Market Report
– Charu Chanana and Redmond Wong, Market Strategists, Saxo Bank
Summary: Equity and bond markets rebounded from the post-CPI selloff as Fed members
downplayed the hot January CPI report. Japan slipped into a technical recession, which could question BOJ tightening hopes again, but Nikkei’s strength and Yen’s weakness persisted. Dollar momentum eased, helping most G10 FX to recover some of the losses although GBP was the underperformer after dovish CPI and comments from Gov Bailey. Gold was also unable to catch a bid, and the focus turns to comments from ECB’s Lagarde and Fed’s Waller in the day ahead.
Commodities: Gold remained depressed under the $ 2,000 mark, still supported by the 100DMA but lacking any signs of recovery despite yields moving lower. Silver, however, bounced higher from the $22-level support. Crude oil fell after US crude stockpiles unexpectedly rose. EIA’s weekly inventory report showed commercial stockpiles gained 12mbbl last week (vs. 2mbbl expected), the most since November, but gasoline inventories fell, offsetting some of the losses.
US Equities: On Wednesday, the US equity market rebounded. Meta, climbing 2.9%, and Tesla, rising by 2.6%, contributed to the S&P 500’s 1% and the Nasdaq 100’s 1.2% increase. Notably, ride-hailing companies Lyft and Uber had strong performances. Uber’s shares surged by 14.7% to a record high after unveiling a $7 billion share buyback plan, fueled by a recovery in ride-share revenue and robust demand in its food delivery business. Lyft soared by 35.1% following better-than-expected profits and a positive free cash flow outlook for 2024. Cisco Systems cut its annual revenue guidance amid weak demand and announced a 5% global workforce cut, causing its shares to drop by more than 5% in the extended hours. According to its latest filing with the SEC, Berkshire Hathaway reduced its Apple stake by 1% to a 5.9% holding in the December quarter. The ‘Wizard of Omaha’ also trimmed his stake in HP while adding to Chevron and Occidental Petroleum. Apple’s shares slid by around 1% in the after-hours trading. For an assessment of the investment environment of the US equities after the hot CPI, please refer to Peter Garnry’s article.
Fixed income: Treasuries rebounded as investors returned to pick up T-notes and T-bonds following the post-CPI surge in yields. The 2-year yield fell by 8bps to 4.58%, and the 10-year yield shed 3bps to 4.26%. While the timing of the first-rate cut may have been postponed, the disinflation trend has not been altered by one month’s data. In her latest article, Althea Spinozzi sees value in 10-year Treasury notes from a diversification perspective but remains cautious about ultra-long duration.
