MHMarkets; February 23, 2024 Economic Highlights

Date: February 23, 2024

Economic Highlights (GMT + 8)

No High-impact news event

Market Overview

Global Market Recap

On Thursday, the U.S. Dollar Index experienced a sharp V-shaped reversal, touching a low of 103.432 during the session but rebounding strongly after robust U.S. economic data and comments from Federal Reserve officials dampened expectations for imminent interest rate cuts. The index briefly surpassed the 104 mark, nearly erasing all of its intraday losses, and eventually closed down 0.046% at 103.94. U.S. Treasury yields continued to rise, with the benchmark 10-year Treasury yield closing at 4.327% and the 2-year yield, which is most sensitive to Fed policy rates, closing at 4.72%, reaching a new high since the Fed's policy meeting in December last year.

Affected by the dollar's initial rise and subsequent fall, spot gold exhibited an inverted V-shaped pattern, ending down 0.08% at $2024.4 per ounce, halting its five-day winning streak. Spot silver moved further away from the $23 mark, closing down 0.61% at $22.75 per ounce, setting a new weekly low.

With U.S. crude oil inventory increases being lower than expected, signs of tightening in the spot market were exacerbated, pushing international oil prices near the top of their recent trading range. WTI crude closed up 0.4% at $78.29 a barrel, while Brent crude closed up 0.36% at $83.36 a barrel. In terms of natural gas, U.S. natural gas futures at one point plummeted by 6%; European benchmark natural gas futures at one point fell to €22.98 per megawatt-hour, the lowest level since May 2021.

U.S. stock indices all closed higher, with the Dow Jones Industrial Average up 1.18% and the S&P 500 index up 2.1%, both setting new closing highs. The Nasdaq Composite surged 2.96%. Nvidia (NVDA.O) closed up 16%, with its market value approaching $2 trillion, AMD (AMD.O) rose over 10%, and Rivian (RIVN.O) fell 25%. The Nasdaq Golden Dragon China Index rose 1.4%, with Li Auto (LI.O) up over 5% and Baidu (BIDU.O), favored by Citron, up over 3%.

European stock indices were uniformly in the green, with Germany's DAX 30 index up 1.47%; the UK's FTSE 100 index up 0.29%; and the Euro Stoxx 50 index up 1.68%.

Hong Kong stocks went from a lower open to a higher close, with the Hang Seng Index opening down 13 points at 16489, fluctuating throughout the day but ultimately extending gains in the afternoon to a peak of 16742 points. At the close, the Hang Seng Index was up 1.45%, and the Hang Seng Tech Index was up 1.75%, with total market turnover at HK$100.09 billion. Sector-wise, resources such as coal and oil were strong, along with agriculture and tourism stocks; apparel accessories, entertainment, and packaged food stocks were among the losers. In terms of individual stocks, Trip.com Group (09961.HK) and GDS Holdings (09698.HK) were up over 7%, CNOOC (00883.HK), PetroChina (00857.HK), and China Shenhua (01088.HK) all rose over 5%, Li Auto (02015.HK) was up nearly 5%, and both Meituan (03690.HK) and Alibaba (09988.HK) rose over 2%; Kingdee International (00268.HK) fell over 2%, NIO (09866.HK) fell over 1%, and NetEase (09999.HK) nearly fell 1%.

Market Highlights:

· Federal Reserve officials dampen expectations for recent interest rate cuts

· The number of initial jobless claims in the U.S. hits a new low in over a month

· U.S. crude oil inventories increase less than expected last week

· Houthi militants seek to escalate operations in the Red Sea region

· A high-ranking Hamas official says hostage negotiations may soon achieve a breakthrough

· Nvidia's single-day market value increase sets a record in U.S. stock market history

· Regulatory response to the ban on institutions short selling A-shares？

· Several small and medium-sized banks announce cuts to deposit interest rates

· Regulatory bodies file for special bond projects for 2024

Institutional Views:

1. Goldman Sachs

Goldman Sachs' revisions to its forecasts for monetary policy and economic growth in the UK signal a careful approach to the enduring nature of inflation and the economy's performance. The postponed prediction for a rate cut emphasizes the difficulties confronting the Bank of England in managing inflation while trying to stimulate the economy. Furthermore, the reduced estimate for GDP growth points to the persistent obstacles in the UK's path to economic recovery, underscoring the importance of monitoring upcoming economic indicators and policy decisions by the BoE.

2. Credit Agricole

The resurgence of the Nikkei to its highest level in 34 years, along with the Bank of Japan's (BoJ) prudent stance on monetary policy, highlight the intricate factors impacting the Japanese yen (JPY). The Nikkei's strong performance and the appeal of carry trades are exerting downward pressure on the JPY, yet the looming threat of intervention presents complications for its use in carry trade strategies. Credit Agricole advises looking towards the Swiss franc (CHF) or the Euro (EUR) as more secure options for carry trades, in light of the Japanese Ministry of Finance's increasing warnings about intervention.

3. ING

According to ING's fair value models, the Japanese yen is substantially undervalued, yet its performance is still being shaped by the carry trade dynamics, where the yen is a popular choice as a funding currency. The movement of Japan's trade balance back into surplus supports the fundamental valuation of the yen, in spite of its present weakness. Moving forward, a change in the overall trend of the dollar might trigger a correction in the USD/JPY exchange rate, offering a pivotal moment for making adjustments in corporate hedging strategies.

4. Danske Bank

Danske Bank's review indicates that the Canadian dollar (CAD) has outperformed other currencies in comparable economic situations this year. However, anticipated adjustments in global monetary policy are expected to bolster the US dollar (USD), presenting opportunities for gains in the USD/CAD pair. The future direction of USD/CAD is poised to closely align with changes in global monetary policies and the wider economic environment.