In May 2024, minutes from the recent Federal Open Market Committee (“FOMC”) meeting suggested that Federal Reserve officials grew more concerned about inflation [1], with members indicating that they lacked the confidence to move forward on interest rate reductions and apprehension from policymakers about when it is time to ease.

However, there have been some incremental signs of progress on inflation as the published US Consumer Price Index (“CPI”) report for Apr 2024 shows core inflation falling to 3.6% YoY from 3.8% in the previous two months, in line with consensus forecast [2]. The Apr 2024 inflation print ends three consecutive months of upside surprise to core inflation, to the relief of markets.

President Joe Biden announced that he is raising tariffs on Chinese imports valued at $18 billion in several sectors considered vital for national security [3]. This move aims to hinder Beijing’s advancement in crucial technologies and encourage the development of these technologies within the U.S. instead.

As trade tensions escalates, China sold a record amount of Treasury and US agency in the first quarter, signalling the Asian’s nation’s move to diversify away from American assets [4]. Based on the official Treasury International Capital (“TIC”) data from the US Treasury department, China is the second highest holder of US Treasury Bonds, behind Japan, at $767 Billion. However, over the last 12 months China sold more than $100 Billion of US Treasuries, with accelerating selling over the last quarter [5]. In addition, China’s official Treasury holdings can be tracked via Belgium holdings, also have been decreasing.

For commodities, we stay positive on gold as the current market conditions, nestled with inflation stickiness, problematic public deficits, geopolitical dangers, and diversification by central banks/monetary authorities continues. A key driver of gold price has been the demand from central-banks, particularly demand from non-Western aligned countries of the Global South. In 2023, global central-bank purchases of gold amounted to be over 1000 tonnes, double the 2010-21 average [6]. Aside from gold, we see further upside in copper amidst rapidly growing demand and sluggish supply. The demand growth for copper is set to double due to the electrification of the world, including electric vehicles, solar panels, wind farms, but also military usage and data centres [7].

Views on Fixed Income

Recent US economic data supports the view of a soft landing in the US economy. The labour market appears to be in better balance, contributing less pressure to inflation. Earlier this month, the labour report for Apr 2024 showed a smaller-than-expected increase in employment growth, a higher unemployment rate, and wage growth that is at its lowest level since June 2021 [8]. Investment grade (“IG”) bonds remain our preferred asset class, as UBS expects the yield on the 10-year US Treasury to fall to 3.85% by year-end [9],  providing investors with capital gains along with current attractive initial yields. We also value IG bonds in a portfolio context, given their potential for outsized returns if there is a growth misstep or increased concerns regarding geopolitical uncertainty.

Views on Equities

The performance of the US technology sector continues to dominate investor attention, especially as Nvidia reported another strong set of earnings results. Nvidia reported $6.12 earnings per share and $26 billion of sales for the three-month period ending 30 Apr 2024, shattering mean analyst forecasts of $5.60 and $24.59 billion, according to FactSet [10].

We believe that tech equities have more room to run as US tech earnings have been among the strongest in the first-quarter reporting season [11], with revisions in the sector outpacing the rest of the market. We expect sustained earnings growth for AI-related companies in the years ahead, fueled by solid AI capital expenditure and monetization progress. Although our outlook on AI trend remains highly positive, we maintain our preference for large tech with more stable fundamentals and market positioning. Investors can consider semiconductor ETFs which offer a diversified portfolio of globally leading semiconductor companies and can be an opportunity to capitalize on the burgeoning semiconductor industry.

For both HK and US, volatilities have been edging lower. S&P VIX Index (“VIX”) fell to 11.52, which marked its lowest point since Nov 2019, when the index dipped to 11.42 [12]. It may be a good time to put on some hedges, especially hedges for geopolitical risk, Fed decisions (any surprises) and the US presidential election.

Moving to Asia, Goldman Sachs (“GS”) analysts stated that China’s underlying recovery fundamentals of the Chinese economy remain largely intact: manufacturing and exports are strong, increasing economic growth; the property market is notably weak, with price declines rising; household consumption is stable. Taken together, real GDP growth remains on track for the government’s ‘around 5%’ full-year target [13]. The overall sentiment and interests on China seemed to continue to improve, we believe that investors can expect improved returns from China equities. This is in line with our sentiments in Feb 2024 where we expected a reversal with regards to the China stock markets. Since then, the Hang Seng Index (“HSI”) has risen 17.1% from 15,566.21 (1 Feb 2024) to 18,230.19 (30 May 2024).

