Global Market Quick Take: Asia – February 19, 2024 Global Market Quick Take: Asia – February 19, 2024 Global Market Quick Take: Asia – February 19, 2024

Global Market Quick Take: Asia – February 19, 2024

Macro 6 minutes to read
APAC Strategy Team

Summary:  A strong PPI report drove the 10-year Treasury yield to 4.28% and saw the S&P 500 down 0.5% and the Nasdaq 100 down 0.9%. The highlight of this week's earnings announcements is expected to be from Nvidia on Wednesday after the market closes. Crude oil traded higher amid tensions in the Middle East. The Hang Seng Index surged by 2.5% last Friday. On Sunday, data showed that China's domestic travel and tourism spending increased by 19% and 7.7%, respectively, from the 2019 pre-COVID levels during the Lunar New Year holiday period. The mainland A-share market resumes trading today after the holiday while the US markets are closed in observance of Presidents' Day.

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

US Equities: Stocks slid modestly on Friday after PPI prints added fuel to concerns about the sustainability of the disinflation trend. The S&P 500 Index declined by 0.5%, while the Nasdaq 100 Index shed 0.9%. Applied Materials bucked the decline, rising 6.4% and topping the performance of the S&P 500 after the chip-making equipment manufacturer delivered quarterly results and guidance exceeding expectations. On the contrary, Super Micro Computer, a server maker and the largest constituent stock in the small-cap Russell 2000 Index plummeted 20% amid an analyst downgrade and an SEC filing disclosing the selling of $25.1 million in shares by a senior sales official.

The most watched earnings announcement this week will be from Nvidia on Wednesday after the market closes. In a WSJ interview, ARK Investment Management’s Cathie Wood expects Nvidia’s Q4 results to be “very good” but she has concerns about potential upcoming inventory overhang due to over-ordering by customers that need to be unwound in the future.

The US equity market is closed for Presidents' Day on Monday.

Fixed income: A hot PPI report, featuring both the headline numbers and the PPI components that are inputs in the computation of the core PCE price index (the Fed’s preferred inflation gauge), came in stronger in January. Upon its release, the PPI prints sent Treasury yields to their intra-day highs before part of the gains receded throughout the day. Meanwhile, San Francisco Fed President Daly joined the chorus of Fed speakers emphasizing patience and caution about rushing to cut rates. At the close, the 10-year yield increased by 5bps to 4.28%, and the 2-year yield rose by 7bps to 4.64%. The US Treasury market is closed today in observance of Presidents' Day.

China/HK Equities: Last Friday, news broke that the top five Chinese state-owned banks had received over 8,000 'property development project whitelist' recommendations from local governments, calling for providing credit support to property projects. This news propelled Chinese developers higher, with Longfor leading the way with a remarkable 10.2% gain. Nonetheless, investors should be cautious about the willingness and levels of accommodation from banks. Meanwhile, mainland catering and tourism companies saw a surge in stock prices, fueled by robust high-frequency Lunar New Year holiday travel and consumption data. China Resources Beer jumped by 9.3%, and China Tourism Group Duty Free added 5.7%. The Hang Seng Index surged by 2.5% for the day and 3.8% over the three trading days following the Lunar New Year.

As we start the first post-holiday trading day in the mainland equity markets, investors received welcoming official data on Sunday that China's domestic travel and tourism spending increased by 19% and 7.7%, respectively, from the 2019 pre-COVID levels during the Lunar New Year holiday period. Separately, while the PBoC maintained its key policy MLF rate unchanged on Sunday, the focus is likely to remain on the anticipation of potential cuts to the loan prime rates by major banks this Tuesday.

FX: The post-PPI gains in the dollar faded quickly, and the DXY is testing the 100DMA support. Lack of a China rate cut over the weekend is translating into some relief for the yuan at the Monday open, and optimism around China is gathering pace as the market reopens today after a week-long Lunar New Year holiday and travel demand has been upbeat. USDCNH slid to 7.21, and worth watching the AUD which rallied to 0.6530+ on Friday on optimism around China easing and China’s LPR decision as well as RBA minutes are on tap for Tuesday. NZDUSD was the outperformer, seen rising towards 0.6140 at the Asia open with expectations for higher-for-longer, and even the potential for more rate hikes, being priced in. EURUSD back at Friday’s highs of 1.0780+, but key test will be the 1.08 handle.

