Global Market Quick Take: Asia – January 30, 2024

Macro 5 minutes to read
APAC Research

Summary:  Both the S&P 500 and the Nasdaq 100 reached new highs, closing at 4,928 and 17,596, respectively. Consumer discretionary stocks outperformed, with Tesla rising over 4%. Microsoft and Alphabet are set to release their quarterly earnings reports today. The 10-year yield dropped to 4.07%, following the Treasury Department's announcement of smaller-than-expected funding needs. The dollar started to weaken, edging higher on escalating geopolitical concerns, but gains were cut short by the drop in yields. Oil prices dropped slightly overnight as Iran denied having anything to do with the weekend attack on a U.S. base in Jordan. In Hong Kong, China Evergrande Group entered into the winding-up process.


 The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

US Equities: Both the S&P 500 and the Nasdaq 100 reached new highs, rising 0.8% and 1% to close at 4,928 and 17,596, respectively. Among the 11 S&P 500 sectors, consumer discretionary led the market benchmark's advance, with Tesla and Carnival rising over 4%. Microsoft and Alphabet are set to release their quarterly earnings reports today after the market closes.

Riding the wave of the technology investment boom, Microsoft is anticipated to reveal a quarterly revenue of $61.1 billion, reflecting a 16% Y/Y increase, with an EBITDA of $30.7 billion, up from $25.9 billion a year ago. Key focal points for Microsoft's results include monitoring the growth of Azure revenue (consensus is at 27% in constant currency), insights into the outlook, comments on the expansion of AI workloads, and additional details on the Activision Blizzard acquisition that concluded on October 13.

Alphabet is expected to sustain its robust revenue growth momentum. The combination of higher revenue growth and cost reduction is projected to elevate EBITDA to $33.8 billion, reflecting a 44.4% Y/Y growth. Positive dynamics surrounding Alphabet's YouTube business are anticipated, and investors will be keenly observing cloud and AI figures, with a prevailing sentiment that Google may be experiencing a slight deceleration in comparison to Microsoft.

Overall, we are positive on earnings growth. For a comprehensive preview of this week's significant earnings releases, please refer to Peter Garnry's article.

Fixed income:  Yields across the Treasury yield curve declined, with the 2-year yield falling by 3bps to 4.3% and the 10-year yield dropping by 6bps to 4.07%, following the Treasury Department's announcement of smaller-than-expected funding needs for Q1 and Q2.

China/HK Equities:The Hang Seng Index rebounded 0.8% while the CSI300 Index slid 0.9%. China bans strategic investors and key shareholders under lock-up or restrictions from lending their stock, aiming at limiting shares available to short-sellers as well as stopping key investors from effectively unloading restricted shares. Meanwhile, a Hong Kong High Court granted an order to creditors to wind up China Evergrande Group. WuXi AppTec extended losses, tumbling 10.6% amid the overhang of US legislation against China biotech companies. Beer brewers gained in share prices, led by Budweiser which surged 6.6% after its CEO delivered an upbeat message about business in China in an interview with the state-owned Xinhua News.

After the market close on Monday, China’s State-owned Asset Supervision and Administration Commission (SASAC) announced the implementation of making market capitalisation management one of the performance indicators in the evaluation of the management of state-owned enterprises which are publicly listed. This is a confirmation of the implementation timeline for the initiative introduced in a State Council press conference last Wednesday. The news may lend support to the share prices of the central state-owned enterprises in the near term.

FX: The dollar started to week edging higher on escalating geopolitical concerns, but gains were cut short with the drop in yields following the Treasury refunding announcement. NZDUSD jumped higher but was capped by resistance at 0.6150, AUDUSD also broke above 0.66 touching the top of the recent range. Yen also had reasons to cheer with the drop in yields, and USDJPY dropped to 147.26 lows. GBPUSD was still stuck around 1.27 and EUR could not gain despite the weaker USD, with EURUSD testing 1.08 but reversing slightly to 1.0830-levels subsequently. 100DMA at 1.0779 coming in focus with GDP data on tap today, as well as US JOLTS job openings. For more details on FX momentum and positioning, as well as our weekly FX views, read this article.

Commodities: Having touched the top end of its recent range, oil prices dropped slightly overnight as Iran denied having anything to do with the weekend attack on a U.S. base in Jordan. Tensions are however likely to keep oil traders on edge with market chatter hinting that Biden could be expected to authorize US military strikes in mid-East in the US evening today. However, the Biden administration may remain cautious of an oil price spike ahead of the US elections this year, and could probably choose sanctions over a military response with plenty of space capacity available from GCC members. Read our weekly COT report here for more details. Metals rallied with Gold and Silver particularly liking the drop in yields.

Macro:

  • Treasury announced it expects to borrow $760bln in net marketable debt for the January-March period, down $55bln from its October 2023 estimate of $816bln "largely due to projections of higher net fiscal flows and a higher beginning of quarter cash balance", assuming an end-of-March cash balance of $750 billion. It also expects to borrow a much smaller $202bln in the April-June period, assuming an end-June cash balance of $750bln.
  • A Hong Kong High Court granted a winding-up order to creditors of China Evergrande Group on Monday. For overseas creditors, while certain offshore assets could provide more readily available recovery, their focus will be on whether the liquidator will succeed in obtaining recognition and assistance from mainland courts to seize assets in the mainland. As the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance Cap 645 (Ordinance) that came into effect yesterday specifically excludes insolvency cases, the liquidator cannot rely on it but instead will need to apply to the Hong Kong court to issue a letter of request to mainland courts in Shanghai, Shenzhen, and Xiamen under the Mainland-Hong Kong mutual recognition arrangement for insolvency proceedings piloted in 2021. The level of assistance the liquidator receives will be a litmus test for the latter mechanism. For shareholders of the listed company in Hong Kong, the likelihood of obtaining anything from the winding-up process is low. The winding-up of Evergrande’s Hong Kong listing entity has been widely anticipated. Restructuring and winding up of developers are necessary for cleaning up the excesses in the Chinese property sector.
  • US Dallas Fed’s manufacturing index fell much more than expected in January, to -27.4 from a revised -10.4.
  • ECB member Kazimir said that the Bank will not rush into cutting rates, and he sees June more probable than April. Mario Centeno added that he prefers to act sooner than later and be more “gradual’ when easing policy. Euro-area Q4 GDP up next today, and a negative print will confirm a technical recession

     

    Macro events: German Flash GDP (Q4), EZ Flash GDP (Q4), EZ Consumer Confidence Final (Dec), US Home Prices (Nov), JOLTS (Dec)

    Earnings: Microsoft, Alphabet (Google), AMD, Starbucks, Chubb, Danaher, Pfizer, UPS, Volvo, Stryker, Mondelez

    In the news:

  • Pentagon says it is not seeking war with Iran after Jordan attack (Reuters)
  • Japan PM Keeps Up Push for Higher Wages as Election Talk Swirls (Bloomberg)
  • France's Renault scraps IPO of EV business Ampere because of sluggish stock market conditions (Nikkei Asia)
  • Alaska Airlines Plane Appears to Have Left Boeing Factory Without Critical Bolts (WSJ)
  • Vale Beats Iron Output Estimates in Hurdle for Price Rally (Bloomberg)
  • Invesco, Galaxy Cut Spot Bitcoin ETF Fee in Cutthroat Market (Bloomberg)

 

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

For a global look at markets – go to Inspiration.

Quarterly Outlook 2024 Q4

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Head of FX Strategy

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Head of FX Strategy

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.