Global Market Quick Take: Asia – February 9, 2024

US Equities: The S&P 500 reached 5,000.40 before pulling back to settle just a touch below the 5,000 mark at 4,998, 0.1% higher than the day before. The Nasdaq 100 gained 0.2% to reach 17,783. ARM jumped 47.9% after stating a strong outlook in AI chips. Walt Disney surged 11.5% following an earnings beat and upbeat guidance. PayPal plummeted 11.2% after providing an outlook below expectations. In extended hours, Expedia plunged more than 13% after reporting Q4 gross bookings missing estimates and announcing a CEO change. Pinterest dropped by as much as 23% before paring all losses and then plunged again, trading around 10% lower after reporting Q4 revenue of $981 million, below the median forecast of $990 million, and Q1 revenue guidance between $690 and $705 million, versus analyst projections of $702 million.

Fixed income:  Treasury yields edged up modestly by around 3bps across the yield curve, with the 2-year yield at 4.45% and the 10-year yield at 4.15% at the close. The $25 billion auction went well, benefiting from robust demand from investors.

China/HK Equities: The Hang Seng Index extended its retreat, falling 1.3% to break below 16,000 to settle at 15,878. China’s CPI deflation deepened and Alibaba plunged 6.1%. Alibaba reported in-line quarterly results but maintained a price-competitive strategy and adopted an aggressive investment plan for Taobao and Tmall group of businesses, both may impact profitability.  Meanwhile, Chinese developers gained, following news banks vamped up lending to selected quality developers. The CSI 300 Index continued to rally, adding 0.6% on the last trading day before the six-trading-day-long Lunar New Year holiday.

FX: The dollar showed some strength earlier in the US session on a lower jobless claims print and hawkish Fedspeak but reversed later. We delved into the USD Smile theory and other reasons that could keep the dollar supported for now in this FX 101 article. Yen weakness came to the forefront again, seemingly an over-reaction to BOJ Uchida’s comments that continuous interest rates are unlikely. USDJPY broke past 148.80 resistance to highs of 149.48. Uchida appears in parliament again today, and focus later turns to US CPI revisions that have been highlighted by Fed’s Waller earlier. EURUSD remains capped under 100 DMA but the slide to sub-1.0750 was reversed. AUDUSD also remains below 100 DMA, and slipped back below 0.65 as AUDNZD extended its decline below 1.07 to reach 1.0650.

Commodities: Crude oil prices rose over 3% yesterday as Israel rejected the peace offer from Hamas. Brent settled above the $80-mark, while Natural gas fell further to a three-year low after slipping below $2 earlier with milder weather forecasts and weekly storage report coming in bearish. Gold was stable but Silver rose back above $22.50 and Platinum moved ahead of palladium for the first time in over five years, driven by its growing use in auto catalysts for gasoline-powered cars.

Macro:

• US jobless claims for the week ending February 3rd fell to 218k from the upwardly revised 227k, falling for the first time in three weeks and coming in just short of the 220k estimate. This raises the question about how recent layoff announcements, and also the upturn in both the Challenger survey’s measure of layoff announcements and the official state WARN notices of mass layoff and plant closures could be reconciled. As for the Fed, May rate cut is also now priced in with less than 75% probability.
• Fed’s Barkin (voter) said that he wants to see a broadening in forces lowering inflation and he wants to see rents and service prices cool more, which will give them the confidence to cut. He also said that he would be cautious of January NFP report due to seasonals. Collins (2025 voter) said her baseline is similar to the December SEPs for 75bps of cuts in 2024.
• China’s CPI deflation deepened to -0.8% Y/Y in January (consensus -0.5%, prior -0.3%) party due to last year’s Lunar New Year being in January but not this year. A larger-than-expected 5.9% Y/Y decline in food prices also contributed to the downside surprise. Core CPI fell to 0.4% in January from 0.6% in December. Meanwhile, the PPI deflation moderated to -2.5% Y/Y from -2.7%.
• ECB’s Lane said that they need to be further along in the disinflation process before being sufficiently confident that inflation will hit the target in a timely manner and settle at target sustainably.

Macro events: China Aggregate Financing (Jan, expected to be released between Feb 9 and 15), German CPI (Final), Canada Employment, US CPI Seasonal Factor Revisions. Speakers: ECB’s Cipollone, Fed's Logan

Earnings: PepsiCo, Hermes, Tokyo Electron, Enbridge, Recruit, Mitsui Fudosan, Daiwa House Industry, Mitsubishi Estate, Shiseido.

In the news:

• Expedia Falls on Sudden CEO Change, Holiday Bookings Miss (Bloomberg)
• Pinterest Follows Snap in Posting Disappointing Revenue (Bloomberg)
• BOJ's Uchida rules out large interest rate hikes (Nikkei Asia)
• Yellen Eyes Nonbank Mortgage Lenders, Warns of Potential Failure (Bloomberg)
• German bank PBB says it can cope with US real estate troubles as shares slide (Reuters)
• Biden Knowingly Kept and Shared Classified Material, Special Counsel Concludes (WSJ)
• SoftBank posts first quarterly profit in over a year on bull market (Nikkei Asia)
• China’s Xi Jinping hails progress in integrating Hong Kong and Macau in speech ahead of Lunar New Year (SCMP)
• Chinese listed companies pledge to 'enhance corporate quality' follow premier's cue with buyback plan (Nikkei Asia)
• Modi's BJP to win India's 2024 polls, seat share may fall: survey (Reuters)

For all macro, earnings, and dividend events check Saxo’s calendar.

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