S&P 500 Achieves Record Peak Driven by Enthusiasm Surrounding Nvidia

Stocks

Economic

Summary:

On Thursday, the S&P 500 reached an all-time high, propelled by a surge in tech stocks, notably influenced by Nvidia's impressive earnings reported the previous day.

The S&P 500 reached a historic peak on Thursday, fueled by a surge in tech stocks, particularly driven by Nvidia's remarkable earnings performance. Nvidia's stock soared by 16%, setting a new all-time high and making history with the largest single-session increase in market value ever recorded. This unprecedented growth added nearly $277 billion to the company's market capitalization, bringing its total value close to the $2 trillion mark. This monumental achievement overshadowed the previous record set by Meta Platforms Inc. just weeks earlier. S&P 500 Achieves Record Peak Driven by Enthusiasm Surrounding Nvidia_1

S&P 500 Achieves Record Peak Driven by Enthusiasm Surrounding Nvidia_1

Analysts such as Stacy Rasgon from Sanford C. Bernstein expressed confidence in Nvidia's financial prowess, highlighting the company's exceptional revenue generation and the promising outlook for future growth. The chipmaker's impressive results, particularly in the realm of artificial intelligence technologies, resonated well with investors and Wall Street, propelling the stock to new heights. Nvidia's optimistic guidance, fueled by increased AI investments from key clients like Microsoft and Meta, further solidified its position as a market leader.

Morgan Stanley analyst Joseph Moore underscored Nvidia's consistent ability to surpass already high expectations, especially in the context of the ongoing AI boom. The company's track record of exceeding revenue projections by over $2 billion in recent quarters has become a notable trend, reflecting the robust demand for AI-related products and services. This sustained momentum has led to a favorable valuation for Nvidia, making its shares increasingly attractive from a price-to-earnings perspective.

The broader market also witnessed a positive uptick, with the benchmark index posting a 2.1% gain driven by the tech sector. Nvidia emerged as the top performer, registering a remarkable 16.4% increase and setting a new record high. The chipmaker's substantial market value addition of nearly $277 billion on Thursday marked a significant milestone in market history. Concurrently, the Nasdaq Composite index rose by 3%, with major tech stocks contributing to the overall market rally.

Global markets echoed this bullish sentiment, with major stock indices in Japan and Europe hitting record highs on the same day. Tech stocks across various markets experienced upward movement, reflecting the widespread optimism surrounding the sector's performance and growth potential.

From a technical standpoint, Nvidia's exceptional market performance and the broader rally in tech stocks are indicative of the increasing importance of AI technologies in driving corporate growth and investor interest. The company's ability to consistently deliver strong financial results and exceed market expectations underscores the robust demand for AI-driven solutions across industries. This trend not only highlights Nvidia's leadership in the semiconductor space but also signifies the broader impact of AI advancements on the global economy and financial markets.

Nvidia's record-breaking market value surge and the subsequent rally in tech stocks underscore the growing significance of AI technologies in shaping the future of businesses and markets worldwide. As companies continue to leverage AI for innovation and growth, investors are likely to pay closer attention to firms at the forefront of this technological revolution, such as Nvidia. The remarkable performance of Nvidia and the tech sector at large serve as a testament to the transformative power of AI and its implications for the investment landscape moving forward.

Source: Yahoo Finance

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Alex

Bond

Indian government bond yields were little changed in early session on Friday as traders digested minutes of the Reserve Bank of India’s February meeting which showed that most members considered current interest rates as appropriate.

The benchmark 10-year yield was at 7.0723% as of 10:00 a.m. IST, following its previous close of 7.0682%.

“Minutes are slightly hawkish but are not adding any fresh concerns to the interest rate trajectory than what was said during the policy and with no supply in the next few weeks, bonds are consolidating,” a trader with a state-run bank said.

In the minutes released on Thursday, RBI Governor Shaktikanta Das said that at the current juncture, “monetary policy must remain vigilant and not assume that our job on the inflation front is over”.

The six-member Monetary Policy Committee (MPC), comprising three RBI and three external members, left the key repo rate unchanged at 6.50% for a sixth straight meeting.

The central bank has raised rates by 250 basis points since May 2022.

The RBI also reiterated its commitment to meet the 4% inflation target on a sustainable basis.

India bond yields little changed, focus on central bank minutes

India’s retail inflation eased to a three-month low of 5.10% in January, from 5.69% in December and 5.55% in November.

While inflation eased last month, it will be a slow grind back to the 4% midpoint of the RBI’s 2-6% target range and that suggests the central bank is unlikely to pivot yet.

Rate cuts will only materialise in the second half of the year, Capital Economics said. Meanwhile, US yields remained elevated, with the 10-year yield around the 4.35% mark.

Traders said a break could see a move towards 4.50%, leading to a selloff in local bonds.

