MHMarkets：March 22, 2024 Economic Highlights

Date: March 22, 2024

Economic Highlights (GMT + 8)

3:00pm

GBPRetail Sales m/m

All Day

EUREuro Summit

Market Overview

Global Market Recap

On Thursday, the dollar index rose by 0.60% to 104, bolstered by an unexpected rate cut by the Swiss National Bank and strong U.S. economic growth, closing at 4.2660% for the 10-year U.S. Treasury yield and 4.6430% for the 2-year yield, which is most sensitive to Federal Reserve policy rates.

Spot gold reached a new all-time high, surpassing the $2220 mark after hints from Powell about three rate cuts in 2024, but ended the day down 0.24% at $2180.50 an ounce as the dollar strengthened; spot silver closed down 3.32% at $24.72 an ounce.

WTI crude oil closed down 0.76% at $80.75 a barrel, and Brent crude closed down 0.67% at $85.52 a barrel, pressured by weak U.S. gasoline demand data and reports on a UN resolution calling for a ceasefire in Gaza.

U.S. stocks saw gains with the Dow Jones up 0.7%, the S&P 500 up 0.3%, and the Nasdaq up 0.2%, all closing at new highs. Reddit surged 47% on its debut day, Apple fell 4% amid antitrust lawsuits, and Micron Technology rose 14%. The Nasdaq Golden Dragon China Index fell 1.6%, with LU Inc. surging 45%, Li Auto dropping over 7%, and JD.com nearly 4% down.

European stocks also rose across the board, with Germany's DAX30 up 0.91%, the UK's FTSE 100 up 1.88%, and the Euro Stoxx 50 up 1.04%.

Hong Kong stocks opened high and fluctuated throughout the day, with the Hang Seng Index opening up 219 points at 16,762, reaching a high of 16,973 points, and closing up 1.93% with a significant increase in turnover to HK$118.05 billion. Sectors like toys, dining, and domestic real estate were strong, while electronics, agricultural products, and new energy materials saw declines. Notable stock movements included Ping An Healthcare surging nearly 7%, China Hongqiao and Longfor Group around 6%, and Kingsoft Software and Geely Automobile over 5%; in contrast, Sunny Optical Technology plunged 13%, and Xinyi Solar nearly 2%.

In the A-share market, indices fluctuated weakly throughout the day with notable gains in pork concept and low-altitude economy stocks. The Shanghai Composite Index closed down 0.08%, the Shenzhen Component Index down 0.36%, and the ChiNext Index down 0.64%. Sectors like pork, low-altitude economy, and tourism performed well, while automotive dismantling, CXO concept, weight loss drugs, liquid cooling servers, telecommunications, and coal were among the worst performers. Over 2700 stocks declined, with transaction volumes exceeding 1 trillion yuan.

Market Highlights:

· U.S. initial jobless claims fell below expectations to 210,000.

· The Bank of England kept its base rate unchanged.

· The Swiss National Bank initiated its first rate cut.

· Former U.S. Treasury Secretary Larry Summers criticized the Federal Reserve.

· The UN Security Council will vote on a draft resolution for a ceasefire in Gaza proposed by the U.S.

· Deputy Governor of the People's Bank of China stated there is still room for reduction in the required reserve ratio.

· Reports indicate multiple public funds are under off-site inspection by different regional branches of the Securities Regulatory Commission.

· Kimi's traffic growth far exceeded expectations, resulting in exceptional experiences for SaaS customers.

Institutional Views:

1. Bank of America (BofA)

BofA's study emphasizes how G10 currencies vary in their vulnerability to potential corrections in the equity market amidst an economic downturn. By examining the relationship between stock market trends and nominal GDP growth, the analysis identifies the JPY, USD, NOK, and SEK as currencies that could be especially affected. This evaluation highlights the intricate connections between equity markets, economic health, and the stability of currencies, stressing the necessity for investors to factor in these considerations in their investment approaches.

2. Credit Agricole

Credit Agricole reaffirms its bullish stance on the AUD/NZD pairing, attributed to Australia's strong employment sector contrasted with New Zealand's economic challenges. The bank's aim for the currency pair to reach 1.12 is based on the anticipated diverging directions of monetary policy between the Reserve Bank of Australia (RBA) and the Reserve Bank of New Zealand (RBNZ). This analysis highlights the critical role of labor market trends and overall economic health in informing currency trading strategies.

3. Société Générale

Société Générale advises selling CHF/NOK and CHF/JPY, leveraging the divergent monetary policy trajectories of the Swiss National Bank (SNB) and Norges Bank, alongside the wider economic factors influencing these currencies. The surprise rate reduction by the SNB opens a tactical window for traders to exploit prospective currency appreciations, positioning the Norwegian Krone for potential uplift within the European currency sphere.

4. Danske Bank

The Bank of England's recent policy announcement and comments indicate a careful but dovish adjustment, laying the foundation for a series of rate cuts starting in June 2024. As inflation and wage growth are projected to level off, and with the UK economy displaying weakening tendencies, Danske Bank considers the environment favorable for a loosening of policy. This perspective supports their advice to maintain a short position on GBP/USD, expecting further depreciation of the GBP against the EUR and USD in the near future.

5. HSBC

The Swiss National Bank's surprise rate cut highlights its proactive stance on inflation and external economic risks, significantly impacting the Swiss Franc's role in the global currency markets. As the initial G10 central bank to implement a rate cut, this action notably boosts the attractiveness of the CHF as a funding currency in the current environment of low foreign exchange volatility. Although the SNB currently adopts a neutral position regarding currency intervention, the diminishing real value of the CHF could lead to a reconsideration of this policy soon.