Global Market Quick Take: Asia – January 30, 2024

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.