Weekly Market Recap: Volatility In Hong Kong, US Earnings Surge, Fed Influences Bonds

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By Ronald Tech

Market Insights: Hong Kong Volatility, US Earnings Surge, Fed Influence

Hong Kong Stock Volatility

Last week, the Hong Kong stock market experienced a tumultuous ride as the HSI struggled to maintain support at 15500 points. Despite a relatively strong performance in peripheral markets, weak economic expectations and investor sentiment dragged down A-shares and Hong Kong stocks. With the Chinese Spring Festival approaching, market participation remains low amidst pressure and uncertainty.

US Stock Market and Earnings Surge

Opening higher but then fluctuating, the US stock market closed with a long positive line above the EMA20 day average. While interest rate expectations were suppressed by the Federal Reserve’s decision to keep rates unchanged in January, the ongoing earnings season provided a boost. With 25% of companies reporting actual earnings for 2023Q4, 69% have exceeded expectations for earnings per share, fueling optimism for the market’s direction.

Fixed Income and Fed Influence

Following the Federal Reserve’s decision to maintain the federal funds rate, Chairman Powell’s hint that a rate cut in March is unlikely sent a hawkish signal impacting future expectations. Bond trading diverged as derivatives markets bet on a larger rate cut, while regional bank operating risks intensified risk aversion. The US Treasury’s decision not to increase the issuance scale of long-term bonds next year reversed market expectations, driving long-term bond prices. Long-term rates, including the 10-year, fell sharply compared to short-term rates.

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