Global Market Quick Take: Asia – March 8, 2024

US Equities: The S&P 500 reached a new high to close at 5,157, gaining 1% while the Nasdaq 100 advanced 1.6% to 18,298 after Fed Chair Powell told US Senators that the Fed was “not far” from cutting rates. Nvidia surged 4.5% to 926.7, a fresh record closing high. The Philadelphia Semiconductor Index added 3.4%. Outside of semiconductors, the supermarket chain Kroger soared 9.9% after reporting results beating estimates and an upbeat outlook. On the other hand, Costco shed 4% in the extended hours on reporting revenues missing analyst forecasts.

Broadcom slid 2% in the after-hours trading, following the company said weaknesses in broadband and server storage business offsetting the strong outlook in its AI business, leaving the full-year revenue outlook unchanged at around $50 billion. Likewise, Marvell Technology said revenue declines in its consumer/carrier infrastructure and enterprise networking will offset are going to offsetting growth in the AI and standard cloud data center business, seeing share price plunging 7.9%.

Hong Kong/China Equities: The Hang Seng Index declined by 1.3%, and the CSI300 dropped by 0.6%. Chinese EV manufacturers faced challenges amid rising concerns over potential additional EU tariffs on the country's EV exports. Alleged state subsidies led to declines in Li Auto and Xpeng by more than 5%. The mobile and online gaming sector was under pressure as several National People's Congress delegates advocated for expanded restrictions on gaming hours from minors to college students, impacting NetEase, which dropped by 4%. The U.S. Homeland Security Committee approved a bill curbing operations of certain Chinese biotech firms, citing national security concerns. WuXi AppTec, heavily reliant on U.S. sales, experienced a 20.6% drop, and WuXi Biologics plunged by 21.5%. Contrarily, JD.com defied the market with a 6% rise, fueled by robust earnings and a dividend plan. Amidst record-high gold prices, mining stocks like Zijin, Zhaojin, Shandong Gold, and China Gold surged against the market trend.

After Hong Kong's market closure, Bilibili reported a Q4 total net revenue growth of 3.4% to RMB 6.3 billion, meeting expectations. Stronger advertising revenue growth of 28% was offset by a 12% decline in online gaming revenue. Cost-cutting measures led to a smaller adjusted net loss of RMB 553.8 million, narrowing by 58% Y/Y, better than the median forecast in the Bloomberg survey.

Fixed income: Short-end of the Treasury yield curve cheered Powell’s “not far” from the first rate cut remark, seeing the 2-year yield 5bps lower to close at 4.5%. The 10-year underperformed with a 2bps drop in yield to 4.08. Today’s focus is on the employment report due in the New York morning. See below for a preview.

FX: The decline in the dollar extended further with the DXY index breaking below the 103 mark. Japanese yen got multiple boosts, from a dovish Powell to a strong wage growth print to BOJ’s Nakagawa hinting at strong wage talks and some unions reporting wage growth of over 6%. USDJPY has retreated below 148 to its lowest levels since early-Feb and the next support is seen at 147. EURUSD rallied to 1.0950 with inflation projections reduced by the ECB, as rate cut expectations still remain measured and dollar weakness also supported. GBPUSD also pushed above 1.28, printing YTD highs of 1.2827. Activity currencies also showed strong gains, with AUDUSD rising above 0.6620 and NZDUSD pushing above 0.6180.

Commodities: Gold extended its gains as Powell’s comments continued to tilt dovish. Focus turns to NFP data today and a miss in headline can fuel further gains in Gold from its record highs of $2165 yesterday. While investors are still pulling metal out of gold-backed ETFs, central banks remain strong buyers. The PBoC added to its gold reserves for a 16th straight month in January, and total holdings rose by about 390koz to 72.58m troy ounce. Crude oil was largely unchanged as investors assess rising tension in the Middle East. Meanwhile, services were suspended at the Keystone pipeline carrying Canadian crude to the US, adding to supply pressures.

Macro:

• Fed Chair Powell appeared in the Senate on Thursday, repeating his prepared remarks he gave on Wednesday to the House. He also added that the Fed is “not far” from being confident enough to cut rates, and pushed back on the idea that surge pricing will fuel inflation.
• ECB left rates unchanged, but Christine Lagarde indicated the ECB may ease in June, with 2% inflation in sight by 2025. The ECB’s latest economic projections put 2024 inflation at 2.4%, down from 2.7% in December, and thereafter inflation is seen at 2.0% and 1.9% in 2025 and 2026 respectively. Market pricing saw a slight dovish shift, with 100bps of rate cuts priced in now for the year.
• NFP preview: US jobs data will be a key focus today. January print was hot at 353k, but consensus expects February print due today to be at 200k. Focus will also be on private payrolls with its 3m average at 249k in January. Recent labor market indicators and anecdotal evidence suggests that job growth could come in lower, and market is looking for more dovish hints after Chair Powell’s testimony this week.
• Softer-than-expected headline growth could mean that markets will increase rate cut expectations. This can be positive for equities (unless soft landing assumption is challenged). Yields and dollar could plunge lower, pushing yen and gold to extend their rally.
• Hot NFP print again will bring focus back on competitive pivots for central bank, reaffirming that ECB may cut before the Fed. This could be negative for equities, and yields and dollar are likely to go higher. EURUSD could reverse back below 1.09 and USDJPY could retrace to 148.50.

• China's exports demonstrated robust growth, rising by 10.3% year-on-year in RMB terms or 7.1% in USD terms during the initial two months of the year, surpassing initial expectations. Despite the positive data, reactions were subdued, as the NDRC director had already disclosed a 10% YoY growth in China's exports in RMB terms during an NPC press conference the day before. Notably, trade with Import growth also exceeded expectations, with a 6.7% increase in RMB terms or 3.5% in USD terms.

Macro events: Germany Industrial Output and PPI (Jan), EZ GDP Revised (Q4), US NFP Jobs Report (Feb), Canada Jobs Report (Feb). Saturday: China CPI/PPI

Earnings: Oracle, China Unicom, ZTE

In the news:

• Billionaire, Corporate Tax Hikes Will Be Focus of Biden State of the Union (Bloomberg)
• Tesla supplier Panasonic weighs more battery investment in Kansas (Nikkei Asia)
• New push in Congress to ban TikTok or force Chinese divestiture gains steam (Reuters)
• SK Hynix rides AI boom as Samsung plays catch-up (Nikkei Asia)
• Foreign firms warn Vietnam of investment freeze without new tax offset, source says (Reuters)
• TikTok crackdown bill unanimously approved by US House panel (SCMP)
• Broadcom revenue beats estimates as AI powers demand, investors still unimpressed (Reuters)
• Japan Inc set to offer bumper pay hikes, paving way for BOJ stimulus exit (Reuters)
• Gap Jumps as Earnings Show Turnaround Making Progress (Bloomberg)

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

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