Global Market Quick Take: Asia – February 14, 2024

US Equities: After the anticipation of a near-term Fed rate cut was further diminished, and bond yields surged following a hot CPI report, stocks had a significant pullback across the board. The S&P 500 Index dropped by 1.4%, with all 11 sectors declining. Moody’s, which plunged 7.9%, was the worst-performing stock within the broad market benchmark index after reporting revenue and earnings below estimates. The Nasdaq 100 Index dropped by 1.6%. Biogen, plunged by 7.4% and was the worst performer within the Nasdaq 100 after guiding a low-to-mid-single-digit percentage revenue decline in 2024. JetBlue, on the other hand, surged by 21.6% following the news that Carl Icahn has built a 9.9% stake in the airline. Cisco is reporting results today.

Fixed income: The 2-year Treasury yield jumped by 18bps to 4.66% after the CPI prints came in stronger than expected, reducing the anticipation of rate cuts in March and May. The 10-year Treasury yield rose by 14bps to 4.31%.

China/HK Equities:In the first trading session following the Lunar New Year holiday, the Hong Kong equity market is expected to face pressure due to the MSCI announcement regarding the deletion of 66 Chinese companies from the MSCI China Index and 76 from the MSCI China All Shares Index. This includes notable names such as China Southern Airlines, Greentown China, Weibo, Ping An Healthcare, and China Everbright Environment. Additionally, there are three deletions from the MSCI Hong Kong Index: Xinyi Glass, Budweiser Brewing, and New World Development. The mainland A-share market will remain closed for the Lunar New Year holiday for the rest of this week. Overnight, the NASDAQ Golden Dragon China Index pulled back 2.7%, reversing the 2.1% gains on Monday.

FX: The dollar surged sharply in response to the hot CPI report overnight, with the DXY index breaking past 100DMA to touch its highest levels in three months when markets started to price in Fed rate cuts. Scandies were the underperformers, while Swiss franc also slid below its 200DMA after Swiss CPI came in softer-than-expected yesterday. USDCHF rose to 0.8880 and next resistance seen at 0.89. USDJPY also rallied past 150.50, and Japanese currency official Kanda was on the wires this morning warning about the move and stoking concerns of intervention. EURUSD tested 1.07 while GBPUSD slid below 1.26 and UK CPI will be on the radar today. To read our weekly FX outlook, go here.

Commodities: Gold slumped below the key $2,000 mark as yields and dollar jumped higher. The precious metal has held above this key psychological level since mid-December on the hope of Fed rate cuts, which are being re-assessed now. Crude oil gained as concerns over demand were soothed by a bullish outlook from OPEC. IEA however hinted at “comfortable” markets this year as increasing production from non-OPEC countries underpins, and inventory data was also mixed, keeping oil range-bound.

Macro:

• US CPI came in hotter than expected, both on the headline and core, disrupting the disinflation narrative and reaffirming the last mile of the inflation move to 2% could be bumpy. Headline rose 3.1% YoY and 0.3% MoM, vs. 2.9% and 0.2% expected respectively. Core meanwhile was steady at 3.9% YoY vs. 3.7% expected, and rose on a MoM basis to 0.4% from 0.3% previously. Prices of most staples increased, including food, shelter, car insurance were higher. Focus now turns to PPI report on Friday which could help to gauge what Fed’s preferred inflation measure PCE could come at. The hot CPI report has priced out a March rate cut, now seen with only 10% odds. May rate cut probability has also dropped to less than 40% from ~70% previously and the first rate cut is only seen in June.
• Germany ZEW expectations improved for a seventh consecutive month, suggesting a more stable outlook for Europe’s sick man. The index for current conditions slipped to -81.7 in February from -77.3 the prior month amid manufacturing sector struggles. Still, the ZEW institute’s gauge of expectations rose to 19.9 from 15.2 in January. That is above the 10-year average of about 13.
• In January, China recorded RMB6.5 trillion in new aggregate financing, significantly surpassing the median forecast of RMB5.6 trillion and maintaining the year-over-year growth of the outstanding amount of aggregate financing at 9.5%, consistent with December. The better-than-expected growth was primarily attributed to the increase in loans, with new RMB loans reaching RMB4.92 trillion, exceeding the expected RMB4.5 trillion. Nevertheless, M2 growth slowed to 8.7% year-on-year (consensus: 9.3%; previous: 9.7%). The deceleration in money supply was partially influenced by the timing of the Lunar New Year and a high base.

   

  Macro events: Indonesian Presidential Election, UK CPI (Jan), EZ Employment (Q4), Japan GDP (Q4). Speakers: ECB’s de Guindos, Cipollone; BoE's Bailey hearing; Fed’s Goolsbee, Barr

  Earnings: Commonwealth Bank of Australia, Sony, Cisco, Occidental Petroleum, Heineken, Tokio Marine, Equinix, CME, EssilorLuxottica, Kraft Heinz.

  In the news:

• China's BYD plans new electric vehicle plant in Mexico, says Nikkei (Reuters)
• Bezos sold $4bn in Amazon stock over the past week (FT)
• Cost cuts to help Lyft turn cash flow positive in 2024; shares surge (Reuters)
• Airbnb sees Q1 revenue above Street estimates on strong international travel (Reuters)
• Indonesia is heading to the polls to elect Jokowi's presidential successor (CNBC)
• Japan’s Kanda: MOF Will Take Appropriate Steps on FX as Needed (Bloomberg)

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

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