Global Market Quick Take: Asia – March 5, 2024

US Equities: Major US indices pulled back, with the S&P 500 down 0.1% and the Nasdaq 100 trimming 0.4%, dragged down by the Magnificent Seven stocks. Nvidia, on the other hand, advanced 3.6% along with other semiconductor names. Taiwanese chipmaker, TSMC surged to record high, with its ADR reaching $141.99 before closing at $138.26.

Tesla emerged as the worst-performing stock in the S&P 500 on Monday, plummeting 7.2%, bringing the EV maker’s year-to-date loss to 24.3%. Alphabet and Apple also experienced declines of 2.8% and 2.5%, respectively, widening their year-to-date losses to 4.8% and 9.1%.

Hong Kong/China Equities: Markets trod water as investors awaited news from Premier Li Qiang's Government Work Report scheduled to be delivered at the National People’s Congress (NPC) today. The Hang Seng Index finished Monday nearly unchanged, while the Hang Seng Tech Index slid by 0.4%. Wuxi Apptec, Wuxi Biologics, Techtronic Industries, Lenovo, and Hansoh Pharmaceutical, which rose between 6.9% and 12.5%, were the top performers in the Hong Kong benchmark. Meanwhile, Li Auto plunged 10.7%, trimming a strong post-results run-up, after the plug-in hybrid EV maker launched its first full battery model and experienced slower delivery in February. Nio and XPeng dropped more than 4%. Competition in China’s EV market is intensifying, and at the same time, the prospect of expanding exports is shadowed by the rising scrutiny of the EU and the US. NIO reports results today. In the mainland, CSI300 ticked up 0.1%, aided by coal miners and oil stocks.

Fixed income: Treasuries pared last Friday’s gains, with the 2-year yield rebounding by 7bps to 4.60% while the 10-year yield added 3bps to reach 4.71%.

FX: The dollar treaded water again to start the week, amid lack of clear data or commentary that could change the market narrative for now. Under the surface, however, there were significant cross-currents. SEK under-performed, with ERUSEK rising above 50DMA to touch 11.26. Meanwhile, sterling remained resilient, clocking in 0.3% gains against the greenback ahead of Hunt’s budget announcement on Wednesday. GBPUSD touched the 1.27 handle, which has been a major resistance in February, but a break above could bring 1.28 in focus. EURUSD also rose above 1.0860 ahead of Thursday’s ECB meeting, while EURCHF rallied to 0.9620 amid the continued disinflation trend in Swiss CPI. USDJPY slipping slightly this morning in Asia to 150.40 amid a hot Tokyo CPI, while China’s 2024 GDP target at around 5% came as no surprise, and AUDUSD seeing only a minor bump higher above 0.6510 levels.

Commodities: Gold rallied to over $2,100, getting to a new record high despite a run higher in yields, suggesting the safe-haven asset’s strong physical demand and low short-selling appetite at a time of heightened geopolitical tensions along with market’s continued optimism around the rate cut trajectory. Crude oil prices eased from the highs seen following the announcement of OPEC+ production cuts, and China’s policy direction along with US jobs data and Powell’s testimony will be key this week. Iron ore rallied 2% and focus remains on China’s two sessions.

Macro:

• Fed’s Bostic was hawkish on the margin. He said he would not anticipate that cuts, when they start, would be “back-to-back”. The Atlanta Fed President noted a third quarter cut will likely be followed by a pause but he still expects two 25bps rate cuts this year (current market pricing has 84bps of cuts in 2024, vs the 75bp suggested in the Fed December Dot Plots).
• Switzerland February CPI came in a notch higher than expected, albeit still cooling from January. Headline inflation was at 1.2% YoY vs. 1.1% expected and 1.3% prior. Core CPI slowed to 1.1% YoY from 1.2%, and the odds of a March rate cut reduced to less than 50%. Still, about 35bps of easing is priced in by June.
• Japan’s Tokyo CPI was also a hot read. Although softer base effect underpinned, headline CPI rose to 2.6% YoY from an upward revised 1.8% YoY in January, coming in above 2.5% expected. Core measures were in-line with expectations, coming in at 2.5% YoY for core and 3.1% for core-core, which is a further reason to expect that both March but more so the April BOJ meeting is live. Governor Ueda will be on the wires today at noon Singapore time.
• China’s National People’s Congress (NPC) started today and will conclude on March 11. The announcement of not holding a premier press conference, against the norm in the past three decades, stirred up some speculation among investors and dampened the already low expectations of aggregate demand-boosting measures from the NPC. In his Government Work Report this morning, Premier Li Qiang is expected to set targets of around 5% for GDP growth, 3% for on-budget fiscal deficit, 3% for CPI, and a 5.5% unemployment rate. For more details, read our preview and stay tuned for updates from us.

Macro events: US Primary Super Tuesday, Chinese Caixin Services PMI Final (Feb), EZ/UK/US Services and Composite PMI Final (Feb), EZ PPI (Jan), US ISM Services PMI (Feb), China NPC. Speakers: BoJ’s Ueda; Fed's Barr

Earnings: NIO, Crowdstrike, Target, Ross Stores, Ferguson.

In the news:

• Tesla shares skid after China sales fell to the lowest level in over a year (Reuters)
• Apple hit with $2 billion EU antitrust fine in Spotify case (Reuters)
• China Sets Ambitious GDP Growth Target of Around 5% at NPC 2024 (Bloomberg)
• Bitcoin bursts above $68,000, record high comes into view (Reuters)
• Japan’s Nikkei 225 Breaches Key 40,000 Level for First Time (Bloomberg)

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

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