Global Market Quick Take: Asia – February 5, 2024 Global Market Quick Take: Asia – February 5, 2024 Global Market Quick Take: Asia – February 5, 2024

Global Market Quick Take: Asia – February 5, 2024

Macro 6 minutes to read
APAC Strategy Team

Summary:  Treasury yields surged after a robust January non-farm payrolls report and Powell's comments on CBS 60 Minutes causing increased expectations of a delay in rate cuts pushing the 10-year Treasury yield to 4.08%. Last Friday, Meta and Amazon stocks soared on strong quarterly results, lifting Nasdaq 100 and S&P 500 to new highs. The dollar strengthened as Treasury yields rose, with the DXY index reaching 104.20. Meanwhile, oil prices dropped amid a stronger dollar and hopes for a resolution in the Israel-Hamas conflict.


 The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

US Equities: Meta soared 20.3%, and Amazon surged 7.9% after surpassing expectations in their quarterly results. Meta’s announcement of share buybacks and its first-ever dividends further propelled sentiment. Nvidia and AMD gained over 4% as a major investment bank raised the target price for Nvidia to $800. The Nasdaq 100 added 1.7% to 17,643, and the S&P 500 climbed 1.1% to 4,959, both reaching new highs. The advance in stocks was particularly impressive, indicating strong momentum. This was noteworthy, given the sharp rise in Treasury yields on Friday, which could otherwise weigh down the equity market. For a review of earnings from Meta, Amazon, and Apple, read Peter Garnry’s article

Fixed income:  Treasury yields jumped sharply with a bang following the surprisingly large addition to the January non-farm payrolls and significant positive revisions to prior months as well. The increase in the 3-month moving average job creation to 289,000 from 165,000 caused traders to temper their bets on a March rate cut and anticipate the first cut coming in May. The 2-year yield surged 16bps to 4.36%, while the 10-year yield climbed 14bps to 4.02%. On Monday Asian morning, Powell said in a pre-recorded CBS 60 Minutes episode that the first interest rate cut would be likely to come in the middle of the year. Treasury yield rose further in Tokyo trading, with the 10-year yield reaching 4.08%.

China/HK Equities: The gains in the Hang Seng Index in the initial hour due to the strong performance of EV stocks on robust vehicle deliveries in January and mobile gaming names on game approvals waned shortly in the afternoon. The Hang Seng Index finished the day 0.2% lower. Wuxi Biologics and WuXi AppTech sold off again, plummeting over 20%, on persistent worries of US restrictions on their contract research service business. The Hang Seng Tech Index dropped by 0.7% with the gains in Tencent, Weibo and Li Auto offset by losses in JD.COM, Alibaba Health, Kuaishou, Sunny Optical, Kingdee, XPeng and so on. The decline in mainland A shares was more violent. CSI300 plunged as much as 3.4% to 3,108 at one point before paring losses to conclude the day 1.2% lower. On economic data this week, Caixin China PMI Services is scheduled on Monday and expected to modestly strengthen to 53.0 from 52.9. The CPI and PPI are expected to show persistent deflationary pressure when released on Thursday. China will also release aggregate financing data this Friday or next week. On corporate earnings, the focus will be on Alibaba this Wednesday.

FX: Dollar surged sharply in response to the blowout jobs report on Friday, and the DXY index rose to 104 and testing the 104.20 resistance as Fed Chair Powell starts his interview with ’60 Minutes’ which was reportedly taped before the NFP release. However, further pushback to March rate cut expectations could bring USDJPY, which is now close to 148.50, higher to test 149 handle. For technical analysis on JPY pairs, see this article. EURUSD plunged to sub-1.08 again broke 100DMA support at 1.0784, and sterling bulls were also jolted as GBPUSD fell all the way to 1.2620 from 1.2760+. Test of 1.2600 ahead break of which could expose the 200DMA at 1.2564. AUDUSD has been one of the worse performers last week as RBA dovish bets picked up, and pair slipped to 0.65 handle from 0.66+ on Friday. RBA meeting tomorrow, and continued downbeat China rhetoric, could push the pair lower to test 76.4% fibo retracement level at 0.6412.

Commodities: Oil prices plunged again on Friday amid a stronger US dollar weighed and hopes of a truce in the Israel-Hamas conflict. However, prices were firmer this morning in early Asia with US forces launching attacks against the Houthis in Yemen over the weekend and Houthis vowing to respond. Iron ore prices however slid 3.6% as China pessimism continued. Gold also was a victim of the overly-hot jobs data in the US which put more weight on Fed Chair Powell’s comments from 2 days earlier where he pushed back on March rate cut expectations. 50DMA however provided support to Gold. Uranium sector has been showing remarkable strength on delbal acceptance, and read our Commodity Weekly for more insights.

Macro:

  • US NFP jobs report showed massive broad strength. January jobs added came in at 353k, well above 180k consensus. Net upward revision of over 100k for December and 400k for 2023. The underlying drivers also delivered a message of strength with private payrolls at 317k, against the expected 155k. The unemployment rate was unchanged at 3.7% despite expectations for a rise to 3.8%. Monthly earnings rose 0.6% (exp. 0.3%, prev. 0.4%), Y/Y earnings rose 4.5% (exp. 4.1%, prev. 4.4% - revised up from 4.1%). March rate cut probability is now down to less than 20%. Focus turns to ISM services, Fed’s SLOOS survey and Bostic’s comments due later in the day.
  • The final UoM headline sentiment index for January was revised higher to 79.0 from 78.8, above the expected 78.9, while the conditions index was revised lower to 81.9 from 83.3 and the forward-looking expectations index was revised up to 77.1 from 75.9. On inflation expectations, 1yr ahead remained at 2.9% and the longer-term 5-10yr ticked higher to 2.9% from 2.8%.

     

    Macro events: US S&P Services PMI (Jan, final), US ISM Services (Jan), US Senior Loan Officer Opinion Survey (Jan), Eurozone Sentix (Feb), Eurozone Producer Prices (Dec), Caixin China Services PMI (Jan), Singapore Retail Sales (Dec).

    Earnings:  McDonald’s, Caterpillar Inc, Vertex Pharmaceuticals, Sony, Mitsubishi UFJ Financial.

    In the news:

  • Fed Chair Jerome Powell shares why central bank hasn't yet cut interest rates, even as inflation falls (CBS)
  • US intends further strikes on Iran-backed groups, national security adviser says (Reuters)
  • China Vows to Stabilize Markets After Rout, Offers No Detail (Bloomberg)
  • Trump said he would impose more tariffs - possibly in excess of 60 per cent - on China if he is elected again (SCMP)
  • Turkey's new central bank head plans tight monetary policy until inflation curbed (Reuters)

 

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

For a global look at markets – go to Inspiration.

Disclaimer

The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-sg/legal/disclaimer/saxo-disclaimer)

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region

Singapore
Singapore

Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-sg/about-us/awards.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.