Global Market Quick Take: Asia – April 23, 2024

Equities: US equity futures pointed slightly lower at the Asia open after a rebound was seen on the Wall Street on Monday as risk sentiment recovered amid lack of escalation in Mideast tensions. The S&P 500 closed back above 5,000 as it rose 0.9% and NASDAQ 100 was up 1%. Market darling Nvidia climbed 4.4% as it bounced from a 14% slump last week and the semiconductor index SOXX was up 1.7%. Earnings season will take the focus from here in this big week where several big tech companies are reporting, starting with Tesla today. Read this article to know more about the expectations around the technology earnings this week.

Japan’s Nikkei 225 was up 1% on Monday and a rally in tech shares and a retreat in crude oil prices overnight could bring in more gains today. HK’s Hang Seng index was up 1.8% on Monday as China’s market regulator unveiled a series of market reforms aimed at enhancing the city’s status as a financial hub.

FX: The US dollar index (DXY) rose to 106.40 at the US open but pared the gains and retreated back towards 106 subsequently with lack of key data and Fed speakers and focus on corporate earnings. USDJPY traded to a fresh 34-year high of 154.85 and BOJ meeting on Friday remains in focus. Even as commodities were softer with geopolitical concerns not escalating over the weekend, activity currencies were the front runners on Monday with the positive risk sentiment pulling equities out of a deep slump for now. NZDUSD rallied to 0.59+ levels, AUDUSD tested 0.6450 while USDCAD slipped all the way to the 1.37 handle. EURUSD traded around 1.0650 despite some dovish ECB comments (see below). The sell-off in GBPUSD was sharper as pair tested lows of 1.23 but recovered as US equities turned higher. As noted in this Weekly FX Chartbook, sterling has a high correlation to equity sentiment and still-long positioning could make it vulnerable in the face of further USD strength.

Commodities: Easing geopolitical risk prompted some profit-taking in the recent high-flying commodities. Particularly, Silver was down over 5%, reaching lows of $27.11, and focus will be on the support at $27.05 and $26.41 next. Gold also retreated back from $2,400 as haven demand was subdued but found support at fibo retracement level of $2,322 for now. Keeping $2,288 and $2,255 on the radar. Crude oil prices also saw modest losses with concerns around Iran’s retaliation easing but Mideast tension still remain elevated with Israel returning to focus on its war with Hamas.

Fixed income: Treasuries were sold off earlier on Monday as safety bid retreated, but weakness was pared with a decline in crude oil prices and ahead of auctions this week. Read this article to know more about the Treasury auctions and their potential impact on yields.

Macro:

• ECB’s Mario Centeno said the central bank may cut borrowing costs by more than 100 bps in 2024, though colleague Christodoulos Patsalides said the rate decision is data dependent without a set path.
• China’s loan prime rates were kept unchanged yesterday with the one-year loan prime rate kept at 3.45% and five-year LPR also unchanged at 3.95%. The weakness in the Chinese yuan, which continues to test the 2% trading band limit continuously, may have been a key factor to resist further easing for now, but that doesn’t rule out further rate cuts in China in Q2.

Macro events: EZ/UK/US Flash Manufacturing PMI (Apr), US Richmond Fed (Apr)

Earnings: PepsiCo, Danaher, Visa, Tesla, Texas Instruments, Novartis, General Electric, Phillip Morris, Deutsche Boerse

In the news:

• China offers support for HK stock exchange as city’s market hits 4-year losing streak (Fortune)
• Copper output at Chile's Codelco set to rise this year, CESCO says (Reuters)
• Bubble Tea Maker Chabaidao Debuts After HK’s Biggest IPO of 2024 (Bloomberg)
• EU threatens to suspend TikTok Lite’s money-for-views program over addiction fears (CNBC)

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

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