Global Market Quick Take: Asia – March 20, 2024

Equities: After having started the US session on a sour note, stocks rebounded led by big tech, and S&P 500 closed at a record high. Nvidia was up 1% amid the launch of the Blackwell AI chip and expanding stack of its AI customer, but overall there has been little exuberance from the GTC event. Super Micro Computer, meanwhile, fell 9% after the company announced that it would be selling another two million shares to finance inventory, expand its manufacturing capacity expansion and boost R&D investments. Energy stocks also gained, with oil prices rising beyond the recent range. Focus now turns to the Fed announcement and dot plot, where a hawkish surprise could potentially make stocks especially in the technology space to pare recent gains.

FX: The DXY dollar index rose higher to touch the 104 handle again yesterday with losses led by JPY despite BOJ’s move to remove negative interest rates and YCC. USDJPY traded to fresh YTD highs of 150.96 which is just above the double-top around 150.90. Intervention or jawboning from authorities could be a key risk if USDJPY moves above 151 but the effectiveness of that remains debatable. EURJPY also touched 164 handle, a YTD high, and next target will be the 2023 high of 164.30. Activity currencies also tumbled on dollar strength and dovish data and central bank signals. AUDUSD tested the 0.65 support as RBA dropped its tightening bias, while NZDUSD printed fresh YTD lows at 0.6034 amid pressure from RBA and deteriorating economic conditions which could prompt earlier start of easing compared to October priced in for now. USDCAD also rose to YTD high of 1.3614 as inflation undershot, although higher oil prices supported. UK CPI will be in focus today as GBP rebounded from a dip to sub-1.27 amid sustained equity momentum but dovish notes can hit today or at the BOE meeting tomorrow.

Commodities: Stronger USD triggered some selling in commodities although crude oil still held up. Brent is now over $87/barrel after breaking out of range and is up over 13% YTD amid concerns of tight supplies while demand conditions are still holding up. FOMC decision ahead could bring some jitters if easing expectations are delayed. Copper corrected lower but green transition and AI demand could mean upward trajectory could remain in place. Our commodity strategist, Ole Hansen, discusses how to invest in copper in this article. Gold edged lower as well but found support ahead of FOMC.

Fixed income: A slew of dovish data and central bank decisions saw yields edging lower. From BOJ to RBA to Canada’s inflation, all sent dovish hints yesterday. The 20yr Treasury auction was very strong, and event risk from FOMC’s dot plot ahead.

Macro:

• BOJ: The Bank of Japan has entered a new era as it scrapped negative interest rates and yield curve control, while also ending its ETF purchases. The central bank has set the short-term interest rate at between 0-0.1% in its first rate hike since 2007, although comments suggested that they expect accommodative conditions to persist for some time which is a signal that concurrent rate rises are unlikely. Overall, the BOJ’s message remained dovish with no signals on further tightening plans.
• RBA: The Reserve Bank of Australia kept its policy settings unchanged but toned down its hawkish bias even though there was no mention of rate cuts in the statement. Markets have slightly increased the odds of rate cuts this year, now standing at over 45bps from 40bps pre-RBA.
• Canada’s inflation came in cooler-than-expected for February at 2.8% YoY vs. 3.1% expected and 2.9% prior and the headline was further beneath the top end of the BoC's 1-3% range, although the core measure (average of median, trim and common) still sits above, but that also eased in February to 3.13% from 3.33%. That has reinforced near-term rate cut expectations from the BOC with 73bps of rate cuts expected now for the year vs. Just over 60bps earlier.
• FOMC Preview: The FOMC is set to keep rates unchanged at 5.25-5.50% on Wednesday. The market's focus will be on the accompanying Dot Plot with risks the 2024 median forecast may nudge higher to two cuts from December's three cuts to reflect the recent upside surprises in inflation and growth data. There is also a risk the neutral rate forecast moves higher. Given a dovish bent in data and central bank communications this week, the hawkish bar for the Fed may be lower and a pushback on rate cuts may be enough. Saxo’s FOMC preview provides insights into how markets can potentially react to a dovish or hawkish surprise by the FOMC, including equities, bonds, currencies and commodities.

Macro events: FOMC Announcement, PBoC LPR, BCB Announcement, Japan Market Holiday (Vernal Equinox Day), UK CPI (Feb), New Zealand GDP (Q4)

Earnings: Tencent, Prudential, Micron Technology, Alimentation Couche-Tard, Kuaishou Technology, PDD, General Mills, BioNTech

In the news:

• Kering warns of 10% 1st-quarter revenue drop, led by Gucci (Reuters)
• BOJ’s Small Rate Hike May Have Big Ripple Effect Around the World (Bloomberg)
• Hong Kong Passes New Security Bill, Triggering Warnings Overseas (Bloomberg)
• China’s Builders Tackle Restructuring as Crisis Enters New Phase (Bloomberg)
• Unilever to spin off ice cream business, cut 7,500 jobs for cost savings (Reuters)
• Bitcoin slides 6%, while altcoins sparkle (Reuters)
• MicroStrategy shares fall 13% after convertible deal for bitcoin purchases (Reuters)

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

For a global look at markets – go to Inspiration