Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Summary: The US stock market, especially the AI and semiconductor sectors, surged with Nvidia, AMD, Broadcom, Marvell Technology, and others gaining over 4%. The semiconductor momentum extended to Japan's market, driven by chipmaking equipment manufacturers and semiconductor materials makers, offering diversification opportunities. Weaker-than-expected ISM data caused Treasury yields to fall, weakening the dollar and boosting gold over 2% to $2080+. Oil prices rose on reports of OPEC+ extending output curbs. In China, investors noted President Xi Jinping's emphasis on 'new productive forces' through science and tech innovation. New economy stocks are expected to remain in focus amid potential policies unveiled in the Two Sessions this week.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The optimism and advances in the US stock market, fueled by AI and semiconductors, persisted and reached new highs. Nvidia, AMD, Broadcom, Marvell Technology, and other semiconductor names surged more than 4%, lifting the Nasdaq 100 Index by 1.4% and the S&P 500 Index by 0.8% higher on Friday. Dell jumped a whopping 31.5% after reporting a large backlog for its AI servers.
The strength of the semiconductor sector extended across the Pacific, contributing to the robust performance of the Japanese stock market, which houses a significant number of semiconductor companies. On Friday, Japanese chipmaking equipment manufacturers Tokyo Seimitsu surged 8.8% and Towa jumped 11.9% while Tokyo Electron, Disco, Advantest, Screen, and Kokusai Electric climbed 3%-4%. Semiconductor materials makers Nomura Micro Science, Shin-Etsu Chemical, and Japan Electronic Materials added +2.8%, 3.1%, and +13.2%, respectively. The Nikkei 225 climbed 1.9%. The Japanese semiconductor space offers diversification opportunities for investors who want to ride on the global trend of AI and the semiconductor industry but seek to reduce concentration in US exposure.
Hong Kong/China Equities: Last Friday the CSI300 surged by 1%, propelled by the sustained outperformance of the TMT sector and the robust performance of AI-related stocks. Investors foresee a spotlight on new economy industries, including AI, 5G, and new energy vehicles, in the government work report set to be delivered by Premier Li Qiang at the National People’s Congress on Tuesday, March 5, anticipating them to be this year's driving forces for economic growth. Despite the Hang Seng Index having only a marginal uptick of 0.2%, EV makers XPeng, Nio, and BYD surged by 4% to 8%. Meituan emerged as the top-performing blue-chip in Hong Kong, surging 10.8% on unconfirmed reports of the company ceasing community group-buying services.
Investors also took note of state-owned media extensively covering President Xi Jinping’s call for the advancement of 'new productive forces,' emphasizing the leverage of science and technological innovation to foster new industries and expedite economic development. New economy stocks are anticipated to remain in focus this week, benefitting from policies potentially unveiled during the Two Sessions.
Fixed income: Weaker-than-expected ISM headline prints, coupled with notable weaknesses in new orders and employment, led to a decline in yields across the curve. The 2-year yield fell by 9bps to 4.53%, while the 10-year yield slid by 7bps to 4.18%. The focus of bond investors this week will be on Fed Chair Powell’s semi-annual testimony to Congress before the House Financial Services Committee on Wednesday and then before the Senate Committee on Banking, Housing, and Urban Affairs on Thursday.
FX: The dollar traded broadly lower in Friday’s US session as ISM manufacturing and the revision to University of Michigan sentiment numbers garnered a dovish reaction. Despite a softer greenback, however, yen underperformed as Governor Ueda retained a dovish narrative saying that inflation is easing at a quick pace and wage negotiations will offer a tailwind, but they are not yet in a situation where sustained achievement of 2% inflation can be foreseen. USDJPY rose to highs of 150.72 before reversing slightly to 150 handle. Activity currencies were the top gainers amid dollar weakness, with NOK outperforming followed by SEK, AUD and NZD. NZDUSD is back above 0.61 after a dovish hold from RBNZ last week. EURUSD also making an attempt towards 1.0850 again after the inflation beat on Friday, and GBPUSD stays above 1.26 with ECB meeting and UK budget on the radar, respectively, this week.
Commodities: oil prices gained on Friday on reports that OPEC+ has agreed to extend output curbs into mid-year amid non-OPEC supply and risk of demand disruptions. Gold also saw a sharp rally to end the week over 2% higher at $2080+ levels as weak US economic data saw yields tumble. Focus early this week will be on metals, as China’s NPC commences and growth target as well as policy direction will be key.
Macro:
Macro events: Swiss CPI (Feb), China NPC
Earnings: Archer-Daniels-Midland, China Tower, Sea, Gitlab.
In the news:
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