Global Market Quick Take: Asia – January 23, 2024

US Equities: The Dow Jones Industrial Index achieved a historic milestone, gaining 0.4% to reach 38,002. Simultaneously, the S&P 500 Index and Nasdaq 100 closed at record highs, rising by 0.2% to 4,850 and 0.3% to 15,360, respectively. Small-cap stocks notably outperformed, with the Russell 2000 rising by 2%. The surge is attributed to optimism surrounding a Goldilocks US economy and positive earnings surprises in the ongoing earnings season. Johnson & Johnson and Procter & Gamble are set to report before the U.S. market opens on Tuesday, with Netflix scheduled after the market closes. Saxo’s Head of Equity Strategy, Peter Garnry, anticipates a positive Q4 for Netflix, potentially boosting sentiment in technology stocks. For additional insights on this week’s earnings, refer to Peter's note.

Fixed income: In the absence of comments from Fed officials during the blackout period ahead of the January 30-31 FOMC meeting, and with no major economic data to move the market, Treasuries finished a lackluster session mixed, with the 2-year yield 1bp higher at 4.39% and the 10-year yield falling by 2bps to 4.11%.

China/HK Equities: Persistent concerns about the Chinese economy, coupled with waning anticipation of near-term stimulus measures, exerted downward pressure on stocks. The Hang Seng Index plummeted by 2.3% to 14,961, while the CSI300 dropped 1.6% to 3,219. Chinese banks keeping loan prime rates unchanged and reports of selling from overseas institutional investors added to investor pessimism. In the near term, prevailing pessimism regarding the economy, policy efficacy, and reduced allocation to China by global and Asian equity funds persists. Bargain hunters remain on the sidelines, and technical rebounds might face selling pressure until more information emerges from the Third Plenum potentially in February and the Two-session meetings in March, shedding light on the trajectory of the Chinese economy.

FX:Tight ranges in the FX market to start the week as traders focused on key events later in the week, including the Bank of Japan meeting and New Hampshire Primary today, followed by Bank of Canada on Wednesday and ECB on Thursday along with US GDP data followed by PCE on Friday. Support for DXY index at 103 remains key, while EURUSD continues to find it tough to stay above 1.09. USDJPY wobbles around 148 with 100DMA coming in at 147.46 providing support for now. Lack of hawkish hints at the BOJ announcement today could propel the pair back towards 150 and intervention threat could become louder. GBPUSD still above 1.27 as AUDUSD reverses from a test of 0.66 and NZDUSD dips below 0.61.

Commodities: While markets focused on Mideast tensions, geopolitical risks escalated on another front after Ukrainian drone attacks against oil facilities on Russia’s Baltic coast, raising the stakes in the two-year long war. Tensions in Red Sea also continue to escalate with US and UK making fresh strikes, but overall risk sentiment was positive with markets starting to price in a better economic outlook in the wake of recent strong data. Gas prices however continue to tumble, as market price in an end of the winter season. Gold still supported as markets push back Fed rate cut expectations, but Silver saw a sharp slide testing the 76.4% fibo retracement level at $21.89.

Macro:

• BOJ preview: With the Jan 1 earthquake in Japan followed by the airplane crash in Haneda, markets have pushed forward BOJ pivot expectations. We think BOJ has no exit policy, as discussed in this article. Still, markets will be focused on two things today – Governor Ueda’s press conference and BOJ’s inflation forecast. Ueda’s comments will be skimmed to look for any optimism on the wage front, while inflation forecasts will be key to assess if the BOJ thinks that price pressures will be sustained. Nikkei reported that while fiscal 2024 inflation forecast may be lowered from the previous forecast of 2.8% but fiscal 2025 forecast could be more important. If that is seen around 2%, then markets could again start to price in an April or July move.
• Leading banks in China maintained their benchmark 1-year and 5-year loan prime rates at 3.45% and 4.20% respectively.

Macro events: BoJ Policy Announcement, New Hampshire Primary, US Richmond Fed (Jan)

Earnings: Verizon Communications, Netflix, Texas Instruments, Intuitive Surgical, Johnson & Johnson, Procter & Gamble, General Electric, RTX, Lockheed Martin

In the news:

• China’s Premier Orders More Measures to Arrest Stock Rout (Bloomberg)
• Bitcoin falls to $40,000, lowest level since bitcoin ETF launch (Reuters)
• China's 'lackluster recovery' not having strong effect on US economy -Brainard (Reuters)
• Fed Should Stop Quantitative Tightening, Reduce Interest Rates Soon, Bill Gross Says (Bloomberg)
• Accounting investigation under way at Archer Daniels Midland and its top financial executive has been placed on leave (AP)
• Gilead's Trodelvy fails to meet main goal in lung cancer trial (Reuters)
• Gas Station Owner Sunoco to Buy NuStar Energy for $7.3 Billion (Bloomberg)

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

For a global look at markets – go to Inspiration.