot or write-ins of “cease-fire,” but in prior contests, the movement has gained little traction. Biden’s other opponents — Rep. Dean Phillips and self-help author Marianne Williamson — will appear on some, but not all, of the ballots.
• In his Government Work Report delivered at the NPC, Premier Li Qiang unveiled China's economic targets for the year, as outlined in the government work report. The goals included a real GDP growth target of around 5.0%, a CPI inflation target of approximately 3.0%, and an on-budget deficit-to-GDP ratio target of 3.0%. These targets align with the previous year's objectives, indicating a degree of continuity in the current, relatively cautious macroeconomic policy. When factoring in the RMB1.0 trillion of central government special bonds and RMB3.9 trillion of local government special bonds, the actual deficit ratio would substantially increase to around 7.0% of nominal GDP in 2024. The Central Government will issue ultra-long special bonds for the next few years.
• The Caixin China Services PMI declined slightly to 52.5 in February from 52.7 a month ago, contrary to the expectations of an increase. Employment conditions weakened, with the February service industry employment sub-index at its lowest since 2023. The business expectation sub-index for the service industry in February also slightly decreased to its lowest in nearly four months, although it remained in the expansion territory. On the other hand, the new export order sub-index reached its highest since July 2023, indicating stronger overseas demand.

Macro events: BoC Announcement, German Trade Balance (Jan), EZ Retail Sales, US ADP National Employment, Wholesale Inventory, JOLTS. Speakers: Fed Chair Powell, Daly, Kashkari

Earnings: JD Logistics, JD.com, Brown-Forman, Campbell Soup

In the news:

• Target Aims for Turnaround After First Sales Decline Since 2016 (WSJ)
• China makes science and tech a budget priority with 10% jump in spending (SCMP)
• Japan stock rally spreads beyond chip sector to construction (Nikkei Asia)
• Trump wins Virginia as he seeks knockout blow to Haley on Super Tuesday (Reuters)
• Meta's Facebook, Instagram back up after global outage (Reuters)
• NYCB Bounces After Two-Day Rout Brought Shares to 1996 Level (Bloomberg) 

For all macro, earnings, and dividend events check Saxo’s calendar.

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