ASX 200 Surges as Tech Sector Soars on the Influence of NVIDIA

Highlights

• China experienced a 0.7% year-over-year decline in house prices in January.
• The ASX 200 saw gains driven by tech stocks, signaling a potentially favorable conclusion to a volatile week.
• Early advances in the Hang Seng Index were overturned as the Year of the Dragon rally lost momentum, reflecting uncertainty about the Chinese economy.  

China Property Prices Decline Continues

In January, house prices in China saw a further decline of 0.7% compared to the previous year, following a 0.4% decrease in December. Investors reacted positively to these figures, which aligned with expectations.

Recent measures by the People's Bank of China (PBoC) aimed at supporting the real estate market likely influenced investor sentiment. This week, the PBoC reduced the 5-year loan prime rate by 25 basis points to 3.95%, indicating efforts to revive the struggling real estate sector. The PBoC's cut in 5-year mortgage rates could have a significant impact on market sentiment towards real estate.

However, there are expectations in the market for fiscal stimulus to stimulate the broader Chinese economy, which could potentially change the current scenario. Nevertheless, concerns persist regarding demand, particularly as some economies face technical recessions.

The AUD/USD pair responded to these developments, rising from $0.65649 to a high of $0.65740 during Friday's session. Additionally, the appetite for riskier assets was fueled by positive sentiment, often referred to as the "NVIDIA Effect."

On Friday morning, the AUD/USD pair was up by 0.24% to $0.65725.

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NVIDIA's Performance Boosts ASX 200

On Friday, the S&P ASX All Technology Index (XTX) saw a 1.41% increase, with investors further reacting to NVIDIA's earnings report from Wednesday. NVIDIA's stock surged by 16.40% on Thursday, leading to a 2.96% rise in the Nasdaq Composite Index and a 2.11% increase in the S&P 500. By midday Friday, the ASX 200 was up by 0.42%.

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Australian tech stocks saw movement following overnight gains in the Nasdaq.

However, the Hang Seng Index failed to capitalize on the overnight gains in the US equity markets. During the morning session, the Hang Seng Index experienced a 0.37% decline, erasing early gains. The Hang Seng TECH Index contributed to these losses, dropping by 1.24%. Nonetheless, the real estate sector helped mitigate the downside, as indicated by the 0.33% increase in the Hang Seng Mainland Properties Index following the release of mainland house price data for January.

Other Updates

The USD/JPY pair remained in negative territory amidst speculation regarding a potential shift by the Bank of Japan away from negative interest rates. On Friday, the USD/JPY pair was down by 0.05% to 150.438.

However, the downside was limited, with a departure from negative rates contingent upon the outcome of wage negotiations. These negotiations could conclude before the Bank of Japan's monetary policy decision on March 19, 2024. A significant increase in wages could pave the way for the Bank of Japan to raise rates during the March meeting. However, favorable macroeconomic conditions are necessary for the hawkish stance to prevail during the meeting.

USDJPY Daily Chart 230224