Views on Currency

In May 2024, the Dollar Index (“DXY”), a popular measure of the Greenback’s value against a basket of 6 major currencies, eased from a high of 106.22 (30 Apr 2024) to 104.34 (15 May 2024), a five-week low [14].The performance of the Greenback was predominantly influenced by the publication of the FOMC Minutes of the 1 May 2024 meeting, in which the Federal Reserve (“Fed”) maintained its Fed Fund Target Range unchanged at 5.25%-5.50%, as broadly anticipated.

As the Swiss National Bank and Riksbank of Sweden lead interest rate cuts among G10 central banks, GS expects the European Central Bank (“ECB”), Bank of England, and Bank of Canada to start cutting rates in Jun 2024 [15]. In an interview with the Financial Times, ECB Chief Economist, Phillip Lane said that “there is enough in what we see to start interest rate cuts”. [16]

Despite a lower close to the Dollar Index, the USD/JPY pair climbed to 157.00 (24 May 2024). Japan’s inflation in Apr 2024 slowed, contributing to the Yen’s weakness. Japan’s Annual Core Inflation eased to 2.2% in Apr 2024 from 2.6% in Mar 2024 [17]. The Yen has been gradually depreciating, not just against the US Dollar, but other crosses as well, making it more difficult for the Bank of Japan (“BOJ”) and/or Ministry of Finance (“MOF”) to justify intervening again. Here is our perspective:

  • Japanese Yen (“JPY”): JPY remains a concern despite views that the U.S. would eventually cut rates which would help against the JPY weakness. We think JPY will continue to trade on the weaker side but could be limited due BOJ resolve top stop further weakness in the currency.

  • Euro (“EUR”): The common currency is not expected to significantly decline following expected rate cut in Jun 2024. Rather, the moderate rebound in manufacturing is likely to offset any headwinds arising from the monetary policy adjustment. We expect the Euro to continue to be range bound.

  • British Pound (“GBP”): UK inflation fell to 2.3% year-on-year in Apr 2024, a figure that was higher than the market and the Bank of England were expecting (2.1%) [18]. We expect the currency to trade with a mild positive bias, but it is unlikely that it would breach the 1.3 range.

  • Swiss Franc (“CHF”): Expect the Swiss franc to remain well supported against the backdrop of a highly uncertain global macro-outlook. A retracement in global yield levels should similarly help the currency, while also providing a hedge against geopolitical uncertainty.


[1] US Fed’s rate meeting minutes show growing inflation concerns (

[2] April 2024 CPI Report: Inflation Is Trending In The Right Direction | J.P. Morgan (

[3] Biden to increase tariffs on $18 billion in Chinese imports in a new warning to Beijing | CNN Politics

[4] China Sells Record Sum of US Debt Amid Signs of Diversification (

[5] The Inflationary Spike Unfolding While China Dumps Treasuries | Seeking Alpha

[6] Conviction Thinking: Geopolitics should continue to drive the gold price ahead of the US election | Societe Generale

[7] Copper is the new oil, and prices will soar 50% to $15,000, analyst says | Fortune

[8] April jobs report shows hiring, wage growth slow as unemployment unexpectedly jumps (

[9] 16 May 2024 – UBS Daily Asia House View

[10] Nvidia Earnings: Stock Rallies As AI Giant Reports 600% Profit Explosion, Stock Split (

[11] 23 May 2024 – UBS Daily Asia House View

[12] Market volatility (VIX) drops to its lowest level in 4 years (

[13] 27 May 2024 – Premia Weekly Digest

[14] US Dollar Forecast: DXY recovers ground as expectations of a Fed June rate cut diminish (

[15] 28 May 2024 – Daily Research Update | LGT

[16] European Central Bank is ready to start cutting interest rates, says chief economist (

[17] Yen Weakens to 157 per USD, Intervention Rhetoric Ramps Up | Myfxbook

[18] Pound Sterling Jumps against Euro, Dollar After UK Inflation Beats Expectations (

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