Global Market Quick Take: Asia – January 31, 2024

US Equities: The Nasdaq 100 Index pulled back by 0.7% while the S&P 500 Index ticked down 0.1% in the regular session ahead of results from Microsoft and Alphabet after the close. General Motors surged 7.8% on an upbeat full-year outlook while United Parcel Service plummeted 8.2% after reporting a larger-than-expected decline in revenue and announcing the cutting of 12,000 jobs. 

In the extended hours, Microsoft slid over 1% after the technology giant reported quarterly revenues of $62.0 billion, increasing 17.6% Y/Y and slightly above the median forecast of $61.1 billion. The company’s Azure and other cloud services businesses grew 28% on a constant currency basis, exceeding the 27% expected. Net income increased 33.2% to $21.9 billion or $2.93 a share, beating the consensus of $2.78. 

Meanwhile, Alphabet plunged more than 4% in the after-hours trading after reporting a Q4 net income of $20.7 billion or $1.64 a share, below the consensus forecast of $1.72. Revenue came in with growth of 14.6% in Q4 revenues, excluding acquisition costs, to $72.3 billion, ahead of the consensus of $71.0 billion but digital advertising revenue missed analyst estimates.

Fixed income:  Treasuries ended the session mixed ahead of the FOMC decision today. The 10-year yield dropped by 4bps to 4.03% while the 2-year yield edged up 2bps to 4.33%. A larger than expected JOLTS job openings and a rise in the Conference Board consumer confidence to its highest level since December 2021 had little market impacts.

China/HK Equities:The Hang Seng Index sank 2.3%, dipping below the 16,000 mark again to close at 15,703 amid broad-based weakness across sectors. Chinese developers, internet, EV, and insurance stocks were among the stocks falling most. Longfor, China Overseas Property, and Sunac China fell over 6%. BYD dropped by 4.4% after preannouncing preliminary 2023 results missing estimates. Hang Lung Properties plunged 8.4% after reporting underlying profits missing estimates and announcing the retirement of the chairman. In the mainland, the CSI300 Index shed 1.8%, with notable weakness in electronics, properties, and media.

Despite numerous piecemeal supporting measures, investor confidence remains subdued. On Wednesday, eyes are on the NBS manufacturing and non-manufacturing PMI and market reactions to the news story that Tencent has been told by the Chinese authorities to seek a smaller slice in the payment market and not be a rival with banks.

FX: Dollar traded sideways ahead of the FOMC decision due later today. The focus on disinflation may be a dovish hint as it suggests real rate pain, and discussions on QT tapering are also likely. However, as we said in the preview, dollar could remain a buy on dips given the economic exceptionalism and seasonality that remains in play. AUDUSD recovered from lows of 0.6575 with Q4 CPI data ahead where a miss could bring dovish RBA re-pricing. Market is also likely to be in a risk-off mode with big tech earnings after close remaining uninspiring. Watch the 200DMA at 0.6577 but bearish trend will be confirmed only if 100DMA at 0.6534 breaks. AUDJPY sliding sharply at Asia open as risk sentiment takes a beating, and immediate support seen at 96.90 level. USDJPY also heading lower as BOJ summary of opinions for the Jan meeting sent hawkish hints with some members talking about increasing conditions for end of negative rates and the need to start discussing policy exit in a clear change of tone. First key support for USDJPY comes in at 146.60. EURUSD held up close to 1.0850 with Euro-area avoiding a technical recession, and focus shifts to BOE with CPI giving reasons for a less hawkish outcome that can bring GBPUSD to give up the 1.27 handle. EURGBP as such has room for a tactical recovery to 0.8550+.

Commodities: Oil prices ended a choppy day higher but are on track to finish with gains for January for the first time since September. President Biden’s response on the drone attack is still awaited but he seems inclined not to escalate the Mideast conflict and sanctions could be the likely outcome. Gold rallied towards $2050 but reversed sharply with FOMC meeting ahead and NFP data to follow on Friday. Gold may be on course to close lower for the month, but only marginally given a strong dollar and reassessment of Fed cut bets, and we see range-trading until the rate cut path is clearer. For more details, read this article.

Macro:

• US JOLTS job openings rose to 9.026mn in December, up from the prior 8.925mn (which was revised up from 8.79mn), despite expectations for a decline to 8.75mn. Data again confirms the divergence in hard and soft data, which could mean that Fed remains focused on the path of disinflation for now. Read our full preview here.
• US Consumer Confidence for January rose to 114.8, the highest since December 2021, from 108.0 but was short of the expected 115.0. Present Situation and Expectations rose to 161.3 (prev. 147.2) and 83.8 (prev. 81.9), respectively.
• Eurozone avoided a technical recession but remained in stagnation as Q4 GDP came in flat from -0.1% in the third quarter.
• China’s manufacturing PMI, according to the surveyed median forecast, is projected to improve to 49.3 in January from 49.0 the previous month. Also to be released today is the non-manufacturing PMI which is expected to rise to 50.6 from 50.4.

Macro events: US Fed FOMC Decision, US Employment Cost Index (Q4), US Chicago PMI (Jan), Germany Unemployment (Jan), Germany Harmonized CPI (Jan, preliminary), France Harmonized CPI (Jan, preliminary), Australia CPI (Q4), China NBS Manufacturing and Non-Manufacturing PMI (Jan)

Earnings: Qualcomm, Mastercard, Boeing, Novartis, Thermo Fisher Scientific, Novo Nordisk.

• The median forecast for Novo Nordisk Q4 revenue is at DKK 63.2bn, a 31% Y/Y increase, with EBITDA rising to DKK 28.3bn from DKK 19.2bn, fueled by the thriving obesity care sector. The demand surge for obesity drugs has been remarkable, with Q3 2023 segment revenue skyrocketing to DKK 12.3bn from DKK 2.4bn in Q3 2021. Investors will closely monitor Novo Nordisk's production capacity for GLP-1s and assess future obesity drug demand due to its positive impact on co-morbidities. Despite Eli Lilly's presence in the market, Novo Nordisk doesn't see it as a growth impediment.

In the news:

• IMF Lifts World GDP Outlook on US Strength, China Fiscal Support (Bloomberg)
• AMD revenue forecast misses estimates, shares slide (Reuters)
• Google parent Alphabet ad revenue sputters, capex up; shares sink 6% (Reuters)
• Microsoft touts AI strength, but shares dip as market digests costs (Reuters)
• Samsung Electronics' Q4 profit falls 34% amid weak consumer demand (Reuters)
• Starbucks earnings disappoint as U.S. boycott, ‘cautious’ China weaken sales (CNBC)
• Tencent CEO Pony Ma asks fintech unit to cede share in payments market to avoid challenging banks (SCMP)
• Elon Musk's Neuralink implants brain chip in first human (Reuters)
• China EV price war spreads to gas-fueled cars, denting foreign brands (Nikkei Asia)
• Chinese vice-premier urges support for listed firms to help stabilise battered stock market (SCMP)

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

For a global look at markets – go to Inspiration.