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Weekly Market Update (February 25, 2024)


HIGHLIGHTS

Equities were up this week, mainly driven by the strong earnings from Nvidia. Other AI companies also outperformed. All eyes are on the coming inflation and job data next week.


FOMC Minutes: Commentary from the Fed officials this week made the markets adjust their rate cut expectation. As the minutes emphasized the risks of premature easing and the Fed remained highly attentive to inflation risks, markets are pushing the expectation of the first rate cut from May to June.


China Cut: The People’s Bank of China cut the 5Y prime rate by 25bps in order to boost the property markets. The policy change will have the largest effect on the mortgages. 1Y loan prime rate, which mostly affects household and corporate loans, remained unchanged.


Japan: The GDP data in Q4 2023 was disappointing. Previously, the Bank of Japan (BoJ) is waiting for the wage negotiation in spring to strengthen their argument of departing from the Negative Interest Rate Policy (NIRP). The tone has shifted now after the release of GDP data. Therefore, even if BoJ insists on departing from NIRP in April, it will be at a very slow pace.

 
MARKETS

Nasdaq

15,996.82

+1.40%

S&P 500

5,088.80

+1.66%

Dow

39,131.53

+1.30%

10-Year

4.26%

-3bps

Brent

81.73

-1.88%

DXY

103.96

-0.31%

*Data as of market close. 5-day change ending on Friday.

 
VIEW FROM THE STREET

Equity

UBS: The rally in tech has caused investors to think about whether to take profit now, while we believe it is not the right timing. We recommend retaining exposure to US mega tech names as we expect the tech stocks to have the potential to go up further.


Standard Chartered: Developed markets are at all-time highs, including major benchmark indices in the US, Europe and Japan. Japan equities are attractive as they continue to be backed by both foreign and domestic inflows, mainly because of the strong earnings from export companies, which are benefitting from the weak yen.

Fixed Income

Morgan Stanley: Last month, markets were still pricing almost 100% chance of first cut in March. After the PPI and CPI data were released, 70bps were priced out. 10Y treasury yield went up for more than 30bps in the previous month, which is a radical repricing.


UBS: As the interest rates are expected to drop this year, cash will deliver lower returns. Investors are suggested to diversify with a combination of bond ladders, fixed-income deposits and structured investments.


Economy

Bank of America: Although the data from last year showed that the US imported from Mexico more than from China, it does not mean the US has de-risked from China successfully. China may no longer be the “World Factory” in recent years, it has allocated more resources to push the theme ‘New Three”, namely Electric Vehicles, Lithium-ion Batteries, and Renewables. As the US is also boosting the green transition, it remains dependent on China.


UBS: The companies that matter the most to employment and GDP are small and medium-sized companies, not listed companies. The rising equities do not necessarily represent a good economy. The bubble means misallocation of capital in the economy, which does further damage when the bubble bursts. If policymakers focus on pushing the markets, asset prices tend to move away from the fair value, which is not favorable to the economy.

 
KNOWLEDGE TRANSFER

GLP-1

Here's all you need to know about the Game-Changing Obesity Drugs.


 
DISCLOSURE

This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.



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