MHMarkets：March 07, 2024 Economic Highlights

Date: March 07, 2024

Economic Highlights (GMT + 8)

9:15pm

EURMain Refinancing Rate

EURMonetary Policy Statement

9:30pm

USDUnemployment Claims

9:45pm

EURECB Press Conference

Market Overview

Global Market Recap

On Wednesday, the US Dollar Index experienced fluctuations during the Asian and European sessions, but weakened during the US session, closing down 0.398% at 103.37, following Powell's statement on Capitol Hill about a potential rate cut later in the year. The yield on the benchmark 10-year US Treasury note closed at 4.1078%, while the yield on the 2-year Treasury note, which is most sensitive to Fed policy rates, closed at 4.562%.

Driven by Powell's remarks, continued central bank purchases, and increased risk aversion, spot gold reached a new high, breaking above $2,152 per ounce at one point and closing up 0.97% at $2,148.64 per ounce; spot silver closed up 2.1% at $24.17 per ounce.

International oil prices rebounded due to Saudi Arabia unexpectedly raising its official selling price for oil to Asia and heightened tensions in the Middle East. WTI crude closed up 1.23% at $79.22 a barrel; Brent crude closed up 0.04% at $83.62 a barrel.

All three major US stock indexes rose. The Dow Jones Industrial Average increased by 0.2%, the S&P 500 by 0.5%, and the Nasdaq by 0.58%. Tesla (TSLA.O) fell 2%, Apple (AAPL.O) fell 0.6%, and Nvidia (NVDA.O) rose 3%, setting a new record. New York Community Bank (NYCB.N) had a trading range of up to 77%, closing up 8%. The Nasdaq Golden Dragon China Index rose nearly 2%, with JD.com (JD.O) surging 16% after announcing a significant buyback, Bilibili (BILI.O) up 6%, and Alibaba (BABA.N) rising more than 2%.

European stocks closed higher across the board, with Germany's DAX30 up 0.1%, the UK's FTSE 100 up 0.43%, and the Stoxx Europe 50 up 0.46%.

Hong Kong stocks opened flat but continued to rise; the Hang Seng Index at one point increased by 2.3%, reaching a high of 16,545 points. At close, the Hang Seng Index was up 1.7%, and the Hang Seng Technology Index rose 2.67%; total trading volume for the market was HK$102.377 billion. Tech stocks were strong today, with JD.com (09618.HK) up 7.79%, Alibaba (09988.HK) rising more than 3%, and Meituan (03690.HK) up 2.72%; gold stocks continued to rise, with Zijin Mining (02899.HK) up 6.17%, reaching a new high since April last year. Biotech stocks surged in late trading, with WuXi Biologics (02269.HK) closing up more than 9%.

A-shares experienced a slight rise in the morning session before entering a phase of fluctuation. At close, the Shanghai Composite Index was down 0.26%, the Shenzhen Component Index fell 0.22%, and the ChiNext Index was down 0.06%. In the market, humanoid robot concepts soared, with Tianqi Shares and Xiamen Tungsten hitting the upper limit; energy storage concepts strengthened, with Jiangnan Yifan and Huaxi Energy among several stocks hitting the upper limit. Additionally, cultivated diamonds, new industrialization concepts, automobile manufacturing, and tourism sectors were among the top gainers; while Sora, AI smartphones, hotel catering, banking, and media entertainment sectors were among the top losers. The total trading volume for both markets was about 930 billion yuan.

Market Highlights:

· Powell: A rate cut may be appropriate at some point this year

· The US February ADP employment report showed the largest increase since December 2023

· Fed's Beige Book: Future demand expected to strengthen further, financial conditions to become more relaxed

· New York Community Bank shares soared up to 70%

· Musk: Will not donate to any US presidential candidate

Institutional Views:

1. Bank of America (BofA)

BofA expects the Bank of Canada (BoC) to hold interest rates steady at its upcoming meeting, closely watching inflation trends before considering rate cuts, possibly by June. The decision to cut rates sooner will depend on the BoC's assessment of recent inflation data, influencing both rate and currency strategy adjustments. Investors are advised to favor long positions in Canadian interest rates relative to U.S. rates and to brace for initial short-term USD/CAD strength, with an expected gradual appreciation of the Canadian dollar later in the year.

2. Westpac

Westpac suggests short-selling the USD/JPY at current levels as a strategic short-term move, targeting a shift towards 146. While the yen faces structural challenges, recent rate adjustments and growing expectations for a Bank of Japan (BoJ) rate hike create a favorable scenario for a tactical pullback. However, the potential for a significant drop in USD/JPY is moderated by the yen's ongoing structural headwinds.

3. ANZ

ANZ counters the recent gains of the Japanese yen, predicting a rise in the USD/JPY exchange rate to about 151. With intervals between BoJ meetings and a history of the yen weakening post-BoJ announcements, ANZ views the yen's current strength as a chance to anticipate its depreciation. The bank's perspective suggests a near-term continuation of negative interest rates by the BoJ, forecasting a reversal in the yen's recent gains.

4. Goldman Sachs

Goldman Sachs anticipates the February jobs report to depict a strong yet slightly cooled labor market, with payroll increases slowing from January's surge but remaining robust. The expected stagnation in average hourly earnings hints at a temporary anomaly in January's data due to weather influences, leading to a drop in annual wage growth. The forecasted constant unemployment rate highlights the sustained resilience of the US labor market.

5. CIBC

CIBC interprets the BoC's March policy announcement as in line with its prediction of a June rate cut, assuming ongoing inflation improvement. The focus on persistent inflation, especially in shelter costs, indicates a data-dependent approach to rate decisions. CIBC is keenly awaiting further jobs and CPI data, essential for refining their forecast and evaluating the chances of a mid-year rate adjustment.