Commodities: Crude oil ended the week higher amid escalating tensions in the Middle East. Israel warned that it could launch a ground offensive in Rafah area of Gaza as early as mid-March, and talks of a ceasefire haven’t progressed well. Still, supply concerns remain measured due to OPEC over-capacity, and a mixed demand outlook. Copper recorded its biggest weekly gain in months as expectations of stronger demand in China rose. Gold, meanwhile, seen to be gaining momentum in early Asian session after ending lower last week, and focus this week will be on China reopening, PBOC’s LPR decision and FOMC minutes, along with consumer earnings.


  • After a hot CPI report last week, US PPI for January also came in above expectations. Headline PPI rose 0.3% M/M above the 0.1% forecast and -0.1% prior. On a Y/Y basis, PPI rose 0.9%, easing only a notch from the prior 1.0% pace but above the 0.6% consensus. The core print rose 0.5% M/M (prev. -0.1%, exp. +0.1%) with the Y/Y rising 2.0% (exp.1.6%, prev. 1.7%) while the super core rose 0.6% (prev. 0.2%), with the Y/Y steady at 2.6%. Core PCE, which is the Fed’s key inflation metric, is only due end of February, but hot CPI and PPI suggest that it could remain hot as well. Markets now expect a less than 40% chance of a rate cut by May.
  • Fed officials have brushed off the high inflation numbers, as seasonality could be at play for the January prints. Ex-St. Louis Federal Reserve branch president Bullard said that the FOMC should cut interest rates at its 19-20 March meeting as a preemptive move to prevent the current level of rates from needlessly curtailing economic activity later this year. Mary Daly and Raphael Bostic also shrugged off the inflation surprise, with Daly saying that markets are now pricing in something more dovish than Fed officials ever said so there's some convergence here but the Fed isn't changing its tune.
  • On February 18, the People’s Bank of China (PBoC) held its 1-year Medium Term Lending Facility (MLF) stead at 2.5%. As expected, the PBoC retains some tools for later use, having recently cut the reserve requirement ratio (RRR) by 50bps on February 6. Despite the unchanged MLF rate, market economists surveyed by Bloomberg anticipate the penal banks of the National Interbank Funding Center to reduce the 5-year Loan Prime Rate from 4.20% to 4.10% while maintaining the 1-year Loan Prime Rate at 3.45%. Some market economists also project a cut to the 1-year Loan Prime Rate. Following the reduction of deposit rates in December and the RRR cut, Chinese banks have the capacity to lower lending rates.
  • According to the preliminary estimate from the State Administration of Foreign Exchange (SAFE), China's current account surplus decreased to USD 55.2 billion, equivalent to 1.1% of nominal GDP, in Q4, down from USD 62.8 billion or 1.4% of nominal GDP in Q3.
  • In Q4, China's foreign direct investment (FDI) recorded a net inflow of USD 11.8 billion, showing a slight improvement from the first-ever net outflow in Q3. The net FDI inflow for the entire year of 2023 amounted to USD 33 billion, the lowest figure in three decades.
  • During the 8-day Lunar New Year holiday, domestic tourist travel increased by 34.3% year-on-year, reaching 474 million trips—an uptick of 19% from the pre-COVID 2019 level. Tourism spending followed suit, rising by 47.3% from 2023 or 7.7% from 2019, totaling RMB632.7 billion. It's worth noting that this year's Lunar New Year holiday spanned eight days, compared to the seven days in 2019. Additionally, the average tourism spending per trip declined by 9.5% to RMB1,335 this year, down from RMB1,475 in 2019.


    Macro events: US markets closed for the Presidents’ Day holiday

    Earnings: Cochlear

    In the news:

  • China's travel spending during Lunar New Year holidays beats pre-COVID levels (Reuters)
  • Premier Li Qiang called for “quick results” in tackling domestic economic problems (SCMP)
  • ARK Invest's Cathie Wood: AI Boom is Real, But Still Selling Nvidia (WSJ)
  • Japan's revamped NISA program seen benefiting U.S., Indian stocks (Nikkei)
  • Nintendo Plunges After Game Makers Say Switch 2 Pushed to 2025 (Bloomberg)
  • EU to hit Apple with first ever fine in €500mn music streaming penalty (FT)
  • Eli Lilly, Novo Nordisk get growth stock status on weight-loss drug boost (Reuters)
  • Intel in Talks for More Than $10 Billion in Chips Act Incentives (Bloomberg)


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