BoJ Holds, China Eyes Stimulus

Equities Positive with ECB on the Horizon 

European stock markets tentatively tried to rise early Tuesday after a generally positive session on Monday. Futures were looking quite upbeat but the cash open witness a sharp pullback in the DAX and FTSE, which couldn’t break 7,500. Asian equities firmed broadly led by Hong Kong as China was said to be mulling 2 trillion yuan in stimulus to prop up markets. The Bank of Japan left policy rates unchanged, which helped nudged the yen to a week-high and cooled Tokyo’s recent equity market surge. Oil prices rose after fresh British and US strikes on Houthi sites in Yemen. ECB meeting on Thursday is starting to come into view. 

New Heights 

The Dow Jones broke 38,000 and achieved a fresh all-time high, whilst the S&P 500 rose 0.22% to 4,850, also a new record. Yardeni: “Now that investors’ recession fears have abated, they’re focusing on company fundamentals .. The possible result: an exuberant meltup phase, which might already be under way and might become irrational .. funded by money moving from interest-paying vehicles into stocks and bonds.” BofA notes that breadth however is not good, with only the top 2 deciles of S&P 500 market cap green YTD. Meanwhile hedge funds are shorting and retail is not getting in on this wave…odd combination. Small caps played some catchup but continue to lag - the Russell 2k added 2% to trim YTD losses to 2%. 

Bad Choice Road? 

Tesla declined further, taking its YTD loss to almost 16% as MS (Jonas) cut its price target, as well as estimates for EPS, margins, pricing and cash flow ahead of earnings tomorrow. “Global EV momentum is stalling. The market is over-supplied ...Fleets are cutting EVs.” United Airlines saw its shares jump after a bullish analyst call. Netflix reports Q4 subscriber figures today as part of its earnings update. Has momentum from the forecast-beating prior quarter continued? NFLX is emerging from the streaming wars as the champ.  

BoJ Holds 

The yen rose as the Bank of Japan left rates unchanged but talked up progress on achieving its inflation target and sounded optimistic on wage negotiations taking place this spring. The BoJ left its short-term rate at 0.1% and yield curve control envelope unchanged. April is the consensus now, though the BoJ did marginally lower its inflation outlook for fiscal 2024. The yen rallied to its best in a week, with USDJPY dipping below 147. 

But it was not a mere yen move - sterling and the euro also rose against the dollar as it was offered across the piece, DXY futures bouncing off the 50-day line to strike a fresh one-week low.