MHMarkets：March 01, 2024 Economic Highlights

Date: March 01, 2024

Economic Highlights (GMT + 8)

9:30am

CNYManufacturing PMI

11:00pm

USDISM Manufacturing PMI

USDRevised UoM Consumer Sentiment

Market Overview

Global Market Recap

On Thursday, the U.S. Dollar Index experienced a downtrend during the Asian and European trading sessions, following the announcement that the U.S. core PCE price index's annual rate for January marked its lowest increase since March 2021, which led to a significant drop in the Dollar Index. However, a monthly rate of 0.4% fueled hawkish expectations, prompting the Dollar Index to rebound around 103.65 and reach a new high for the day, eventually closing up by 0.191% at 104.14. The benchmark 10-year U.S. Treasury yield fluctuated upwards during the Asian and European sessions but took a dive following the PCE data, closing at 4.254%. The 2-year U.S. Treasury yield, which is most sensitive to Fed policy rates, ended at 4.623%.

Affected by the PCE data and the trajectory of the Dollar Index, spot gold surged during the U.S. session, breaching the $2050 mark and closing up by 0.48% at $2044.26 per ounce; spot silver ended up by 0.96% at $22.67 per ounce.

Concerns over a slowdown in demand triggered by a larger-than-expected increase in U.S. crude oil inventories, along with signs that U.S. interest rates might remain high, added pressure to the oil market. WTI crude oscillated and eventually closed flat at $78.46 per barrel; Brent crude slightly increased by 0.06%, closing at $82.85 per barrel.

U.S. stock indexes all rose. The Dow Jones increased by 0.1%, the S&P 500 by 0.5%, and the Nasdaq by 0.9%. Nvidia (NVDA.O) closed up by 1.8%, Arm (ARM.O) by 5%, and AMD (AMD.O) by 9%. Marathon Digital (MARA.O) fell by 16%, while MicroStrategy (MSTR.O) surged by more than 6%. The Nasdaq Golden Dragon China Index fell by 0.2%, with XPeng Inc. (XPEV.N) rising by 7.9%, NIO Inc. (NIO.N) by 5%, and Li Auto (LI.O) by more than 1%.

European stocks ended mixed, with Germany's DAX 30 up by 0.44%, the UK's FTSE 100 up by 0.07%, and the Euro Stoxx 50 down by 0.12%.

Hong Kong stocks fluctuated, with both major indexes closing nearly flat. The Hang Seng Index fell by 0.15% to 16511.44 points, while the Hang Seng Tech Index rose by 0.14% to 3431.30 points. At close, the total trading volume of the Hang Seng Index reached HKD 130.351 billion. Sector-wise, lithium battery stocks strengthened, semiconductor stocks continued to rise, entertainment stocks climbed, while coal and oil & gas stocks fell, and telecom stocks declined. In individual stock movements, Xinyi Solar (00968.HK) surged by 24% following its earnings report, Ganfeng Lithium (01772.HK) rose by 9.2%, Shanghai Fudan (01385.HK) by 10.3%, ZTE Corporation (00763.HK) by 7%, Tianqi Lithium (09696.HK) by 6.4%, Hua Hong Semiconductor (01347.HK) by 5%, SMIC (00981.HK) by 5.9%, Baidu (09888.HK) fell by 6.6%, China Telecom (00728.HK) by 2.6%, China Shenhua (01088.HK) by 3.2%, and CNOOC (00883.HK) by 2.2%.

In the A-share market, the three major indexes initially surged but then fell back before fluctuating upwards again in the afternoon session. By the close, the Shanghai Composite Index was up by 1.94%, the Shenzhen Component Index by 3.13%, and the ChiNext Index by 3.32%. Sector-wise, there was a general uptrend, with the semiconductor sector seeing significant gains, including stocks like Naura Technology and Wenye Group hitting their upper limits. The shipbuilding sector saw fluctuations but moved higher, with China State Shipbuilding achieving a multi-year high. The hydrogen energy concept also saw a surge, with several stocks hitting their upper limits; other sectors such as industrial mother machines, satellite navigation, and CPO also saw significant increases. Over 5000 stocks in the market rose, with the trading volume exceeding 1 trillion yuan.

Market Highlights:

· Federal Reserve's Williams: Three rate cuts within the year is a reasonable option

· U.S. GDP growth for the fourth quarter of last year revised down from 3.3% to 3.2%

· U.S. congressional leaders agree to a short-term extension of the government shutdown deadline

· Hamas and Fatah to discuss forming a Palestinian government in Russia

· Bitcoin breaches $64,000 in early morning trading

· CSRC: Will continue to strengthen supervision of OTC derivatives business, including DMA

Institutional Views:

1. Bank of America (BofA)

BofA's positive outlook on the EUR/USD exchange rate is mainly driven by expected changes in the US economy and Federal Reserve strategies, rather than events in Europe and the actions of the ECB. Although there has been a minor adjustment to the third-quarter forecast, the general anticipation is that the EUR will strengthen against the USD throughout the year, buoyed by decreasing inflation and possible reductions in Fed interest rates. BofA's predictions are still above the average market expectations, forecasting the EUR/USD to reach 1.20 by 2025.

2. Credit Agricole

As excitement grows over the Bank of Japan's (BoJ) upcoming March meeting and the possibility of policy changes, Credit Agricole recommends taking a bearish position on the EUR/JPY pair through options trading. The proactive comments from Japan's financial leaders, coupled with the BoJ's positive projections for meeting its inflation goals, set the stage for a potential appreciation of the JPY. Investors should keep these factors in mind when assessing their EUR/JPY trading strategies.

3. ANZ

ANZ holds a positive outlook on gold, supported by continuous purchases by central banks, geopolitical uncertainties, and market expectations surrounding potential Federal Reserve rate reductions. Although real interest rate fluctuations may pose short-term challenges, the long-term perspective for gold is optimistic. ANZ forecasts that gold prices will, on average, exceed USD 2,000 per ounce over the course of the year.

4. MUFG

The recent appreciation of the yen highlights the market's reaction to signals from the Bank of Japan (BoJ) that it is gearing up to move away from its highly expansive monetary policy. Statements from BoJ officials, especially those related to Japan's short-term inflation objectives and anticipated wage increases, have sparked expectations of nearing interest rate rises. MUFG believes that these factors will bolster the yen, which is presently seen as undervalued, in the context of the BoJ's shift to a more restrained monetary approach.

5. RBC

RBC indicates that although the current pricing of the EUR/USD pair seems to largely incorporate its bearish sentiment, the possibility of positive surprises remains open. The firm has adjusted its short-term forecast for the EUR/USD pair, now expecting a low of 1.06 in the second quarter, considering the changing economic indicators and geopolitical events.