Macro: Sandcastle economics
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Summary: 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 supportive statement made by the National Administration of Financial Regulation (NAFR) toward the property sector propelled Chinese developers higher. US Q4 GDP came in hot, with annualized growth of 3.3%, well above the expected 2.0%. Meanwhile, Treasury yields fell across the curve following a 25k rise in the initial jobless claims to 214k. The S&P 500 added 0.5% to 4,894, marking a new high for the fifth consecutive day. The Nasdaq 100 was dragged by a 12.1% drop in Tesla. Intel plummeted over 10% in the extended hours, after releasing EPS and revenue guidance for Q1 below expectations.
The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events.
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:
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:
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