Daily Market Outlook - Thursday, Feb. 19

The MSCI Asia Pacific Index saw a 0.4% uptick, with South Korea’s Kospi hitting a new all-time high. This rally mirrored the positive momentum on Wall Street, where the S&P 500 gained 0.6% and the Nasdaq 100 climbed 0.8% on Wednesday. Meanwhile, the Australian dollar strengthened following robust employment data, and oil prices remained steady after experiencing their biggest single-day surge since October. Tech stocks made a strong comeback, signalling that concerns about AI-related disruptions might be easing. Many investors saw the situation as an opportunity to buy, further buoying market sentiment. Adding to the optimism were reports that OpenAI is close to wrapping up the initial phase of a fundraising round that could push its valuation beyond $100 billion. So far this year, the MSCI Asia Pacific Index has risen about 12%, led by South Korea's Kospi, which has surged over 30%. In contrast, U.S. stocks have shown little movement, with the S&P 500 remaining largely flat since late December. Samsung Electronics saw its stock jump as much as 5.4% on the Korea Exchange after a three-day holiday break. This movement came on the heels of reports suggesting that Samsung is negotiating prices for its latest AI-targeted memory chip, which could be priced up to 30% higher than its predecessor. Adding to the upbeat mood was the buzz around OpenAI. The company behind ChatGPT is reportedly on track to achieve a valuation exceeding $850 billion once its latest funding round is finalised, according to insiders. Due to the Lunar New Year celebrations, markets in mainland China, Hong Kong, and Taiwan remained closed. The Australian dollar gained against all major currencies after employment data revealed the jobless rate holding steady at 4.1%, defying predictions of a slight increase to 4.2%. The currency rose as much as 0.4%, reaching 70.71 U.S. cents. Gold prices held steady, hovering near $4,970 an ounce, as bargain hunters stepped in following a two-day decline. Over in Japan, demand for a 20-year government bond auction fell below its 12-month average. This dip came as lower yields—following the election victory of Prime Minister Sanae Takaichi—dampened investor interest.

The key takeaway from the January FOMC minutes was that ‘several participants’ supported guidance suggesting potential rate hikes if inflation remains above target. However, the official statement took a more neutral tone, indicating no majority consensus. The minutes revealed a hawkish bias, highlighting a high bar for further rate cuts during Powell’s remaining meetings as Chair. Further disinflation progress is required to justify cuts, with the staff projecting stronger GDP growth and slightly higher inflation, warning of persistent inflation risks. Labour market conditions also remain crucial. While most participants saw signs of stabilisation and reduced downside risks, concerns lingered over potential sharp increases in unemployment, despite recent strong payroll data.

Next week’s macro data is relatively second-tier. In the US, key releases include regional Fed surveys, factory orders (Mon), consumer confidence (Tue), and January PPI (Fri), with a focus on signs of sentiment/activity improvement after recent rate cuts. The UK features the CBI retail survey (Tue), the Lloyds Business Barometer, and GfK consumer confidence (both Fri). In the Eurozone, attention is on the German Ifo survey (Mon), the final January CPI (Wed), and money/credit data alongside confidence figures (Thu). Central bank speakers include Lagarde (Mon), Bailey at TSC (Tue), and several BoE members, with Taylor (Mon), Lombardelli (Thu), and Pill (Fri) offering insights into employment and inflation trends.