Global Market Quick Take: Asia – February 23, 2024

US Equities: Nvidia is the name of the game in town. The chip giant which underpins the AI revolution soared 16.4% and added $277 billion in market cap after reporting quarterly results and outlook that beat expectations. It marked the largest market cap gain in a single day for a U.S. company. For more, read Peter Garnry’s review of Nvidia’s results. The Nasdaq 100 surged 3% and the S&P 500 added 2.1%. The Nvidia results added fuel to the optimism of the outlook of AI and semiconductors, AMD gained 10.7% while Marvell, Broadcom, and Micron climbed around 5%-6%. Likewise, the optimism lifted semiconductor stocks in Japan, South Korea, and Taiwan. Nikkei 225 rose 2.2% on Thursday. Tokyo Electron, a chipmaking equipment manufacturer, rose 6.0% to become the 3^rd most valuable company in Japan.

Fixed income: A fall in initial jobless claims and a rise in the S&P Global US manufacturing PMI signalled resilience in the US labour market and the economy, seeing the 2-year Treasury yield rise 5bps to 4.71% while the 10-year yield remained steady at 4.32%. The $9 billion 30-year Treasury inflation-protected securities (TIPS) auction met with robust demand.

China/HK Equities: The Hang Seng Index gained 1.5% while the CSI300 added 0.9%. Energy stocks were notably strong, oil majors and leading coal miners added around 3% to 9%. Hong Kong retailers rose, in anticipation of China relaxing rules for residents from more Chinese cities to visit Hong Kong. Technology stocks gained, benefiting from the upbeat outlook for AI in Nvidia’s results. Trip.com surged 7.3% after reporting strong Q4 revenue and earnings and strong international business. Lenovo gained 3.3% after reporting Dec quarter revenue of $15.7 billion, up 3.0% Y/Y and ahead of the consensus estimate of $15.4 billion. Net profit came in at $337 million, down 22.9% Y/Y but beating the survey forecast median of $305 million, resulting from better-than-expected operating margins of 3.9%. Overall, market sentiments have somewhat stabilized and investors are expecting persistent support from the Chinese authorities ahead of the Two-Sessions commencing on March 4 and 5.

FX: The dollar was sold initially on a buoyant risk sentiment, but recovered in the US session on US exceptionalism story holding up well with jobless claims and PMIs coming in better-than-expected. Yen and Swiss franc weakened as Nvidia-driven equity rally brought a risk-on tone to the markets. USDJPY rose to highs of 150.69 while USDCHF pushed back above 0.88. AUDJPY, a key barometer of global risk sentiment, rose to a decade-high of 99. NZDUSD is back at 0.62 as activity currencies rose, and RBNZ is likely to stay hawkish next week. EURUSD surged to highs of 1.0888 on strong French PMIs but pared gains later as German manufacturing came in weak. GBPUSD surged to 1.27 handle, but was choppy thereafter.

Commodities: China’s recovery is seen gathering momentum with support measures seen expanding. This saw copper prices surging for a fifth straight day, and closing above $3.90/ton. Copper market is likely to remain tight amid surging demand from green transformation, while supply issues have been bolstered by a potential threat of further sanctions on Russia. Read more on our Copper views here. Gold still range-bound, holding up well despite the global risk-on sentiment. Explore why, in this article.

Macro:

• US jobless claims fell to 201k from 213k, well beneath the 218k expected. Continued Claims for the preceding week was also hot, falling to 1.862mln from 1.889mln, beneath the 1.885mln forecast. However, market has priced in much hawkishness and is now in-line with Fed’s December dot plot in expectations around Fed policy for this year. So any hawkish data sets are likely to have little impact, but focus remains on any miss in growth-related forecasts.
• Fed officials largely maintained the recent narrative of waiting to see more progress on inflation before cutting rates. ECB minutes also saw officials seeing early rate cuts as a bigger risk.
• US S&P Global Manufacturing Flash PMI for February rose to 51.5, above the expected 50.5 and the prior 50.7. Services dipped to 51.3 from 52.5 (exp. 52.0), leaving the Composite declining to 51.4 from 52.0. Eurozone manufacturing PMI slipped further to 46.1 from 46.6 mainly due to weakness in Germany, but services PMI reached the 50-mark from 48.4 previously. UK PMIs also improved, with manufacturing up to 47.1 from 47, services steady at 54.3 but composite rising to 53.3 from 52.9 in January.
• China is drafting a bill, as reported by the state broadcaster CCTV, to better protect the rights of private enterprises and ensure their "equal treatment" compared to state-owned enterprises.

• The readout from a meeting of the Central Commission for Comprehensively Deepening Reform on Monday, chaired by Xi, highlighted reform as a priority in China this year. The aim is to implement the reform blueprint laid out in the Third Plenary Session of the 18th Central Committee 10 years ago.

Macro events: German Ifo (Feb), UK GfK Consumer Confidence, China House Prices

Earnings: Allianz, Deutsche Telekom, BASF, Riverstone

In the news:

• Nvidia adds record $277 billion in stock market value (Reuters)
• US to impose sanctions on over 500 targets in Russia action on Friday (Reuters)
• Japan Shares Open New Chapter as Nikkei Reclaims Its 1989 Peak (Bloomberg)
•  Chinese tech giant Lenovo doubles down on AI after world’s largest PC maker posts first quarterly revenue growth since late 2022 (SCMP)
•  U.S. export curbs on China won't extend to legacy chips: official (Nikkei)
• ‘Deeply sorry’: China hedge fund apologises after trading ban for ‘market disruption’ in first punishment since Beijing’s vow to stem stock rout (SCMP)

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

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