Global Market Quick Take: Asia – January 24, 2024

US Equities: The S&P 500 rose by 0.3% to 4,865, marking an all-time high for the third day in a row, and the Nasdaq 100 reached a new closing record at 17,404, gaining 0.4%. However, the Dow Jones Industrial Index retreated from 38,000, ending 0.3% lower at 37,905, impacted by a significant 11% drop in 3M due to a below-expectation 2024 revenue and earnings outlook. Johnson & Johnson fell 1.6% due to margin compression in its medical device unit and warnings about drug sales outlook. Netflix surged over 8% in after-hours trading on better-than-expected revenues, earnings, and a much stronger-than-expected 13 million addition to subscribers versus the consensus forecast of 8.7 million. Upcoming earnings from Tesla on Wednesday will be closely watched, with analysts anticipating 6.3% Y/Y revenue growth and an expected EPS of $0.53, a 44% decline Y/Y due to increased competition impacting gross margins.

Fixed income:  The 10-year Treasury yield edged up 2bps to 4.13% amid the Bank of Japan’s anticipated inaction and the lack of U.S. economic data. The $60 billion 2-year auction met with decent demand.

China/HK Equities: The Hang Seng Index rebounded by 2.6% on a Bloomberg story citing an anonymous source. The report suggested that China is considering mobilizing RMB2 trillion from offshore funds of Chinese state-owned enterprises to buy A-shares through the Stock Connect. However, mainland investors remain unconvinced, as the CSI300 only edged up only 0.4%. Despite the plan, if implemented, resulting in a large amount of buying of the Chinese yuan, USDCNH fell only 0.4%, reflecting scepticism among FX traders regarding the report's credibility. NetEase and Tencent surged 6% and 3.7% respectively as the Cyberspace Administration of China removed the hyperlink to the controversial Measures for the Management of Online Games (Draft for Solicitation of Comments) after the expiration of the consultation period. According to China Securities Journal, Alibaba’s founders Jack Ma and Joseph Tsai recently increased their stakes in Alibaba, propelling the share price of the Chinese tech giant to rise 3.4% on Tuesday.

FX: Dollar was firmer, with DXY index breaking above the 200DMA as equity momentum eased. EUR underperformed on dollar strength, and weaker Eurozone consumer confidence and Bank Lending survey suggesting tighter Q4 credit standards. EURUSD pushed below 200DMA at 1.0845 although it recovered slightly subsequently with ECB meeting on the radar this week. Yen had a volatile day as BOJ maintained dovish bent, although Governor Ueda hinted at end of NIRP at the press conference bringing some gains to the yen. USDJPY however back above 148 even as EURJPY still around 161. NZDUSD popped higher on high non-tradeable inflation in Q4 reported this morning, and came back to test 0.61 handle after slipping overnight. AUDUSD was boosted yesterday on China stock support package, but is now back below 0.66.

Commodities: Metals continued to rally despite a stronger dollar, as China stock support package boosted sentiment and expectations that economic stimulus will also continue. Iron ore rallied 2.4% with Lunar New Year demand optimism also playing out. Gold was steady but Silver recovered strongly after hitting 2-month lows earlier this week. Crude oil however slipped again but stuck to a tight range with geopolitical tensions continued to escalate while private inventories showed a decline in US stockpiles by almost 7mn barrels last week.

Macro:

• The Bank of Japan maintained its short-term interest rate at -0.1% and YCC settings, while cutting FY 2024 inflation forecast to 2.4% from 2.8% in October. FY 2025 core CPI forecast was slightly increased, but not enough for the market to interpret this as a hawkish outcome. Governor Ueda’s comments could keep the April meeting live, and focus returns to wage negotiation results due in March/April. However, for now Japanese yen remains a US yield play. We still think BOJ has no exit policy, as discussed in this article and any move in April or July will remain very modest.
• Fed surveys continue to be mixed, keeping the battel between soft landing and recession outlooks alive. Richmond Fed composite index fell to -15 in December from -11 in January with new orders down to -16 from -14 and employment slumping to -15 from -1. Meanwhile, Philly Fed Nonmanufacturing Business Outlook Survey indicated overall improvement in business activity, edging up to 6.8 from 6.1 in December.
• The New Hampshire primary election has almost ended. The election saw a strong turnout and DeSantis supporters seemingly went in favor of Trump, paving the way for him to secure the nomination to be the Republican candidate for the presidential elections. South Carolina, Nikki Haley’s home state, goes next into the primaries.
• Eurozone consumer confidence surprised on the downside as it dropped to -16.1 in January from -15.1 previously, reversing some of the improvement seen in the last 2 months.
• ECB Bank Lending Survey noted credit standards tightened in Q4 for firms and households, with further tightening expected in Q1.
• New Zealand CPI for Q4 continued to ease as expected as it came in at 4.7% YoY, 0.5% QoQ from 5.6% YoY and 1.8% QoQ in Q3 in a welcome news for RBNZ. Tradeable CPI dropped into negative territory at -0.2% QoQ from 1.8% previously, although non-tradeable came in above expectations at 1.1% QoQ (5.9% YoY) while still easing from last quarter’s 1.7%.

Macro events: BoC Policy Announcement; EZ, UK & US Flash PMIs (Jan)

Earnings: Tesla, Lam Research, SAP, ASML, Elevance Health, IBM, ServiceNow, Abbott Laboratories, AT&T, Progressive

In the news:

• US pushes for pause in Gaza as Israel suffers worst loss of soldiers (Reuters)
• Exit Poll Offers Haley Positive Sign on Moderate Voters (Bloomberg)
• Australia’s Prime Minister Plans Changes to Tax Cuts Despite Election Pledge (Bloomberg)
• Rio to Tap Giant Australia Solar Project to Power Aluminum (Bloomberg)
• Netflix Posts Best Customer Gain Since Surge During Pandemic (Bloomberg)
• Nvidia CEO’s low-key China visit seen as a goodwill gesture towards key market as US chip firm grapples with sanction issues (SCMP)
• China’s Bold Stock-Market Rescue Plan Leaves Investors Skeptical (Bloomberg)
• China’s demand for LNG imports may double over next decade: largest US exporter Cheniere Energy (SCMP)
• Trump’s proposed 10% tariff plan would ‘shake up every asset class (CNBC)
• Japanese exports hit record in 2023 on weak yen (Nikkei)

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

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