Global Market Quick Take: Asia – February 15, 2024

US Equities: On Wednesday, the US equity market rebounded. Meta, climbing 2.9%, and Tesla, rising by 2.6%, contributed to the S&P 500's 1% and the Nasdaq 100’s 1.2% increase. Notably, ride-hailing companies Lyft and Uber had strong performances. Uber's shares surged by 14.7% to a record high after unveiling a $7 billion share buyback plan, fueled by a recovery in ride-share revenue and robust demand in its food delivery business. Lyft soared by 35.1% following better-than-expected profits and a positive free cash flow outlook for 2024. Cisco Systems cut its annual revenue guidance amid weak demand and announced a 5% global workforce cut, causing its shares to drop by more than 5% in the extended hours. Berkshire Hathaway reduced its Apple stake by 1% to a 5.9% holding in the December quarter, according to its latest filing with the SEC. The 'Wizard of Omaha' also trimmed his stake in HP while adding to Chevron and Occidental Petroleum. Apple’s shares slid by around 1% in the after-hours trading. For an assessment of the investment environment of the US equities after the hot CPI, please refer to Peter’s Garnry’s article.

Fixed income: Treasuries rebounded as investors returned to pick up T-notes and T-bonds following the post-CPI surge in yields. The 2-year yield fell by 8bps to 4.58%, and the 10-year yield shed 3bps to 4.26%. While the timing of the first-rate cut may have been postponed, the disinflation trend has not been altered by one month’s data. In her latest article, Althea Spinozzi sees value in 10-year Treasury notes from a diversification perspective but remains cautious about ultra-long duration.

China/HK Equities: The Hong Kong equity market opened sharply lower on the MSCI’s announcement regarding the deletion of 66 Chinese companies from the MSCI China Index. However, after dipping as much as 1.2%, the Hang Seng Index rebounded in the afternoon to close at 15,879, up 0.8%. Meituan surged 5.7% and Trip.com gained 4.4% amid robust sales performance during the Lunar New Year holiday. Macao casino operators advanced as mainland tourist arrivals to Macao reached 703,000 in the first four days of the Lunar New Year and the total number of visitors to Macao was expected to exceed one million for the 8-day mainland holidays. MGM China soared 9.6%. Investors await Sands China’s quarterly results tomorrow for additional insights into the Macao casino industry. XPeng surged 7.9% as investors anticipated the potential inclusion of the company into the Hang Seng Index in the index’s quarterly review.

FX: The dollar pared some of the post-CPI gains, but was broadly supported and we see dollar gains becoming more durable as rate cuts for other central banks like BOE, ECB and SNB are brought forward while Fed rate cut expectations are delayed. GBP was the underperformer after a dovish CPI and comments from Bailey. GBPUSD slid to lows of 1.2536 and is testing the 200DMA, while EURGBP rallied to 0.8550. EURUSD bounced off the 1.07 support and was back at 1.0730 although yen remains stuck at 150.50-levels despite Japan’s Q4 GDP confirming a recession. Swiss franc was the second worst performer of the day as USDCHF tested 0.8880 and EURCHF remained stuck near 0.95. AUDUSD rallied back to 0.65 despite RBA’s Bullock sounding confident on inflation coming back to target, but a weaker than expected employment report brought the pair back to 0.6480.

Commodities: Gold remained depressed under the $2,000-mark, still supported by the 100DMA but lacking any signs of a recovery despite yields moving lower. Silver, however, bounced higher from the $22-level support. Crude oil fell after US crude stockpiles unexpectedly rose. EIA’s weekly inventory report showed commercial stockpiles gained 12mbbl last week (vs. 2mbbl expected), the most since November, but gasoline inventories fell, offsetting some of the losses.

Macro:

• Chicago Fed President Goolsbee (2025 voter, dove) said even if inflation comes in a bit higher over the next few months, it is still consistent with the Fed's path back to target. Goolsbee said he does not support waiting until inflation is already at 2% on a 12mth basis before cutting rates, and added cuts should be tied to confidence in being on a path towards the target rate. Former Fed Chair and current Treasury Secretary Yellen added her opinion stating that it would be a "tremendous mistake" to focus on minor changes in CPI. It is also being reported that Chair Powell told Congress in a closed-door meeting after the CPI report that the inflation data was "consistent with what they had been anticipating" and the Fed would look to the upcoming PCE report to give them more intel. While yields have retraced some of the post-CPI gains, market continues to expect a June Fed rate cut.
• UK January CPI came in below expectations. Headline was at 4.0% YoY vs. 4.1% expected, as services inflation was up 6.5% vs. BOE’s expectation of 6.6%. Core inflation held up at 5.1%, below the consensus forecast of 5.2%. BOEs Bailey gave testimony to the House of Lords and he was tilted to the dovish side, saying that there are indications of pay growth deceleration.
• Japan’s economy slipped into a technical recession, with Q4 GDP coming in at -0.4% QoQ ann. vs. +1.1% expected. Q3 GDP growth was also revised lower to -3.3% QoQ from -2.9% earlier. This dire growth picture makes it even more difficult for the BOJ to tighten policy, as we have argued before.

Macro events: IEA OMR, Australia Employment (Jan), UK GDP (Dec/Q4), US Philadelphia Fed (Feb), US Retail Sales (Jan), US Industrial Production (Jan). Speakers: ECB’s Lagarde, Lane; BoE’s Greene, Mann; RBNZ’s Orr; Fed's Waller

Earnings: Schneider Electric, Stellantis, Southern Co, Applied Materials, Airbus, Deere, Safran, RELX, Pernod Ricard, Renault, Commerzbank.

In the news:

• Uber hits record high after unveiling first-ever $7 bln share buyback (Reuters)
• Lyft Shares Surge as Strong Earnings Report Offsets Typo Confusion (WSJ)
• Warren Buffett’s Berkshire Hathaway Trims Its Massive Stake in Apple (WSJ)
• Cisco to cut more than 4,000 jobs, lowers annual revenue forecast (Reuters)
• The Six Months That Short-Circuited the Electric-Vehicle Revolution (WSJ)
• Morgan Stanley Is Laying Off Several Hundred in Wealth-Management Division (WSJ)
• US lawmakers led by China hawk Mike Gallagher to visit Taiwan next week (SCMP)
• Prabowo claims victory in Indonesian election based on unofficial counts (Nikkei Asia)

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

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