Macro: Sandcastle economics
Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.
Summary: The S&P 500 rose 0.6% to 5,030, propelled by strong energy stock performance due to increased oil prices. Alphabet dropped 2.2% amid reports of OpenAI developing a rival web search product in a challenge to Google. Tesla surged 6.2% as Elon Musk raised his stake to 20.5%. In after-hours trading, Applied Materials and Coinbase Global saw significant gains on positive sales guidance and better-than-expected results. The US dollar retreated after disappointing retail sales data. Despite a gloomy demand outlook from the IEA, oil prices rose, supported by a risk-on sentiment in the markets.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: The S&P 500 Index gained 0.6% to 5,030, driven by a strong performance in energy stocks, which benefited from rises in oil prices. The Nasdaq 100 ticked up 0.2%, dragged by losses in Alphabet, Nvidia, Microsoft, Cisco, and Adobe. Alphabet shed 2.2% on a report from The Information that OpenAI is developing a web search product in challenge to Google. Meanwhile, Tesla surged 6.2% as SEC filings showed that Elon Musk had increased its stake in the EV maker to 20.5%, sharply higher than the 13% reported in May last. In the extended hours, Applied Materials soared more than 11% after the chipmaking machinery manufacturer gave upbeat sales guidance for the current quarter. Coinbase Global jumped 13% after the crypto-trading platform reported revenue surpassing analyst estimates and EPS of $1.04 for the quarter, much higher than the 2 cents a share expected. Equity market sentiments overall have stabilized after the post-CPI selloff on Tuesday.
Fixed income: Treasury yields started falling in Asian trading on Thursday and then sank further after a softer-than-expected US retail sales report. Nonetheless, yields climbed again shortly to levels higher than those observed before the release of the retail sales figures. The 2-year and 10-year yields finished the volatile session unchanged and 3bps lower respectively. On Friday, the focus is on the PPI report and the inflation expectations in the University of Michigan survey of consumers.
China/HK Equities: As the mainland market continues to be closed for holidays, the Hong Hang Seng Index edged up 0.4% in choppy and thin-volume trading. Li Ning surged 5.6%, topping the performance within the Hang Seng Index, followed by JD.COM and Lenovo. Alibaba climbed 0.7% while Tencent slid 1.6%. The market lacked direction as investors await whether the A-share market can sustain last week’s state-intervention-driven rally upon resumption of trading on Monday. Overnight Nasdaq Golden Dragon China Index added 1%. The US SEC filings showed that Michael Burry’s Scion funds increased holdings in Alibaba and JD.COM while the Canada Pension Plan Investment Board established stakes in Alibaba, JD.COM, Li Auto, and NetEase.
FX: The dollar eased further on the back of disappointing retail sales print in the US, with broad gains across the G-10 space. EURUSD gained on the back of dollar weakness, but reversed from the 100DMA resistance seen just below 1.08. Rumors point to a likely ‘tweak’ in ECB policy statement at the March 7 meeting to create a stage for a June rate cut, reaffirming our view that competitive pivots will be the key story for FX markets in the next few weeks. Sterling also unable to get above the 1.26 handle after recession was confirmed, while USDJPY has drifted lower towards 150 but remains on intervention watch. EURCHF retreated from 0.95 resistance, but we see it getting tested again as SNB rate cut bets are likely to pick up, as discussed in this article.
Commodities: Oil prices gained on the back of risk-on mood in markets and despite a gloomy demand outlook from the IEA. OPEC+ supply cut adherence has kept the oil market bid, while tensions in Middle East also escalated with Hezbollah strikes at Israel. Gold prices rallied back above the $2000-mark after being pushed lower in a reaction to firmer US CPI. Focus turns to PPI today, but we expect precious metals to remain stuck until there is clarity on the start of Fed rate cuts, as discussed here. Copper prices rose 1.5% as growing expectations of tightness in the market potentially prompted short covering.
Macro:
Macro events: UK Retail Sales (Jan), US PPI, US Uni. of Michigan (Feb P). Speakers: ECB’s Schnabel; Fed’s Daly, Bostic, Barr; BoE’s Pill
Earnings: Eni, Sika, Swiss Re
In the news:
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