Global Market Quick Take: Asia – March 18, 2024

Equities: US stocks ended the week lower as the tech rally paused ahead of key event risks from Fed and BOJ meeting this week. NASDAQ 100 was down over 1% on Friday as hot inflation reports last week raised concerns on whether the Fed’s dot plot could shift hawkish this week. Adobe tumbled 14% as outlook fell short of expectations, and tech focus will be turning to the Nvidia GTC conference this week where new flagship chips are expected to be launched. Defense and green metal stocks remain in focus.

In Asia, Japan’s Nikkei 225 was back above 39k at Monday’s open, rising 0.9%, as yen weakness continued to underpin a strong run higher in stocks despite expectations of BOJ normalization. China and HK stocks ended last week in gains, and China’s data dump on Tuesday will be in focus.

FX: Dollar is starting the week on the front foot with a host of central bank meetings ahead, but primary focus on the Fed and the BOJ. DXY index is hovering close to 103.50 and key moving averages are coming just above this level. USDJPY is now close to 149 signaling that a BOJ rate hike is fully priced in and any dovish commentary this week from the BOJ or a hawkish outcome from the Fed could easily put the focus above 150. EURUSD holding up better despite a stronger dollar, trading just below 1.09 as ECB signals on a June rate cut continue to get clearer. AUDUSD drifted back below 0.66 this week and trades near 0.6560 with risks ahead from a dovish tilt from RBA and another set of weak China data due tomorrow.

Commodities: Green metals remain in focus with Copper up 6% last week although Iron ore slipped below the key $100-mark amid China’s property sector concerns. Gold softened slightly last week after touching highs of close to $2,200 earlier as hot inflation concerns returned, but Silver gained on the back of price action in Copper and touched fresh YTD highs of $25.44 last week. Crude oil also rose last week on IEA raising its global oil demand forecast and geopolitical risks remaining elevated. For more on commodities, read our weekly commentary here.

Fixed income: Treasuries sold off with inflation concerns coming back on the radar last week, and ahead of Fed and BOJ announcements due this week. 10-year notes saw their worst week this year as Fed rate cut bets were dialed back. Both 2-year and 10-year Treasury yields rose over 20bps last week. Fed’s 2024 dot plot will be key focus this week, along with 20year auction on Tuesday.

Macro:

• Japan’s largest federation of labor unions, Rengo, secured wage increases of 5.28% for the coming fiscal year, a figure that far outpaces the initial 3.8% tally from a year ago — itself the biggest in 30 years. Base pay deals averaged 3.7% in the first tally of results, compared with 2.33% a year earlier, it added. While wage hikes may be key for the Bank of Japan meeting this week, where signals have been pointing towards a rate hike, but traders have a lot to consider this week including a potential hawkish update from the Fed, as discussed in this article.
• RBA Preview: The Reserve Bank of Australia will announce its next rate decision on Tuesday this week. While it is expected to stay on hold and may be off the global radar amid focus on Fed, BOJ and potentially the SNB, there is a slight chance for the RBA to ease its hawkish tone seen at the last meeting.

Macro events: China Retail Sales (Feb), China Industrial Production (Feb, China Jobless Rate (Feb), China Property Investment (Feb), EZ Final CPI (Feb)

Earnings: WuXi AppTec

In the news:

• Adobe shares slip 10% on soft sales forecast (CNBC)
• TSMC considering advanced chip packaging capacity in Japan, sources say (Reuters)
• Xpeng to launch cheaper EV brand amid fierce China price competition (Reuters)

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

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