Macro: Sandcastle economics
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Summary: Cracks are starting to emerge in Magnificent 7 stocks, with Tesla, Apple and Alphabet leading the declines year-to-date. Chip stocks however continue to see momentum driving TSMC to a record high, and Japan’s Nikkei 225 breaching the 40k level. Rallies in Gold and Bitcoin have also reached at or near record highs. China announced growth target of around 5% as expected. In FX, dollar is treading water but GBP outperforming ahead of budget while JPY and CHF remain weak.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
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:
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:
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