Global Market Quick Take: Asia – March 19, 2024

Equities: US stocks rebounded from a recent sell-off with NASDAQ 100 closing at near 1% gains and S&P 500 up over 0.6%. Gains were mostly driven by tech stocks as AI optimism returned to the forefront with Nvidia revealing its newest line of hotly anticipated AI chips, named Blackwell, at the GTC conference. Meanwhile, Alphabet surged 4.6% on reports that Apple will use Google’s Gemini AI in iPhones. Tesla also jumped 6% on reports of potential price hikes for some of its European models. However, after-market sentiment cooled with Nvidia down 1.8%, and markets jitters ahead of central bank decisions that kick off from today. First up is Bank of Japan and RBA, followed by Fed on Wednesday and Bank of England and Swiss National Bank on Thursday.

In Asia, Nikkei 225 saw a muted start ahead of the likely BOJ exit decision today, while Chinese stocks will also be in focus after strong economic data from China yesterday helped markets close higher. CSI 300 closed up 0.9% and Xiaomi earnings are on tap today and its first EV launch on March 28 still in focus.

FX: The dollar saw a modest upside in the US session with Treasury yields higher ahead of the key central bank decisions this week. Scandis and Swiss franc led the declines, with USDSEK jumping above 10.40 after being rejected at that level a few times. NOK found some support from the rising oil prices, but USDCHF got close to a re-test of the 0.89 handle. EURCHF printed fresh YTD highs at 0.9657 with SNB meeting on Thursday still likely to throw a dovish surprise as we discussed in the podcast yesterday. EURUSD was attempting a rally to 1.09+ but dollar strength came in the way and pair slipped back to 1.0870. GBPUSD remained range-bound around 1.2720 ahead of UK CPI and BOE decision this week, but likely also supported by a stronger equity risk sentiment as we noted in our weekly FX chartbook. AUDUSD lifted higher to 0.6570+ on upbeat Chinese eco data yesterday but could not sustain the momentum overnight, and RBA tone will need to be hawkish today to bring back gains. USDJPY quiet ahead of monumental decision from BOJ today, but gains in yen coming through against CHF.

Commodities: Iron ore returned to over $100 with nearly 4% gains as China’s factor output and investment at the start of the year was upbeat, but focus stays on Copper which extended its recent rally amid positive signals from China adding to the price action coming on the back of supply risks at mines and smelters. Copper is a key metal for energy and AI transition, but iron ore could remain volatile. Crude oil also got close to a five-month high with Ukraine’s drone attacks on Russian refineries over the weekend adding to supply risks along with OPEC+ cuts and deamd signals remaining strong.

Fixed income: Treasuries continued to be offered on Monday as the spate of central bank decisions are awaited. The 2-year yield got in close sight of the 4.75%, reaching its highest level YTD, with odds of a June Fed rate cut now hovering at about 60%. Focus today will be on BOJ decision after a Nikkei article last night noted that the BoJ will end its yield curve control, ETF purchases, and NIRP.

Macro:

• BOJ Preview: It is a historic day for the Bank of Japan, with all indications pointing to possible exit from negative interest rates today. Speculation is also rife that BOJ will exit yield curve control as well as ETF buying today, but reaction from the Japanese yen has remained muted. This is a signal that markets expect a dovish hike and consecutive rate hikes from the BOJ are unlikely. There is also caution ahead of the FOMC, which remains a bigger driver for yen, with expectations that we could get a hawkish surprise after hot inflation prints last week. To know more about the FOMC/BOJ outlook, read this article or tune in to our weekly Macro podcast.
• RBA Preview: The Reserve Bank of Australia will announce its next rate decision as well today. 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 after recent data has started to show weakness. However, RBA will remain wary of fueling expectations of easing, and a balanced tone remains likely but that is unlikely to prove enough to boost AUD.
• China’s February activity data was surprisingly strong. While retail sales slightly missed expectations, coming in at 5.5% compared to a 5.6% forecast, industrial production and fixed assets surprised to the upside. While the data may be brushed aside due to Lunar New Year distortions, it looks like a subdued recovery persists.

Macro events: BoJ Announcement, RBA Announcement, German ZEW Survey (Mar), Canada CPI (Feb)

Earnings: Xiaomi, China Unicom Hong Kong, Partners Group

In the news:

• Nvidia unveils flagship AI chip, the B200, aiming to extend dominance (Reuters)
• Apple Is in Talks to Let Google Gemini Power iPhone AI Features (Bloomberg)
• China Evergrande's flagship unit, founder punished for securities fraud (Reuters)
• Funds That Have Dodged China’s Stock Rout Say It’s Time to Buy (Bloomberg)
• Tesla shares gain after Model Y price hike in US, Europe (Reuters)

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

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