MHMarkets：February 29, 2024 Economic Highlights

Date: February 29, 2024

Economic Highlights (GMT + 8)

All Day

EURGerman Prelim CPI m/m

9:30pm

CADGDP m/m

USDCore PCE Price Index m/m

USDUnemployment Claims

Market Overview

Global Market Recap

On Wednesday, the U.S. Dollar Index displayed a “V-shaped” trend, strengthening during the Asian and European sessions before falling back, ultimately closing up by 0.125% at 103.94. The benchmark 10-year U.S. Treasury yield fluctuated and fell, closing at 4.271%, while the 2-year U.S. Treasury yield, which is most sensitive to Federal Reserve policy rates, ended at 4.644%.

Affected by the U.S. Dollar Index, spot gold initially fell below the $2025 mark, then rebounded to recover all losses, peaking above $2037, and finally closed up by 0.12% at $2032.92 per ounce; spot silver closed up by 0.02% at $22.46 per ounce.

Due to the prospect of a delayed U.S. interest rate cut cycle offsetting the boost from OPEC+ extending production cuts, WTI crude oil fluctuated within a range, touching $79 during the U.S. session before facing resistance and closing down by 0.36% at $78.41 per barrel; Brent crude closed down by 0.58% at $82.78 per barrel.

All three major U.S. stock indices fell. The Dow Jones Industrial Average and the S&P 500 saw slight declines, while the Nasdaq dropped by 0.55%. The cryptocurrency concept continued to rise, with MicroStrategy (MSTR.O) surging over 10% and Coinbase (COIN.O) up by 0.8%. The Nasdaq Golden Dragon China Index fell by 1.6%, with Baidu (BIDU.O) dropping 8% post-earnings, JD.com (JD.O) falling over 5%, and Li Auto (LI.O) nearly 2%.

European stocks had a mixed day, with Germany's DAX30 index up by 0.25%; the UK's FTSE 100 index down by 0.76%; and the Euro Stoxx 50 index slightly down by 0.04%.

The Hang Seng Index in Hong Kong closed down by 1.51% at 16536.85 points. The Hang Seng Technology Index fell by 2.19% to 3426.61 points. By the close, the total trading volume of the Hang Seng was HK$107.398 billion. Market sectors saw highs before falling back, with local real estate developers, insurance stocks, tobacco stocks, AIGC concept stocks, and the semiconductor sector leading the declines. In terms of individual stocks, Longfor Group (00960.HK) fell by 7%, Country Garden (02007.HK) by 6.5%, SMIC (00981.HK) by 4.7%, Meituan (03690.HK) by 4%, and Ping An Insurance (02318.HK) by 3.5%, while NetEase (09999.HK) rose by 4.56%, Henderson Land Development (00012.HK) by 3.8%, and New World Development (00017.HK) by 2.86%.

In the A-share market, the three major stock indices surged in the morning but fell back and continued to decline in the afternoon. By the close, the Shanghai Composite Index was down by 1.91%, the Shenzhen Component Index by 2.40%, and the ChiNext Index by 2.51%. Market sectors mostly fell, with the seed industry concept making a late surge, defying the market downturn, with Autumn Seed rising over 8%; other sectors, including banking and artificial meat concepts, saw slight declines; data rights confirmation, satellite navigation, storage chips, reducers, semiconductors, automobiles, and home appliances sectors all saw significant losses; over 4900 stocks in both markets fell, with hundreds hitting the daily limit; trading volume exceeded 1 trillion yuan, reaching nearly 1.36 trillion yuan, a significant increase from the previous trading day.

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 commentary on the recent surge in the USD underscores the intricate nature of the foreign exchange markets, emphasizing the importance of a sophisticated grasp of how different economic signals and policy measures interact. Investors are encouraged to proceed with care in the present climate, especially in dealings with

2. Credit Agricole

Credit Agricole's analysis, taking into account past trends, points to the possibility of the USD experiencing a decline if there's a US government shutdown. Their assessment indicates that in light of political uncertainty in the US, investors might gravitate towards safe-haven currencies and assets, which could negatively affect the USD's short-term trajectory.

3. ING

Despite the initial downturn in the NZD and AUD after the RBNZ's recent policy meeting, ING advises against seeing this as an indication of lasting weakness. The central bank's projections and the enduring attractive carry potential for the NZD argue for a more complex medium-term perspective. Investors are encouraged to weigh the wider consequences of the RBNZ's position thoroughly before acting on the knee-jerk responses of the market.

4. MUFG

MUFG points out that despite the US's competitive edges, like its prowess in technological innovation and a flexible labor market, the country's unsustainable fiscal deficits present significant hurdles. The analysis warns that the long-term fallout from these fiscal practices could erode the US's standout economic position, potentially impacting inflation, growth, and the strength of its currency negatively.

5. Danske Bank

The EUR/GBP pairing is currently experiencing volatility, fluctuating around the 0.85 mark without a clear trajectory, in the midst of a global investment landscape that is devoid of strong trends. Although the GBP may face downward pressure in the medium term due to differences in growth outlooks and central bank interest rate forecasts, the possibility that the UK economy might outperform that of the eurozone introduces uncertainty to this view. Danske Bank sets its sights on a EUR/GBP rate of 0.88 within a 6 to 12-month period, highlighting the challenge of maneuvering through currency market shifts amid changing conditions in the labor market and inflation.