Macro: Sandcastle economics
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Summary: Copper mining and energy stocks recorded gains, propelled by a 3.6% rise in copper prices and a 2.8% increase in WTI crude oil prices. Notably, Freeport-McMoRan surged by 7.6%. However, the Nasdaq 100 witnessed a decline of 0.8%, attributed to a retreat in semiconductor stocks. Additionally, Tesla saw a decrease of 4.5% following an analyst downgrade. Investors further adjusted their expectations for a potential June Fed rate cut downward, leading to the 2-year Treasury yield climbing to 4.63%. Despite positive signals concerning Japan's annual wage negotiations, USDJPY reached 148, suggesting that the BOJ's March pivot may be close to fully priced in.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
US Equities: : Copper mining and energy stocks saw gains driven by increases in copper and oil prices. Freeport-McMoRan notably surged by 7.6%, while Valero Energy, Marathon Petroleum, and Marathon Oil each added 3% to 5%. However, the Nasdaq 100 and S&P 500 experienced pullbacks of 0.8% and 0.2%, respectively, partly due to a retreat in chipmaker stocks. Nvidia slid 1.1%, while AMD, Intel, Micron, On Semiconductor, and Marvell Technology all saw declines ranging from 3% to 5%. Additionally, Tesla declined by 4.5% following an analyst downgrade to underweight, citing projections of zero volume growth in 2024 and a volume decrease in 2025. Dollar Tree, a discount store operator, plummeted by 14.2% due to EPS guidance falling below estimates, a pessimistic outlook for 2024, and plans to close 1,000 stores. McDonald’s also experienced a decline of 3.9%, attributing it to lower-income customers opting to eat at home more frequently.
Hong Kong/China Equities: Stocks in Hong Kong managed to hold on to recent gains, with the Hang Seng Index ticking down modestly by 0.1% while the Hang Seng Tech Index added another 0.3%. Mining stocks outperformed, led by CMOC, Zijing Mining, MMG, and Jiangxi Copper. Chinese developers retreated as Country Garden missed an onshore bond coupon payment. In the mainland, CSI300 slid 0.7%, dragged down by real estate, non-bank financials, and construction materials.
Fixed income: The day following the release of the hot CPI report, and with the Fed currently in blackout ahead of the FOMC meeting, investors further adjusted their expectations for a June Fed rate cut downward. It resulted in a 5bps increase in the 2-year Treasury yield, settling at 4.63%. The 10-year yield also rose, adding 4bps to reach 4.19%. Meanwhile, the auction of $22 billion in 30-year Treasury bonds met with robust demand.
FX: Narrow ranges in FX with Fed in a blackout. The dollar pushed slightly lower in the late US session but recovered subsequently. Low volatility continues to fuel carry trades, and funding currencies CHF and JPY were sold off. USDCHF rose to 0.8790 and USDJPY touched 148 despite positive signals on wage negotiations, suggesting that BOJ March pivot may be well priced-in. AUDUSD stayed above 0.66 amid dollar weakness and a rally in metals prices. EURUSD rose to highs of 1.0964 for the week, with immediate resistance at 1.0970. GBPUSD is stuck at 1.28, and we see risks of dampening equity sentiment coming to hurt. EURGBP is back at 0.8560 and could re-test 0.8570.
Commodities: Gold resumed its rally and pared the losses seen after the hot US CPI release, coming back to the $2,170+ levels. PPI today could be key and another hot inflation print can derail the momentum and result in a short-term pullback before the yellow metal can continue higher. Iron ore prices continued to grind lower towards USD100/ton amid growing concerns of China’s economic growth prospects and lack of supportive measures at the NPC. Other metals, however, rallied on a weaker dollar. Crude oil prices also inched higher after EIA data showed a withdrawal in US oil inventories, which fell 1.54mb, the first decline in seven months. Markets were also jittery due to the Ukrainian drone attack on a Russian refinery.
Macro:
Macro events: IEA OMR; Spain CPI, Sweden CPIF (Feb), US PPI (Feb) and Retail Sales (Feb)
Earnings: Adobe, Dollar General, RWE, Ulta Beauty, Hapag-Lloyd, Verbund, AIA, Ke Holdings, Weibo, Shennan Circuits, East Money Information, Ping An Bank, Hon Hai Precision Industry.
In the news:
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