Global Market Quick Take: Asia – March 25, 2024

Global Market Quick Take: Asia – March 25, 2024

Macro 6 minutes to read
APAC Research

Summary:  Last week, a dovish FOMC led to the 10-year Treasury yield trimming 11 bps, reaching 4.20%. The PCE inflation data release this Friday may shape yield trends. The DXY index surged above 104.30, its highest in a month, while the Chinese yuan weakened notably, surpassing 7.27 against the dollar. Commodities faced pressure amid dollar strength and renewed China concerns. Copper declined by nearly 3%. Japan's Nikkei 225 hit a record high at 40,888 after the Bank of Japan's anticipated policy adjustments. Nasdaq 100 rose 0.1%, boosted by Nvidia and Alphabet gains. Meituan's Q4 earnings surpassed expectations, with its New York ADS closing 4.2% higher than in Hong Kong.


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

Equities: Last week, the FOMC took a relatively dovish stance, maintaining the projection of three rate cuts in 2024, and Chair Powell downplayed the recent uptick in inflation data, hinting at a potential slowdown in the balance-sheet run-off. These developments were bullish for US equities, leading to a rally in the S&P500 on Wednesday. However, the momentum somewhat stalled on Thursday and Friday, with the S&P 500 modestly pulling back by 0.1% on Friday. This decline was driven by Nike's 6.9% fall and Lululemon's 15% decline, as both retailers released a downbeat outlook. In contrast, the Nasdaq 100 added 0.1%, buoyed by Nvidia's 3.1% gain and Alphabet's 2.2% increase.

In Japan, the Nikkei 225 reached another record high, closing at 40,888 after the Bank of Japan delivered expected policy shifts during the week, removing one of the key uncertainties. Investors turned their focus towards the regaining of corporate pricing power amid the return of inflation, corporate governance reform, and reshoring, particularly in the technology sector from China, which may benefit Japan. The Nikkei 225 index gained 0.2% on Friday and 3.7% for the week.

In China and Hong Kong, the Hang Seng Index and CSI300 dropped by 2.2% and 1.0% respectively due to earnings downgrades, coupled with the renminbi's weakness. Li Auto's stock plunged by 10.9% on Friday and 18.3% for the week after lowering its delivery forecast. Bilibili fell by 9.4% amid Alibaba's decreased holdings. After the Hong Kong market closed on Friday, Meituan reported Q4 earnings that beat expectations, with revenue in line. Its ADS closed in New York 4.2% higher than the Hong Kong closing level. Investors turned cautious ahead of upcoming earnings reports from BYD, China Telecom and Anta Sports on Tuesday and major state-owned banks during the week.

The renminbi's sharp depreciation added to weakness in Chinese and Hong Kong equities, with USDCNH rising by 0.8% to 7.2761. Investors expect China's tolerance for a weaker renminbi amid a slow economic recovery, potentially testing September's high of 7.3682. The possibility of a "Trump presidency 2.0" boosted medium-term prospects for USDCNH. For further discussion on the implications of the US election on Chinese equities and USDCNH, see this Saxo article from last week.

FX: The dollar strength extended further on Friday, with the DXY index back above 104.30 to its highest levels in over a month. The Chinese yuan saw notable weakness and USDCNH rose sharply above 7.27 to its highest levels since November, with PBoC setting a weak fix and signaling that authorities are wiling to tolerate some yuan depreciation. AUDUSD dropped 40pips as well, slipping from 0.6570 and now trades below 0.6520. EURUSD also testing the 1.08 handle with the SNB surprise rate cut prompting wagers to increase bets for ECB easing for June. EURCHF eased from highs of 0.9788 to settle around the 0.967 handle although USDCHF settled just below the 0.90 handle. GBPUSD back below 1.2650 after BoE governor Bailey said rate cuts are in play at future BoE meetings amid signs that tighter policy quelled the risk of a wage-price spiral.

Commodities: Commodities came under pressure with dollar strength extending, and China optimism also coming back under the radar. Copper was down nearly 3% for the week, although Iron ore’s Friday decline could not reverse the weekly gains completely. China’s property earnings this week will be the focus for industrial metals to extend gains. Gold also reversed from the all-time highs of $2,220 to test the $2,160 support with Fed’s Bostic moving his expectations to expect only one rate cut this year. Crude oil prices were largely unchanged last week as signs of tightness in the global crude market offset the impact of a stronger USD, but focus remains on sanction and geopolitical risks.

Fixed income: A dovish FOMC led to the 10-year Treasury yield trimming 11 bps last week and 7 bps on Friday alone, closing at a low point of 4.20%, precisely on its 200-day moving average. A break below appears probable before the release of PCE inflation data this Friday, which will likely determine the yield's direction entering Q2.

Macro:

  • At the China Development Forum, Premier Li Keqiang stressed boosting domestic demand, unifying the national market, advancing urbanization, and upgrading equipment and consumer goods. He also emphasized modernizing industries, driving innovation, upgrading traditional sectors, nurturing emerging ones, and fostering future industries to accelerate the development of new productive forces.
  • Atlanta Fed Chief Bostic said on Friday that he now only expects one interest rate cut this year, adding that the reduction will likely happen later in the year than he previously expected. He said he had less confidence about the trajectory of inflation than in December, and focus this week turns to the Fed’s preferred inflation gauge, the PCE, due out on Friday.

     

    Macro events: US New Home Sales (Feb), US Chicago Fed National Activity Index (Feb)

    Earnings: China Resources Land, Weichai Power

    In the news:

  • Apple CEO extols Chinese suppliers at Beijing forum as iPhone sales dip while Huawei gains (SCMP)
  • Japan stocks could grow more volatile with end of BOJ ETF purchases (Nikkei Asia)
  • Japan overtook China as the biggest private equity market in Asia-Pacific last year (SCMP)
  • China plans new rules on market access, data flows (Reuters)
  • Singapore Dollar’s Stellar Run Seen Ending on Monetary Easing (Bloomberg)
  • Chocolate Panic Escalates as Cocoa Crunch Sparks Scramble to Buy (Bloomberg)
  • China blocks use of Intel and AMD chips in government computers (FT)

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

For a global look at markets – go to Inspiration

Quarterly Outlook

01 /

  • 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...
  • 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 ...
  • 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.