Global Market Quick Take: Asia – February 26, 2024

Global Market Quick Take: Asia – February 26, 2024

Macro 6 minutes to read
APAC Research

Summary:  Nvidia's positive results and optimistic outlook continue to underpin the ongoing upward momentum in the US equity markets. Berkshire Hathaway, holding a substantial cash balance, sees limited investment opportunities according to Buffett. However, he praises Japanese trading firms in which Berkshire Hathaway holds a 9% stake for their shareholder-friendly policies. Crude oil prices declined due to a lack of catalysts. Investors are anticipating the release of the core PCE deflator, the Fed's preferred inflation gauge, this Thursday.


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

US Equities: In a lacklustre Friday session after the dramatic surge the day before, the S&P500 Index made a new closing high of 5,089 while the Nasdaq 100 pulled back slightly from a historical intra-day high to close to 17,938. Nvidia’s solid results, upbeat guidance and optimistic assessment of a ‘tipping point’ of the AI industry pointing to AI-induced growth opportunities across industries continue to sustain the upward momentum of the US equity markets.

Berkshire Hathaway reported Q4 net earnings of $37.57 billion, consisting of $8.48 billion in operating earnings, which has grown 28% year-on-year and ahead of analysts' forecast of $7.89 billion, and $29.09 billion in investment and derivative gains. The investment portfolio is little changed and Buffet said in the letter to the shareholders that he did not see meaningful opportunities in deploying the company’s record $167.7 billion cash balance and Berkshire Hathaway has “no possibility of eye-popping performance”.  Berkshire Hathaway was a net seller in its equity portfolio last year. Notably, Buffett praised the five Japanese trading firms: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo, that Berkshire Hathaway had a 9% stake in each of them, for following "shareholder-friendly policies that are much superior to those customarily practiced in the U.S."

This week, Lowe’s and Salesforce are reporting on Tuesday and Wednesday respectively.

Hong Kong/China Equities: Markets ended mixed on Friday, with the Hang Seng Index sliding 0.1% while the CSI 300 Index added 0.1%. For February so far, both indices gained more than 8% as investors adjusted positions amid state intervention in the A-share market, robust Lunar New Year spending data, and a large cut to the 5-year Loan Prime Rate. This week, the focus will be on the official NBS PMI and private Caixin China PMI scheduled to be released on Friday and anticipation of the National People’s Congress commencing next Tuesday, March 5. Major companies that are reporting this week include Li Auto on Monday, Baidu, iQIYI, Sun Hung Kai Properties, Galaxy, and Budweiser on Wednesday, HKEX and NetEase on Thursday,

Fixed income: Treasuries rebounded last Friday, recovering from losses earlier in the week, with the 10-year yield finishing 7bps lower at 4.25%, which was 3bps lower than the previous week. However, the 2-year underperformed, sliding only 2bps on Friday to end the week 5bps higher at 4.69%. Investors are awaiting the release of the core PCE deflator, which is the Fed’s preferred inflation gauge, this Thursday. After the strong showing in the CPI and PPI data, the median forecast in Bloomberg’s survey sees a robust 0.4% M/M increase in the core PCE and a 2.8% Y/Y increase. Barring an upside surprise in the PCE report, the current level of Treasuries provides investors with meaningful yields.

FX:  The dollar index traded struggled to find a direction on Friday with Fedspeak continuing to lean hawkish but risk sentiment remaining upbeat following the Nvidia-driven AI rally last week. NZDUSD was the outperformer last week, with expectations of a hawkish RBNZ this week adding to the tailwinds along with the risk-on environment boosting high beta currencies. NZDUSD is testing resistance at 0.62 while AUDNZD is back above 1.06. NOK, on the other hand, was the underperformer as USDNOK rose above 10.50. USDJPY rose to highs of 150.80 and intervention threat remains as Japan comes back from holiday today. EURUSD still holding up above 1.08 despite the dovish comments from Lagarde, and focus this week will be on the inflation print.

Commodities:  Crude oil prices declined on Friday, ending the week lower again amid lack of fresh catalysts. Gold rallied on Friday to over $2030 as Treasury yields slipped, but continuation of risk-on on the back of Nvidia-driven AI rally can threaten the momentum. Metals remain in focus with China momentum seen picking up while supply disruptions persist. Iron ore futures were however down over 8% last week in Singapore.

Macro:

  • Fed’s Waller (voter) said there is no rush to start cutting rates as inflation progress in being monitored. Lisa Cook (voter) also said that she was optimistic inflation is cooling but wants to see more evidence of getting close to 2% target before discussing rate cuts. Focus now shifts to January core PCE, Fed’s preferred inflation gauge, due out this week.
  • ECB’s Lagarde said that Q4 wage numbers are encouraging as pay growth slowed to 4.5%. She also stressed that the ECB is independent, hinting that it may not wait for the Fed to cut rates first.
  • China’s regulators said that they would not intervene in normal transactions, including short selling, but only enforce regulations to prevent illegal activities that affect the orderly function of the market.
  • New and existing home prices in the top Chinese 70 cities continued to slide, falling by 0.37% and 0.68% M/M respectively in January.

 

Macro events: US New Home Sales (Jan), US Dallas Fed Manufacturing Activity (Feb)

Earnings: Workday, ONEOK, Fidelity National Information, Li Auto, Public Service Enterprise, HEICO, Zoom, Erie Indemnity, Domino’s Pizza.

In the news:

  • Buffett Says ‘Eye-Popping’ Results Unlikely With Record Cash (Bloomberg)
  • How a Shifting AI Chip Market Will Shape Nvidia’s Future (WSJ)
  • Nikkei average gives boost to BOJ's case for monetary tightening (Nikkei Asia)
  • Japan to Give Extra $4.86 Billion to Expand TSMC Kumamoto Plant (Bloomberg)
  • BYD Unveils $233,450 EV Supercar to Rival Ferrari, Lamborghini (Bloomberg)
  • How Trump defeated Nikki Haley in her home state of South Carolina (Reuters)
  • China seeks to strengthen cooperation with New Zealand for CPTPP, commerce minister says (Reuters)
  • Disney, Reliance Said to Sign Binding India Media Merger Pact (Bloomberg)

 

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

For a global look at markets – go to Inspiration

 

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.