Strong economic data and a higher-than-expected inflation reading in the world’s largest economy have pushed back imminent rate cuts hopes.

The odds of a Fed rate cut in May have tapered sharply to 24% from 38% last week and 84% last month, according to the CME FedWatch tool.

Source:BusinessRecorder

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Ukadike Micheal

Economic

Forex

Germany's fourth-quarter GDP contracted by 0.3%, signaling a potential recession—the first since the pandemic. The decline was in line with the initial estimate, driven primarily by a significant 1.9% slump in capital investment, while private consumption and government spending recorded marginal increases of 0.2% and 0.3%, respectively. Germany's Economy Experienced a Decline in Investment at the Conclusion of the Previous Year_1

Germany's Economy Experienced a Decline in Investment at the Conclusion of the Previous Year_1

This economic downturn underscores the prolonged weakness in Germany, causing growing concern among policymakers in Berlin. The government recently revised its 2024 growth forecast to a mere 0.2%, following a 0.3% contraction for the entire 2023. The export-dependent economy grapples with challenges such as weak foreign demand, elevated interest rates, the impact of disrupted Russian energy supplies, and geopolitical tensions. Additionally, internal issues, including disagreements within the coalition government and a court ruling disrupting spending plans, contribute to heightened uncertainty.

Germany's manufacturing sector, crucial for economic growth, has been in a protracted downturn. A recent survey indicated a further deepening of the retreat in February, with a significant drop in new orders both domestically and internationally.

The Bundesbank predicts the possibility of another GDP drop in the first quarter, potentially pushing the country into a recession. This scenario amplifies concerns about Germany's long-term prospects, marked by worries over excessive bureaucracy, an aging workforce, and insufficient investment in critical infrastructure and technologies. Economy Minister Robert Habeck emphasized the need for reforms to maintain Germany's competitiveness in a changing environment.

Looking ahead, anticipated rate cuts by the European Central Bank and its peers could provide some relief. Meanwhile, pay increases for workers and a slowdown in inflation are expected to stimulate private consumption. However, the economic challenges persist, prompting a broader discussion about Germany's future trajectory.

From a technical perspective, the economic struggles in Germany are likely to have ripple effects in the market. Investor confidence may wane due to uncertainties surrounding the country's economic outlook. The manufacturing downturn and reduced investment could impact various industries, potentially leading to job losses and reduced consumer spending.

Germany's economic woes, marked by a fourth-quarter contraction and the looming possibility of a recession, raise significant concerns. The intricate web of challenges, both internal and external, demands comprehensive reforms to secure the country's competitiveness. As the market watches for potential rate cuts and economic indicators, the impact of Germany's economic struggles will undoubtedly reverberate globally, influencing investor sentiment and market dynamics in the months to come.

Source: Bloomberg

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Forex

The yen is the worst-performing G10 currency this year, with a 6.3% slide on the dollar. The greenback is the best performer.

For the week the yen is down 0.6% on the euro, touching its weakest for three months on Thursday at 163.45 per euro EURJPY=. It dropped by the same margin on sterling GBPJPY=R to hit its lowest since late 2015 at 190.83 and made nine-year nadirs on the Australian AUDJPY=R and New Zealand NZDJPY=R dollars. AUD/

Yen moves against the dollar were more modest due to the risk its slide could prompt intervention in markets from Japan, with officials reminding traders they stand ready in recent days.

The dollar gained 0.2% to trade at 150.53 yen this week JPY=EBS. Moves in Friday's Asia session were small and trade lightened by a public holiday in Japan.

Investors can earn interest, or "carry", by borrowing yen around 0% and buying income-bearing assets in other currencies.

With Deutsche Bank's foreign exchange volatility index .DBCVIX collapsing to two-year lows and markets backpedalling on bets for deep rate cuts in the U.S., Europe and Britain - leaving yields elevated - the trade is profitable.

"There's a focus on carry while we're in a range-bound environment," said Bank of Singapore strategist Moh Siong Sim, noting that hopes for a yen rally had taken a hit from last week's data showing an unexpected slide into recession in Japan.

"We're at a point where there is not a whole lot of conviction in the currency world," he said, adding that carry trades did not seem "that compelling a story...other than for the carry itself."

For now, that seems motivation enough for investors.

At the two-year tenor, the gap in yield between Japanese and U.S. government bonds is more than 450 basis points JP2US2=RR. Positioning data shows yen shorts jumped last week.

Federal Reserve Governor Christopher Waller said on Thursday U.S. policymakers should wait for a few more months of inflation data before moving interest rates.

Elsewhere, the flow into higher-yielding currencies helped lift the Australian and New Zealand dollars. The kiwi NZD=D3 topped 62 cents and last bought $0.6202, shrugging off weak retail sales data as traders weigh a possibility that the central bank hikes interest rates next week.

