Global Market Quick Take: Asia – January 9, 2024

US Equities: The Magnificent Seven stroke back on Monday with all of them gaining more than 1%, led by a 6.4% jump in Nvidia. Ahead of the CES 2024 consumer electronics show officially starting today, Nvidia announced three new graphics chips with extra components and enhanced AI features for PC users. Additionally, the AI chip giants said four Chinese EV manufacturers will use its technology in their auto-driving platforms. The Nasdaq 100 rose 2.1% and the S&P 500 added 1.4%. Boeing plummeted 8.1% after US regulators ordering the grounding of over 170 Boeing 737 Max 9 jets after the accident over the weekend.

Fixed income: Boosted by falls in inflation expectations for the year ahead through the 5-year horizon in a New York Fed survey of consumers, Treasuries rallied modestly with yields falling around 1bp across the yield curve. Additionally, Fed Governor Bowman has toned down her previously relatively hawkish stance, saying inflation could fall further without additional rate hikes. The 10-year yield finished 2bp lower at 4.03%.

China/HK Equities: The Hang Seng Index plunged by 1.9%, showing notable weaknesses in China Internet, EV, catering, and insurance stocks. The Hang Seng Tech Index plummeted by 3%. XPeng tumbled by 7.8% after analysts revised down the EV maker’s earnings and margin forecasts. The CSI 300 dropped by 1.3%. As investors sought explanations for the poor performance, some attributed it to a Reuters report claiming that the China Securities Regulatory Commission (CSRC) lifted a ban on mutual funds' net selling of stocks, as funds needed to raise money to address increasing redemptions.The news that a Beijing court announced last Friday that it had deemed Zhongzhi insolvent and had accepted an application for liquidation of the shadow banking financial group added to the negative sentiments

FX: The dollar index came under some pressure on Monday, and the DXY index tested 102 amid slowing consumer inflation expectations from the NY Fed survey. USDJPY pushed below 144 on softer Treasury yields but recovered later. EURUSD attempted gains but was rejected at 1.0980, the 23.6% fibo retracement level from the December high. GBPUSD however surged to highs of 1.2767, remaining just shy of Friday’s high at 1.2770 break of which is now needed to reaffirm a bullish bias. USDNOK rose to fresh high of 10.42 with the slump in oil prices weighing on NOK.

Commodities: Oil prices saw a sharp slide of 4% on WTI, unwinding last week’s gains, as Saudi’s price cuts fuelled the demand weakness concerns. This comes despite attacks on shipping in the Red Sea by Houthi rebels continuing, along with supply outages in Libya. EIA’s outlook report will be eyed today, along with any further expectations of China’s RRR cut. Gold however continued to slide despite softer yields, and the 50DMA as well as 38.2% fibo retracement levels coinciding at $2,012 will be in focus. Metals will be on watch today amid reports of China cutting RRR.

Macro:

• NY Fed's December consumer survey saw inflation expectations dip across the forecast horizons. One-year inflation expectations fell to 3% from 3.4% in November, the lowest since January 2021. Three-year inflation expectations fell to 2.6% from 3.0% and five-year inflation expectations fell to 2.5% from the prior month's 2.7%
• Fed's Bostic, a 2024 voter, said the current pace of balance sheet normalization is appropriate and the Fed remains in a situation of ample reserves. He repeated his view for two 25bp rate cuts this year, with the first occurring sometime in Q3.
• Japan’s Tokyo CPI for December showed some cooling from last month but remained well above target levels. Headline CPI cooled to 2.4% YoY from 2.7% last month while core CPI was at 2.1% from 2.3% YoY previously. Core core CPI remains a key concern as it was at 3.5% YoY for December from 3.6% previously. Data is broadly in-line with BOJ’s view that import-driven price pressures are cooling, and this would mean policy pivot will continue to be pushed forward.
• In a review of its work for 2023, the People’s Bank of China confirmed, as previously reported by media, that it had increased the quota of the pledged supplemental lending (PSL) by RMB500 billion. As the amount of PSL having decreased through January to November in 2023 but increasing by RMB350 billion in December, there will be RMB150 billion yet to deploy in early 2024. Separately, the central bank hints on additional monetary supports to the real economy, including reductions in the reserve requirement ratio (RRR).

Macro events:  EIA STEO, German Industrial Output (Nov), US NFIB (Dec)

Earnings: Albertsons

In the news:

• Nvidia Rolls Out New Chips, Claims Leadership of AI PC Race (Bloomberg)
• China regulators lift stock net-selling ban for mutual funds due to redemption pressures on funds (Reuters)
• China Hints at More Easing With Possible Reserve Ratio Cut (Bloomberg)
• China Evergrande: key executive at EV unit arrested for unspecified crimes, 3 months after founder Hui Ka-yan’s detention (SCMP)
• United finds loose bolts on several 737 MAX planes, raising pressure on Boeing (Reuters)
• Samsung profit falls 35% in Q4 amid hope for recovery this year (Nikkei Asia)

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