Global Market Quick Take: Asia – January 26, 2024

US Equities: The S&P 500 added 0.5% to 4,894, marking a new high for the fifth consecutive day. IBM surged 9.5% on an upbeat sales and cash flow outlook for 2024 and robust demand for its Watsonx AI platform. American Airlines soared 10.3% after reporting earnings beating estimates. A stronger-than-expected Q4 GDP, coupled with a rise in initial jobless claims boosted investors’ confidence of a resilient economy and cooling inflation. The Nasdaq 100 was dragged by a 12.1% drop in Tesla amid a slowing sales outlook for 2024, edging up 0.1% to conclude the session at 17.517. Intel plummeted over 10% in the extended hours, after releasing guidance for Q1 adjusted EPS at $0.13 and sales at $12.2 billion to $13.2 billion, versus analyst projections of $0.34 and $14.3 billion respectively.

Fixed income:  Treasury yields fell across the curve following a 25k rise in the initial jobless claims to 214k. The $41 billion 7-year Treasury note auction met with robust demand. The 10-year yield fell 6bps to 4.12% while the 2-year yield dropped by 9bps to 4.29%.

China/HK Equities:The Hang Seng Index and the CSI 300 Index both extended gains by 2%. following the prior day’s larger-than-expected reserve requirement ratio cut. The PBoC’s easing of restrictions for developers on the usage of loans collateralized by commercial real estate on Wednesday and the supportive statement made by the National Administration of Financial Regulation (NAFR) toward the property sector propelled Chinese developers higher. Further, shares of central SOEs also benefited from the announcement from the State-owned Asset Supervision and Administration Commission (SASAC) of the inclusion of the share price performance as an indicator for evaluating SOE management’s performance. PetroChina, China Communications Constructions, CRRC, China Railway, and Metallurgical Corp surged around 8%. On the other hand, Chinese EV stocks declined following Tesla’s warning of slower volume growth in 2024.

FX:Dollar gathered some gains in the late session, despite Treasury yields pushing lower as bond traders focused on the disinflation aspect of the report and bought the dips. Pressure on yields and dollar could increase if December PCE comes in softer than expectations today. CHF and EUR were the underperformers in G10, with USDCHF rising to 0.8680 with SNB setup turning bearish for the franc as FX interventions are reduced. EURUSD slipped to lows of 1.0822 on increased pricing of April cut after ECB’s less forceful pushback. USDJPY wobbled around 147.50 but CAD got some support from rising oil prices after a dovish BOC a day before. USDCAD slid back below 1.35 and 50DMA at 1.3455 is coming in focus. NOK also benefitted from oil prices with EURNOK sliding sharply to 11.32 from 11.40 breaking below the 23.6% fibo retracement.

Commodities: Crude oil prices rose 3% to 7-week highs as the US economy showed faster than expected growth, and China stimulus announcements continued to boost sentiment. With supply side remaining mixed on non-OPEC supply offsetting risks from OPEC+ production cuts or geopolitical tensions, focus is likely to stay on the growth outlook. Gold saw mild gains as Treasury yields slipped, but Silver outperformed as it attempted a break of $23 resistance. Metals were sideways after the initial run higher on China stimulus announcements.

Macro:

• US Q4 GDP came in hot, with annualized growth of 3.3%, well above the expected 2.0% and also above the Atlanta Fed tracker of 2.4%, but easing from the Q3 pace of 4.9%. Inflation metrics however cooled for the quarter, boosting soft landing hopes again. PCE eased to 1.7% from 2.6% while the core PCE printed 2.0%, in line with expectations and the prior. Focus now turns to December PCE due today and a preview can be found here. March rate cut pricing is now back to 50%, and could increase further if PCE comes in softer than expected.
• ECB kept its interest rates unchanged as widely expected, but the pushback on April rut cut expectations was less direct and positive direction was noted on wages, although a data-dependent approach continued to be emphasized. President Lagarde noted that it is “premature” to talk about rate cuts, adding that the ECB will be data-dependent and not fixated on the calendar. Odds of April rate cut have picked up to over 90% from less than 70% at the start of this week.
• US jobless claims for the week of Jan 20 rose to 214k from 189k, above the expected 200k. The 4-week average ticked down to 202.25k (prev. 203.75k). Continued jobless claims jumped to 1.833mn (exp. 1.828mn) from 1.806mn.
• China’s National Administration of Financial Regulation (NAFR) said in a press conference on Thursday afternoon that supporting the property sector is an imperative responsibility of the financial sector because the former has an important impact on the economy as well as the livelihood of the people. The NAFR pledged to guide financial institutions to effectively utilize existing financial support policies to maintain overall stability in credit provision to the property sector. The announcement reflects the Chinese authorities’ desire to stabilize the property sector.
• German Ifo Expectations was soft accompanied by some downbeat commentary. Headline eased to 85.2 from 86.3 with both current conditions down to 87 from 88.5 and expectations down to 83.5 from 84.2.

Macro events: US PCE deflators (Dec), US pending home sales (Dec), Germany consumer confidence, France consumer confidence, UK GfK consumer confidence, Japan Tokyo CPI, Bank of Japan monetary policy meeting minutes (Dec), Singapore industrial production, Australian markets closed for Australia Day holiday

Earnings: Christian Dior, American Express, Caterpillar, Colgate-Palmolive

In the news:

• Evergrande case could test China-Hong Kong insolvency arrangement (Nikkei Asia)
• Intel forecasts quarterly revenue below estimates, stock falls (Reuters)
• IBM shares soar to more than 10-year high on rosy AI outlook (Reuters)
• LVMH grows sales as luxury shoppers show resilience (Reuters)
• Visa's weak second-quarter revenue forecast clouds profit beat, shares slip (Reuters)
• Chinese retail investors hit by big losses in ‘snowball’ derivatives (FT)
• Lithium price plunges on slowing Chinese demand for electric vehicles (FT)

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

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