The Australian dollar AUD=D3, which has edged above its 200-day moving average this week, rose 0.2% to $0.6570 on Friday for a weekly gain of 0.6%, its largest in two months.

The euro EUR=EBS is set for its largest gain in two months as well on the back of a steady reduction in the scale of interest rate cuts expected this year, with markets now pricing about 90 basis points of cuts from about 160 at the end of 2023. 0#ECBWATCH

Stronger-than-expected purchasing managers' surveys out overnight added to the case for caution in cutting rates.

The euro last bought $1.0823. The U.S. dollar index =USD was down 0.4% for the week at 103.91. Sterling GBP=D3 was up 0.5% on the week to $1.2664.

China's yuan CNY=CFXS has made a steady return since the Lunar New Year holiday break, barely moving this week at 7.1959 per dollar despite steep cuts to Chinese mortgage rates.

European Central Bank president Christine Lagarde and board member Isabel Schnabel are due to make public appearances later on Thursday.

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Warren Takunda

Central Bank

Traders' Opinions

Economic

In recent trading sessions, the U.S. Dollar has experienced a pullback, signaling a potential shift in its upward trajectory. While this downturn has been notable, analysts remain cautiously optimistic about the Dollar's prospects, suggesting that its recent weakness may be temporary.

Dollar's Recent Decline Expected to Be Fleeting_1

The Federal Reserve's stance on interest rates has been a significant factor influencing the Dollar's movements. Despite the Fed's confirmation of its caution regarding rapid rate cuts, the Dollar's weakening trend has persisted. This is particularly evident in the Pound to Dollar exchange rate, which has seen gains solidify above the 1.26 mark following the release of the Fed's February 01 policy meeting minutes.

Investors interpreted the minutes as indicating that a rate cut in March is unlikely, leading to a decrease in the probability of a 25 basis point cut by the June FOMC meeting from 100% to 90%. This adjustment in market expectations has contributed to the Dollar's recent decline.

However, it's essential to note that the Dollar's inability to advance post the Fed's minutes does not necessarily indicate a long-term trend reversal. Rather, it suggests a potential pause in the recent trend of hawkish repricing, which has been a primary driver of USD strength in 2024.

Analysts anticipate that the Pound will continue to strengthen against the Dollar in the near term, with the Dollar's rally in 2024 showing signs of losing momentum. This view is supported by expectations of fewer Fed rate hikes this year compared to initial projections, as the central bank balances its dual mandate of stable prices and maximum employment.

Looking ahead, GBP/USD may trade within a range of 1.2600 to 1.2660, with upward momentum potentially pushing towards major resistance at 1.2690. While the Dollar slipped overnight, overall movements remain subdued, indicating a period of consolidation in the currency markets.

It's worth noting that the Dollar's recent fluctuations are part of a broader trend characterized by periods of consolidation interspersed with sharp rallies. Despite recent weakness, the Dollar's overall trajectory remains upward, supported by the expectation of continued economic growth and potentially higher interest rates.

While there may be short-term challenges, such as the upcoming U.S. presidential election in November and the possibility of a shift in the Fed's monetary policy stance, the Dollar's long-term outlook remains positive. Key data releases and events in the coming weeks are likely to provide further clarity on the currency's direction, with the potential for further appreciation in the medium to long term.

In summary, while the Dollar's recent weakness may raise concerns among investors, it's essential to view these fluctuations within the context of broader market dynamics. With careful analysis and prudent decision-making, investors can navigate these uncertain times and position themselves for potential opportunities in the currency markets.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Commodity

Chicago corn and soybean futures edged higher on Friday, with bargain-buying lifting prices after both markets dropped to their lowest levels in three years, although plentiful supplies are likely to limit gains.

Wheat rose for a second session on supply concerns as potential US sanctions against top global wheat exporter Russia could hit flows.

“As has been the case for some time now, the principal cause of price declines remains the improved international production outlook, built upon expectations for large harvests in major grain exporters, including Brazil and Russia,” BMI, a unit of Fitch Solutions, said in a report.

“Meanwhile, the recent strength of the US dollar has also weighed on the prices of agricultural commodities.”

The most-active soybean contract on the Chicago Board of Trade (CBOT) rose 0.2% to $11.55-1/4 a bushel, as of 0346 GMT, having dropped 1.5% this week.

Corn added 0.4% to $4.20-1/4 a bushel, having gained almost 1% this week. Wheat, which is set for a weekly gain of 3.9%, was up 0.5% at $5.82-1/4 a bushel.

Corn and soybean prices dropped to their lowest levels since late 2020 on Thursday.

Expectations of higher corn and soybeans production in top South American producers - Brazil and Argentina - are weighing on Chicago futures.

