Asia Day Ahead: Nvidia set the backdrop for recovery, HSI at six-week high

Market Recap

Wall Street staged a last-hour bounce overnight on some last-minute dip-buying, just before Nvidia released its 4Q earnings and it paid off. The artificial intelligence (AI) darling easily beat both top and bottom-line expectations, while providing reassurances on its growth outlook with a higher-than-expected revenue forecast for the current quarter ($24 billion versus $22.17 billion consensus). Management guidance also suggests “continued growth in 2025 and beyond”. Despite the meteoric surge in its share price year-to-date, it is difficult to find fault with the results, as its share price surged almost 10% after-market to bring it back to near to record-high level.

Attention was also on the Federal Open Market Committee (FOMC) minutes overnight. The general caution among policymakers towards lowering rates too quickly may be unsurprising, given what we have heard from various Federal Reserve (Fed) speeches thus far. Nevertheless, rate expectations saw a slight recalibration to lean towards high-for-longer rates, with probability for a rate cut in May down to 28% from previous 32%. Initial market reaction to the minutes was bearish but eventually came short-lived, as focus were quick to revolve around Nvidia’s results.

US Treasury yields were broadly higher, with the two-year yields up 5.4 basis point (bp). The US dollar struggled however, closing slightly lower than where it started. For the Nasdaq 100 index, it is attempting to defend the key 50 level at its daily relative strength index (RSI) to keep the upward bias intact. Potential Fibonacci extension levels from its October 2022 bottom to July 2023 top suggest that the 17,214 level may have to give way in order for sellers to gain greater control while on the other hand, immediate resistance will be at its February top at the 18,014 level.

Asia Open

Asian stocks look set for a broadly positive open, with Nikkei +1.16%, ASX -0.27% and KOSPI +0.49% at the time of writing, with sentiments basking in the stellar results from Nvidia after-market. US futures were also bouncing higher, bringing about a more buoyant risk environment following recent caution. After recent 25 bp cut to China’s loan prime rate (LPR) failed to spur much market reaction, Chinese equities seem to find traction yesterday, as authorities moved to restore confidence with more regulatory efforts to stabilise markets.

Market participants have a series of flash purchasing managers index (PMI) figures in the region to look towards, with Australia’s composite PMI figure edging back into expansionary territory at 51.8 (previous 49.0), thanks to a further recovery in the services sector which offset the weakness in manufacturing. Japan continued to reveal subdued growth conditions however, with easing services activities and weaker-than-expected manufacturing numbers indicating a near-flat growth (composite 50.3) for January.

The Hang Seng Index (HSI) has managed to break above a near-term ascending triangle pattern for now, with its daily RSI edging above the 50 level as a sign of buyers taking back some control. Nevertheless, a series of resistance stands ahead to overcome, with the index now retesting the upper edge of its daily Ichimoku cloud resistance. With immediate support now at the 16,300 level, any further upmove may leave the 17,153 level on watch, which marked its year-to-date high.

On the watchlist: Lacklustre moves in the US dollar following Fed minutes

The US dollar remains in its downbeat state for now, as its daily RSI is back at its key 50 level on some near-term indecision. A crucial level of support remains at the 103.40 level, where a confluence of moving averages (100-day MA, 200-day MA) stands while indicating the low of its post-US consumer price index (CPI) surge. Failure for the support confluence to hold may pave the way towards the 102.30 level, while on the upside, its year-to-date high at the 104.60 level will be a target to overcome for buyers.

Wednesday: DJIA +0.13%; S&P 500 +0.13%; Nasdaq -0.32%, DAX +0.29%, FTSE -0.73%