SignalPlus Macro Analysis (20240424): Bad news is good news

"Bad news is good news" has returned once again. The slowdown in the April manufacturing PMI boosted risk market sentiment, with the overall figure falling below 50, lower than the expected 52. Weak performance in new orders (49.5 vs. 52.6), output (51.1 vs. 54), and employment (51.9 vs. 52.2) were the main reasons. Subsequently, the services PMI also unexpectedly softened to 50.9, below the expected 51.7, with significant declines in new business and employment (47.3 vs. 51.1), the latter hitting its lowest level since the pandemic.

U.S. Treasury bonds rebounded accordingly, with the 2-year yield showing a bullish steepening trend, retreating from around 5% to 4.92%. The U.S. dollar also weakened, with EUR/USD rising above 1.07, while USD/JPY remained below 154.85. The weak economic data reignited hopes for rate cuts, with tech stocks leading the market rebound, gaining 1.5%.

More notably, official comments from S&P economists indicated that recent economic activity "may slow in the coming months, as new business inflows in April declined for the first time in six months," which "has prompted companies to cut jobs at a pace not seen since the global financial crisis (excluding the pandemic period)." This is indeed a sobering outlook.

Additionally, as a further sign of short squeezes, Tesla rose 13% in after-hours trading following its Q1 earnings report, despite profits, revenue, and margins all falling significantly below market expectations. The company's global inventory surged from 15 days to 28 days, signaling slowing demand. However, judging by the price action, investors were well-prepared for the weak earnings.

Elsewhere, some optimism has re-emerged in Asia, with the HSI and HSCEI outperforming most developed market indices last week—a rare occurrence in a long time. Since the Lunar New Year, weekly southbound inflows into Hong Kong have been positive except for one week, indicating that the regulatory authorities' actions following the supportive policy shift earlier this year have indeed had some tangible positive effects.

Cryptocurrency prices remain strong, with BTC approaching $67,000 again, and altcoins rebounding 10-20% over the past week. While some may view the halving as the primary positive driver, we believe the repeated dips to the $60,000 level have cleared out many short-term longs, intensifying the current short squeeze. Prices are expected to reflect the recovery in stock market sentiment in the coming days, up until the PCE data release. If the data weakens, it could serve as a catalyst for BTC to reclaim $70,000—here's hoping for good luck!