Global Market Quick Take: Asia – January 29, 2024

US Equities: The S&P 500 pulled back after making an intra-day record high at 4,907 to finish the Friday session at 4,891, down 0.1%. The loss in the market benchmark was driven by weakness in the information technology sector. The tech-heavy Nasdaq 100 slid 0.6%. Intel, suffering from a 13% decline on a downbeat outlook, was the worst performer. Intel’s slide impacted other semiconductor stocks, dragging KLA, AMD, Lam Research, Marvell, Qualcomm, Nvidia, and Micron Technology lower. The ADR of LVMH Moët Hennessy Louis Vuitton surged 7.1% after the European luxury goods company reported sales beating estimates.

This week is characterized by earnings releases from five of the ‘magnificent-seven” stocks: Microsoft (Tuesday after market close), Alphabet (Tuesday after market close), Apple (Thursday, after market close), Amazon (Thursday after market close), and Meta (Thursday, after market close)

Fixed income:  While the PCE data confirmed the continuation of a disinflation trend, Treasury yields climbed modestly, led by a 6bp rise in the 2-year yield. The 10-year yield ticked up 2bps while the 30-year bond yield remained steady. The upcoming focus for the week is on the FOMC decision scheduled for Wednesday.

China/HK Equities:The Hang Seng Index plummeted 1.6% on Friday, bringing the year-to-date loss to 6.5%, while the CSI300 slid 0.3%, marking a 3.9% year-to-date loss. The contract research organization (CRO) sector was hit by the news that the Chairman and a Ranking Member of the US House of Representatives Select Committee on the Strategic Competition between the United States and the Chinese Communist Party introduced a BIOSECURE Act to “restrict federally funded medical providers from using foreign adversary biotech companies of concern, including BGI Group and its subsidiaries, MGI and Complete Genomics” and “WuXi Apptec. WuXi Apptec tumbled 16.4%.

Mobile phone supply chain stocks were among the top losers as mobile sales volume in mainland China slipped. According to IDC data, the delivery volume of smartphones in mainland China declined 5% in 2023, marking the lowest in the past 10 years.

Further, Chinese EV stocks dropped as sentiment was negatively impacted by Tesla’s downbeat 2024 outlook. This week, the office NBS manufacturing PMI and non-manufacturing PMI on Wednesday and Caixin China manufacturing PMI on Friday will be closely monitored. Investors may also start somewhat pricing in the likelihood of a higher US tariff on Chinese goods in a potential Trump presidency.

FX: Choppy price action seen in the dollar on Friday but it was another week of gains, albeit mild. This week could bring a lot more volatility with Fed and BOE decisions on tap, along with key data from jobs to ISM manufacturing. CHF was the outperformer as USDCHF reversed to 0.8640 and SNB’s Jordan will be speaking Tuesday. CAD and NOK were supported by firmer oil prices on escalating Mideast risks. EURNOK tested a break below 11.30 and a break may expose December lows of 11.18. Yen weakness returned with Tokyo CPI for January coming in below 2% on headline and core measures, and a jump higher in Treasury yields. USDJPY back above 148 although watch for any safety bid as worsening geopolitics underpin and oil and gold are running higher this morning in response. EUSUSD unable to move back above 1.09 but GBP could remain supported this week if BOE stays hawkish.

Commodities: Crude oil prices rose to near 12-week highs, breaking out of the recent range, with drone attacks suspected to be Iran-backed killing three US soldiers in Jordan. This could spell a significant escalation in the Mideast conflict. The decline in US inventories last week (although probably weather-led) as well as resilient US economy and China’s stimulus measures could also push oil prices higher. Gold also got a safety bid at the open this morning in Asia, but could not sustain the gains. Metals ended the week stronger on China optimism, and focus this week will be on any further measures.

Macro:

• US PCE data for December continued to reaffirm soft landing hopes. PCE cooled as expected with headline at 0.2% MoM and 2.6% YoY and core at 0.2% MoM and 2.9% YoY (below the 3% expected). The 6-month annualized rate eased to 1.9% with the 3-month at 1.5%, both beneath the Fed's 2% target. Also, consumer spending was strong, rising 0.7% in December, above the 0.4% forecast while the prior was revised up to 0.4%. Personal income rose 0.3%, in line with expectations, although the US savings rate declined to 3.7% from 4.1% - the lowest since 2022 – but still remaining resilient enough not to spark recession concerns immediately. Market pricing of the March Fed rate cut remained unchanged at around 50%.
• According to the Washington Post, Donald Trump, the former US president and the front-runner for the Republican candidacy for the US presidential election this year, is mulling a flat 60% tariff on all imports from China.
• China's industrial profits increased by 16.8% Y/Y in December but declined by 2.3% for the entire year of 2023, a narrower decrease compared to the Jan-Nov decline of 4.4% Y/Y. Out of 41 major industrial sectors, 27 had profit growth in 2023, and 29 sectors showed improvement in December. The equipment manufacturing industry grew by 4.1%, contributing 1.4 percentage points to the overall industrial profit growth in 2023.
• Guangzhou, the provincial capital of Guangdong, announced over the weekend that the tier-1 city relaxed its home purchase restrictions to allow non-local homebuyers to buy properties larger than 120sqm in restricted districts. It allows homeowners to buy an additional unit if they can rent out their existing units.
• Singapore’s MAS left monetary policy settings unchanged with no changes to width, slope or midpoint of the S$NEER band. It expects growth to improve in 2024, expected to be 1-3% although the central bank noted risks from high interest rates and geopolitics. Inflation is also seen to be easing with 2024 core inflation expected at 2.5-3.5%.

Macro events: US Dallas Fed Manufacturing Activity (Jan)

Earnings: Nucor, Super Micro Computers, Ryanair

In the news:

• Widening Mideast Crisis: Drone Strike Kills 3 U.S. Soldiers in Jordan, White House Says (NY Times) 
• US to announce billions in subsidies for advanced chips -WSJ (Reuters)
• Intel tumbles as chipmaker falls further behind in AI race (Reuters)
• Top US, China Officials Discussed Setting Up Next Biden-Xi Call (Bloomberg)
• Beijing bars investors from lending securities during restricted periods, signalling further support for beleaguered stock market (SCMP)

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

For a global look at markets – go to Inspiration.