Global Market Quick Take: Asia – February 29, 2024

US Equities: Stocks pulled back ahead of the release of the core PCE deflator. The S&P500 slid 0.2% to 5,070 while the Nasdaq 100 shed 0.5%, driven by weakness in Alphabet, down 1.8%, Nvidia, falling 1.3%, and Apple losing 0.7%. 

In the extended hours, Salesforce initially dropped by 4% after providing downbeat full-year guidance before rebounding to nearly unchanged. Quarterly revenue grew 11% Y/Y to $9.3 billion and adjusted EPS came in at $2.29, both slightly ahead of expectations. The revenue guidance of $37.7 billion the full year however is below the analyst forecast median of $38.65 billion.

Snowflake plummeted by more than 20% in the extended hours after announcing the departure of its CEO “effective immediately” and disappointing guidance of product revenue of $745 million to $750 million for Q1 and $3.25 billion for the year vs consensus forecasts of $769.5 million and $3.43 billion respectively.

Hong Kong/China Equities: Local Hong Kong developers gained after the Hong Kong Government removed all cooling measures on property transactions, most importantly additional stamp duties on second-home buyers, non-permanent residents and sellers who dispose of their properties within two years, with immediate effect. However, the Hang Seng Index fell by 1.5%, dragged down by mainland developers and consumer stocks. Country Garden plummeted by 12.5% after a creditor filed a winding-up petition against the developer to a Hong Kong court. Longfor dropped by 7%. Major Chinese banks slid over 1% and insurers shed over 2%. Bucking the market decline, NetEase gained 4.6% after being granted approvals for a mobile version of its blockbuster PC game. The CSI300 lost 1.3%, driven by weakness in TMT, semiconductors and other technology names.

Overnight, Baidu reported Q4 revenue of RMB34.95 billion, up 6% Y/Y in line with estimates and adjusted EPS of RMB21.86, up 43% Y/Y, ahead of the consensus forecast of RMB17.86. While the management stayed optimistic about the full-year outlook, they were cautious about Q1, noting a weak macro environment in China. Baidu’s ADS plunged by 8.1%, equivalent to 5.2% below the previous close in Hong Kong. NetEase and HKEX are reporting results today.

Fixed income: Treasuries rallied after a downward revision to the Q4 GDP, seeing the 2-year yield falling by 6bps to 4.64% and the 10-year yield dipping by 4bps to 4.26%.

FX: The dollar index rose earlier on Wednesday, with DXY taking a look above 104, as NZD slumped on a dovish hold from the RBNZ. However, dollar could not hold on to the gains, and revered to sub-104 levels into the US open. Focus now turns to January PCE due today. NZDUSD broke below the 0.61 handle, from ~0.6180, being supported by the 200DMA for now. Break below could see early Feb lows of 0.6038 being threatened. AUDNZD, which has been held up at 1.06 support, rose back to 1.0680 after the RBNZ announcement, before easing to 1.0650 subsequently. AUDUSD also broke below 0.65 and next support comes in at 0.6450. EURUSD made a round-trip, finding support at 1.08 to reverse back higher to 1.0840 with Germany, France and Spain inflation on the radar today along with US PCE. USDJPY rose back higher to 150.70.

Commodities:  Crude oil was choppy with EIA reporting a larger crude built than expected, tempering optimism stemming from stable demand conditions and tight supplies. US crude oil inventories rose 4.2mbbl last week, but extension of OPEC+ supply cuts remains in focus. Iron ore futures resumed their slide with signal from China construction sector remaining weak. Gold ended the day slightly higher, but still within its recent range, ahead of the US PCE release later today.

Macro:

• The 2nd estimate of US GDP was revised down to 3.2% from 3.3%, despite expectations for it to be maintained at 3.3%. Overall it was a mixed report with consumer spending out at 3% from 2.8% advance estimate and 2.7% expected, while GDP Price Index at 1.6% vs est. 1.5%. Core PCE Price Index at 2.1% vs est. 2%. The small downward revision in headline growth is less of a concern given mixed details, and doesn’t change market’s current thinking about the US economy.
• Fed members continued to warrant caution despite calling for 2024 rate cuts. Bostic (voter) reiterated that he expects the first cut in the summer. Collins (non-voter) suggested the path may be less rapid than past cycles. Williams (voter) said there’s still “a ways to go” to get inflation back to target.
• In his budget speech, the Hong Kong Financial Secretary announced the removal of all cooling measures on property transactions with immediate effect, including the Buyer's Stamp Duty (BSD) on non-HK permanent residents, and the New Residential Stamp Duty (NRSD) on second-time buyers, and the Special Stamp Duty (SDD) that levies on sellers who dispose of their properties within two years of purchases. Separately the Hong Kong Monetary Authority announced to increase in the maximum mortgage financing ratios for homebuyers.
• Hong Kong projects to remain running a budget deficit, amounting to HKD48 billion in the fiscal year 2024-25 after a HKD101.6 billion deficit in 2023-24.
• The expectation of higher Aussie CPI didn’t materialize as January CPI came in unchanged at 3.4% YoY vs. 3.6% expected due to base effects. So, the print just confirms what we already know that the RBA rate hikes have ended. It could also mean that rate cuts could come sooner than currently expected, with markets expecting the first RBA rate cut only in September for now, but pricing in rate cuts remains tough for now until there is clarity on the Fed easing path.
• The RBNZ maintained its cash rate unchanged at 5.5% despite some expectations of a rate hike, and closed the door to further tightening. Market has brought forward expectations of its first rate cut to October from November earlier, and NDZ has come under pressure.

Macro events: Australia Retail Sales, France/Spain/Germany CPI, Germany Retail Sales and Unemployment, US PCE Price Index, Canada GDP. Speakers: Fed’s Bostic, Goolsbee, Mester.

Earnings: NetEase, Hong Kong Exchanges and Clearing, Singapore Technologies Engineering , Alimentation Couche-Tard, Anheuser-Busch InBev, CRH, NetEase, Canadian Imperial Bank, Dell Technologies, Autodesk, London Stock Exchange, Argenx, Saint Gobain, Beierdorf, Leonardo, Haleon, Zscaler, Elastic.

In the news:

• Salesforce Quarterly Sales, Dividend Outshine Weak Outlook (Bloomberg)
• Snowflake's Frank Slootman to Retire From CEO Role, Will Remain Board Chair (Bloomberg)
• Bitcoin hits $60,000 as rally snowballs (Reuters)
• US Congress leaders reach deal on FY24 spending bills, averting government shutdown (Reuters)
• Biden’s Doctor Declares Him ‘Fit for Duty’ (WSJ)
• Supreme Court stalls Trump’s federal election trial while weighing his immunity bid (Politico)
• Elon Musk Says Long-Delayed Tesla Roadster Coming Next Year (WSJ)
• The Fed Governor Who Proved Larry Summers Wrong (WSJ)
• Apple Vision Pro teardown: Japanese companies supply 40% of parts (Nikkei Asia)
• Disney, Reliance Sign $8.5 Billion Deal to Merge India Media Operations (Bloomberg)
• Chinese EV players surprised by Apple’s decision to cancel car project, with Xiaomi CEO Lei saying he remains committed (SCMP)

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

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