Global Market Quick Take: Asia – February 20, 2024

US Equities: The US equity market was closed for Presidents' Day on Monday. On Tuesday morning, the S&P500 eMini and Nasdaq 100 eMini futures contracts are trading little changed. The quarterly results from Walmart and Home Depot today will inform investors about the health of US consumers.  Focus will also be on Nvidia, which is scheduled to report on Wednesday after the market closes, and the full preview from our Head of Equity Strategy, Peter Garnry, can be accessed here.

Fixed income: The US Treasury market was closed on Monday in observance of Presidents' Day. Treasury futures are trading slightly lower before the cash Treasury market opens in Tokyo.

China/HK Equities: The Mainland A-share market returned from a week-long holiday playing catch up to gains recorded last week by Chinese companies traded in Hong Kong and the U.S. amid moderately encouraging Lunar New Year travel and consumer spending data. The CSI300 climbed 1.2% in a broad-based rally led by TMT stocks. In Hong Kong, the Hang Seng Index retraced 1.1%, giving back some of the gains from last week with declines across the board. The Hang Seng Tech Index pulled back 2.7%, while Sensetime and Trip.com bucked the decline. Penal banks of China’s National Interbank Funding Center are expected to cut the 5-year Loan Prime Rate to 4.10% from 4.20% and the 1-year Loan Prime Rate to 3.40% from 3.45% this morning.

FX: Quiet markets overnight saw the dollar trading sideways, after hot inflation reports from last week are making the dollar rally look stretched as discussed here. Kiwi was the outperformer as RBNZ appears to have most room to delay rate cuts, and some banks are calling for a rate hike next week. NZDUSD reached highs of 0.6150, a level that has capped gains since mid-January, and break above could bring 50DMA at 0.6180 in focus. Technical are sending a buy signal for NZD as 100DMA crosses above 200DMA. Meanwhile, CHF remained the underperformer for reasons listed here, and USDCHF is testing 200DMA at 0.8840 while EURCHF is firming its move above 0.95. NZDCHF looks poised to test 0.5450. AUDUSD stayed flat around 0.6540 but headed lower in early Asia ahead of RBA minutes.

Commodities: China optimism fizzled quickly once again amid lack of follow-up measures after the Lunar New Year holiday. Iron ore prices were down ~3% after the PBoC left MLF rate unchanged, and focus will be on the LPR announcement today. Copper prices also slumped, with concerns around China’s construction demand. Oil prices were steady and focus still on Mideast tensions, although the surge in travel demand in China has pushed prices to near-3 week highs. Gold remained steady around $2,015 with US markets closed, and FOMC minutes will be the next key focus this week.

Macro:

• US Manheim wholesale used vehicle index (mid-Feb) SA -0.9% M/M (prev. 0.0% in Jan) or -13.8% Y/Y (prev. -9.2% in Jan) from the full month of Feb 2023 to 202.1.
• Bundesbank said Germany is likely in a recession as external demand is weak and consumption also remains weak, while it added there is still no recovery in the German economy and output could decline again slightly in Q1 which would put the economy in a technical recession.
• Sweden’s January inflation came in higher-than-expected, and there were some concerns as the CPIF YoY print rose 1% pt to 3.3%. However, this was due to base effects, and the pickup will likely be ignored by the Riksbank.

Macro events: PBoC LPR, RBA Minutes (Feb), EZ Current Account (Dec), Canada CPI (Jan)

Earnings: Air Liquide, Medtronic, Walmart, Palo Alto Networks, Home Depot

In the news:

• BHP First-Half Profit Steady as Inflation, Lower Prices Bite (Bloomberg)
• Capital One nears deal to buy Discover Financial (FT)
• Germany likely in recession, Bundesbank says (Reuters)
• China’s BYD launches cheaper plug-in hybrid EV to lure customers away from petrol-powered rivals by Volkswagen, Toyota (SCMP)
• JD.com considers takeover bid for UK electronics retailer Currys as China’s e-commerce giants look overseas (SCMP)
• Nintendo shares slide on reports of delayed Switch successor release (Reuters)
• Bayer cuts dividends to legal minimum to reduce debt (Reuters)
• Investors Are Turning Wary of Crowded India Trade After Run-Up (Bloomberg)

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

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