Global Market Quick Take: Asia – March 1, 2024

US Equities: Stocks advanced higher, with both the Nasdaq 100, climbing 1% to 18,044, and the S&P 500, adding 0.5% to 5,096, making new record highs. Semiconductor stocks were among the top performers. AMD soared 9.1% while Marvell Technologies, ARM, Intel, and Nvidia gained 6.1%, 5.4%, 2.5% and 1.9% respectively.

In the extended hours, Dell jumped more than 17% after beating revenue and earnings estimates amid increases in demand for its AI servers and announcing an increase in dividend by 20%. Autodesk surged more than 9% the 3-D design software developer reported stronger-than-expected sales and earnings and guided a stronger full-year outlook.

Hong Kong/China Equities: The mainland CSI300 rallied 1.9% to recover all its loss the day before, driven by advances in semiconductors, AI concepts, and computing stocks. In Hong Kong, stocks traded mixed with the Hang Seng Index slid 0.2%. Xinyi Solar soared 24.3% after an earnings beat, an optimistic outlook, and a dividend increase. SMIC surged 5.9% amid the strong share performance of semiconductor stocks on mainland bourses. Contrary to that, Budweiser Brewing plunged 6.6% after reporting earnings missing forecasts and Baidu declined 6.6% as well on a downbeat outlook.

After the close of the Hong Kong market, NetEase reported year-on-year revenue growth of 7% and earnings growth of 54% but both missed analysts’ forecasts due to increased competition from games launched by Tencent and others. NetEase raised its dividend payout ratio to 76% from its historical norm of around 30%. ADS shed 3.9%, equivalent to 4.1% below the Hong Kong closing level on Thursday.

Today’s focus will be on China’s official NBS PMIs and the private Caixin China manufacturing PMI. Economists surveyed by Bloomberg are expecting the NBS manufacturing PMI to stay in the contractionary territory and slow to 49.0. After the Hong Kong market closes, NIO will report quarterly results.

Fixed income: Treasuries remained range-bound, with the 10-year yield edging down 1bp to 4.25 and the 2-year yield off 2bps to 4.62 as the PCE data released on Thursday was in line with economists’ projections.

FX: The dollar was choppy on US PCE release but has not threatened any key levels. Comments from BOJ’s Takata, as noted below, stirred up some volatility in the Japanese yen. USDJPY saw lows at 149.20 before recovering to 150 with traders now looking for a BOJ move in April, if not March. AUDUSD also held up near the 0.65 mark, while all other G10 currencies were in red even as NZDUSD held up just below the 0.61 level as Governor Orr said that rate cuts will not come soon. Swiss Franc led the decline, with USDCHF rising above 200DMA and threatening 0.8850. EURUSD failed to push above 1.0850 again, with regional inflation prints coming in mixed. Pair is now back at 1.08 handle, and Euro-area CPI will be on the radar today.

Commodities: Crude oil prices continued to struggle to find a direction with OPEC meeting on the radar next week. Gold rose to a three-week high after US PCE data came in-line with expectations, keeping the rate cut expectation for later in the year alive. Base metals edged higher on the LME with demand outlook brightened by the prospects of strong demand for metals in India after a strong GDP growth of over 8% was reported. Focus is also turning to China’s “two sessions” meetings next week where growth target and policy agenda will be laid out.

Macro:

• There was a lack of hawkish surprises in the January PCE data with both headline and core prints coming in line with expectations. Core M/M accelerated to 0.4% from 0.2%, with the headline rising to 0.3% from 0.2%. Core Y/Y eased to 2.8% from 2.9% with the Y/Y headline easing to 2.4% from 2.6%. Inflation generally has been showing signs of cooling on an annual basis, but M/M elements are showing a sign of pickup. The core PCE annualised rates rose with the 3-month rising to 2.8% from 2%, and the 6-month rising to 2.6% from 2.2%.
• Fed officials again warranted caution on inflation and rate cuts. Bostic (voter) said there’ll be “some bumps along the way” to the 2% price target. Mester (voter) said that right now her baseline forecasts for three cuts in 2024 still feels about right. Goolsbee (2025 voter) expressed caution about interpreting one month’s inflation report and Daly (voter) said policy is in a good place and they can cut if they needed but if they cut too quick, inflation can get stuck.
• US Initial Jobless Claims rose by 215k, rising from the prior 202k and above the 210k consensus. The continued claims, for the week that usually coincides with the BLS survey period, rose to 1.905mn from 1.860mn, above the 1.874mn consensus.
• Sales (in value) of the top 100 Chinese developers decreased by 61.9% Y/Y or 22.2% M/M in February. While it was partly due to the timing of the Lunar New Year, the reading indicated persistent sluggishness in the housing market.
• At a Politburo meeting on Thursday, China’s top leaders pledged to enhance policy consistency and ensure a "transparent and predictable" policy environment. The gathering, preceding the annual Two Sessions, focused on reviewing the upcoming government work report for the National People’s Congress. The Politburo emphasized the need to strengthen proactive fiscal policy moderately, improve its quality, and maintain a flexible, precise, and effective monetary policy. The goal is to create a stable and transparent policy environment, as detailed in the readout from the meeting.
• Inflation saw signs of easing in Germany, France and Spain. Inflation dipped to 2.7% from 3.1% in Germany, to 3.1% from 3.4% in France, and to 2.9% from 3.5% in Spain, with falls driven primarily by energy and food prices. This could mean that Euro-area inflation today could also come in lower, but sticky services prices continue to constrain expectations around ECB easing. In Germany, core inflation held steady at 3.4% while in France, services inflation slowed to just 3.1% from 3.2%. Spanish core inflation was still 3.4%, uncomfortable readings that could point to a rebound in overall price growth further down the road.
• BOJ policymaker Hajime Takata gave the clearest signal yet of the likelihood of normalization. He said that Japan's economy is in inflection point of changing 'norm' that people think wages, prices are not rising. He also talked about spring wage negotiations saying that many companies are offering higher-than-2023 wage hikes and achievement of 2% inflation target is becoming in sight despite uncertainty of economic outlook. Markets are now looking for some measures at the April meeting, with an odd chance of an earlier move in March.

Macro events: China NBS PMIs (Feb), EZ CPI (Feb), US ISM Manufacturing PMI (Feb)

Earnings: NIO, China Tower, Riverstone, Canadian Natural Resources, Kuehne + Nagel

In the news:

• Ueda Says BOJ’s Price Target Not Yet in Sight, Eyes Wage Data (Bloomberg)
• ECB’s Panetta Says Inflation Is Falling Faster Than Expected (Bloomberg)
• NY Community Bancorp disclosed material weaknesses in its internal controls, CEO Steps Down (WSJ)
• U.S. launches inquiry into Chinese connected cars (Nikkei Asia)
• Mainland China banks to offer over-the-counter interbank bond trading from May 1, PBOC says (SCMP)
• AI takes priority at TikTok owner ByteDance, as Sora disrupts the future of video creation (SCMP)
• India Q3 GDP growth surges to 8.4%, exceeding expectations (Nikkei Asia)
• Duolingo stock soars as online learning surge and AI boost forecast (Reuters)

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

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