DAILY MARKET NEWS - 05-03-2024

Ariff Azraei

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China has set an ambitious 2024 economic growth target of around 5%, demonstrating a continued prioritisation of growth despite challenges from its property crisis and high local government debt. The government plans to moderate fiscal stimulus through deficit spending and issuing special bonds, while keeping monetary policy prudent and raising defence spending. Premier Li emphasised transforming the economic model and boosting advanced technologies like AI and quantum computing to enhance technological competitiveness, which could boost specialisation and attract foreign money back into its economy. However, the lack of concrete reform details and continued state interventionist approach may disappoint foreign investors looking for more market-oriented policies.


The US stock market ended slightly lower on Monday as Apple's antitrust fine weighed on the tech sector and prompted investors to take profit off tech stocks at a high valuation, causing spillovers in Asian markets, with Japan, South Korea, and Hong Kong's tech sector particularly affected. Tesla's stock fell over 7% after its China sales dropped in February due to slowing demand and increased competition in the EV market.


Gold prices jumped near an all time high on Tuesday as weak U.S. economic data and hopes for lower interest rates boosted demand for the precious metal as risk off equity gained momentum. Investors were also waiting for more insights from the Fed Chair's two day testimony and the upcoming jobs report. Despite some selling pressure from gold ETFs, the market sentiment was still positive and bullish for gold.


China’s economic transformation plans failed to boost investor confidence, and OPEC+'s extended output cuts of 2.2 million barrels per day until June had little impact on the global supply and demand balance. China set a modest growth target for 2024 and vowed to lower its fossil fuel consumption while also increasing its domestic oil and gas exploration and development. Analysts expected oil supply to still exceed demand in the second quarter due to weak refinery demand and rising non-OPEC output.


The dollar slipped against the euro but gained against the yen and the franc, while Bitcoin surged to a new high above $65,000. Slight movement in the dollar and a large uptick in derivatives suggest equity risk-offs or a strong expectation of rate cuts, pricing in lower future dollars. The market will be watching the U.S. Fed testimony, the U.K. budget, the ECB meeting, the U.S. payroll data, and the political developments in China and the U.S. for clues on the direction.