Argentina’s corn and soybean crops continue to improve due to recent rains, the Buenos Aires grains exchange said on Thursday, with more rainfall expected in the coming days after wet weather conditions helped curb damages from a heat wave last month.

Bearish investors push US corn to lowest level since November 2020

Argentina’s Rosario Grains Exchange cut its estimates this week for the country’s 2023/24 soybean and corn harvests, but the 49.5 million metric tons of soy and 57 million tons of corn are still a huge improvement from the previous year.

Following a record-large US corn harvest in 2023, outlooks for rising grain stockpiles and falling Chinese demand for animal feed have spurred speculators to build massive net short positions in corn and soybean futures.

Source：Business Recorder

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Samantha Luan

Economic

The Nikkei share average rose about 2% to close at a record 39,098.68 points, above the previous intraday high of 38,957.44 points touched on the final trading day of 1989. On that day, the benchmark index closed at 38,915.87.Japan's stock market has climbed past its all-time closing high, surpassing the record level struck during the country’s late-1980s asset bubble after a 34-year wait.

The Nikkei hit an intraday high of 39,156.97 in trading on Thursday.

Reuters pointed out that the 34 years it has taken to regain its footing is a record for a major market and is a decade longer than Wall Street took to recoup losses from the 1929 crash and Great Depression.

For that, we can thank the very strong US dollar for much of the surge in the Nikkei and other measures of Japanese stock market activity and the five-year slide in the value of Chinese markets.

Nikkei and Topix have been standout outperformers in Asia Pacific, up more than 17% in 2024 after surging more than 25% in 2023 — their respective best annual gain in at least a decade. Wall Street is only up around 5% so far this year to Wednesday’s close. Reuters pointed out that the Nikkei's rally has defied a recession in Japan, wars in Europe and the Middle East, the global inflation shock, and a sharp rise in interest rates worldwide. The country’s trade exposure has helped insulate it from deteriorating domestic demand while a weak currency has boosted exporters' earnings.

While many analysts claim that Japanese listed companies are doing well (which many are, like Toyota), the improvements are coming from old-line companies (again like Toyota) and there’s a striking absence of the tech drive seen in the US, especially AI and companies like Nvidia. But there is a fleet of smaller chip-related stocks that have grabbed the eye of foreign investors (who have piled into the Tokyo market as China has slid into insecurity, deflation, and government attacks on foreign and local businesses). Stocks like Screen (up 69% year to date and a Nvidia wannabe), Tokyo Electron (shares up 50% year to date), and Advantest (also up 50% year to date).

By way of contrast, shares in Renesas Electronics Corporation (which has bid $9.1 billion for local/US stock Altium) are only up 0.14% year to date, even though they are a semiconductor maker. US analysts have noticed the bounce, and now Bank of America equity strategists have lifted their 2024 year-end forecasts for the Nikkei 225 to 41,000 from 38,500. They raised their forecasts for the Topix to 2,850 from 2,715.

The key, though, is the weakness of the yen, which has shed about 6% against the dollar so far this year and seems on track to drop to 33-year lows touched late last year. At 150.40 Thursday afternoon, it wasn’t far from that low of 151.95.

Most Japanese companies balance their 2023-24 accounts at the end of next month, and there is a growing feeling that for the third year in a row, corporate earnings could hit a new high.

This comes on the back of record quarterly earnings for the October-December period, which are up 45% from the same period a year earlier and are 14% higher than market forecasts, according to Goldman Sachs analysts.

It’s no coincidence that the three years of strong earnings also saw the yen fall 40% against the US dollar, and Chinese markets drop by around a third in the same time. The weaker yen has injected a dose of inflation into deflation-dominated Japan in the same time. Wages are rising faster than the CPI in some cases, and the Bank of Japan’s ultra-easy monetary policy stance and continuing spending by the central government can’t be ruled out as being very helpful to growth and the markets.

Three years ago, Japan was mired in deep deflation, but thanks to the surge in energy costs (and the rise in food and other commodity prices) since the Russian invasion of Ukraine two years ago, the CPI surged to a multi-year high of 4.3% in January 2023. It has since fallen back to an annual 2.6%, which, while lower, is still well ahead of deflation, as China now finds itself at the consumer and producer price levels.

Thoughtful western analysts also point to corporate governance changes in Japan driving buybacks and unwinding cross-holdings, unlike China where the government led by President Xi Jinping has been cracking down on business, tightening rules on information, and making it tougher for foreign investors (who withdrew more than $US140 billion in 2023).

Foreigners have switched a lot of that money into Japan, investing 6.3 trillion yen ($US42 billion) in the equity market last year. They added a net 1.16 trillion yen (more than $US10 billion) in Japanese shares last month.

And don’t underestimate the impact of Warren Buffett and his high-profile purchases of shares in the country’s five biggest trading houses – Mitsubishi, Mitsui, Itochu, Sumitomo, and Marubeni.