CNBC Pro: These 6 global stocks with low debt are likely to outperform, says Bernstein
Rising interest rates have a big impact on companies with high levels of debt, as they are likely to incur higher costs from increased borrowing.
As interest rates continue to rise, Bernstein analysts believe stocks with low debt exposure and higher debt quality should outperform.
The investment bank named a handful of low-debt, investment-grade global stocks likely to outperform there.
CNBC Pro subscribers can read more here.
— Ganesh Rao
Zip shares reverse after initial rally
Australian buy-now-pay-later company Zip fell more than 10% after a short-lived rally following its quarterly results.
Zip traded 15% lower, a notable reversal from its previous gains of more than 10% after posting 12% revenue growth.
The company said that “underlying monthly cash burn has continued to decline and is expected to continue to improve.” The current available cash and liquidity position is “sufficient to lead the company to the point of generating positive cash flow” and expects to deliver positive cash EBITDA through the first half of fiscal 2024.
Expected week: Purchasing managers’ indices, inflation reports from Australia and Singapore, GDP from South Korea
Here are some of the key economic events in Asia Pacific for investors to watch closely this week.
Stock markets in mainland China and Taiwan remain closed until trading resumes on Jan. 30.
On Tuesday, regional purchasing managers’ indices for Japan and Australia will be in focus as most markets remain closed to celebrate the Lunar New Year – with the exception of Australia, Japan and Indonesia.
Inflation reports will take center stage on Wednesday when Australia and New Zealand release their consumer price indexes for the final quarter of 2022. Singapore is to release its inflationary pressures for December.
The Hong Kong market is set to resume trading on Thursday.
Fourth-quarter gross domestic product for South Korea and the Philippines will be released on Thursday, while the Bank of Japan is due to release its opinion summary from its last monetary policy meeting in January. Japan also releases its producer price index for services on Thursday.
Japan’s core CPI readings for the capital, Tokyo, will be a barometer of where monetary policy is headed.
Australia’s PPI and trade data will also be closely monitored ahead of the Reserve Bank of Australia’s first week of February meeting.
– Jihye Lee
Australia’s business conditions worsened last month: NAB survey
National Australia Bank’s monthly business survey showed a deterioration in business conditions for December, with a score of 12 points, down from November’s 20 point reading.
The survey reflects deteriorating trade conditions, profitability and employment, NAB said.
“The key message from the monthly December survey is that growth momentum has slowed significantly in late 2022, while price and acquisition cost pressures have likely peaked,” said NAB chief economist Alan Oster.
Meanwhile, business confidence rose 3 points to -1 in December, an improvement from -4 points in November.
– Jihye Lee
Japan factory data shows second month of contraction
The au Jibun Bank Flash Japan manufacturing purchasing managers’ index remained unchanged for the second straight month at 48.9 in January, below the 50 mark separating contraction and growth from the previous month.
The measured value “signaled the most severe deterioration in health in the joints [of] in the Japanese manufacturing sector since October 2020,” said S&P Global.
au Jibun Bank’s flash composite output index rose to 50.8 in January, slightly higher than December’s reading of 49.7.
Flash Services activity continued to rise with a print of 52.4, higher than the December reading of 51.1.
– Jihye Lee
CNBC Pro: Wall Street is excited about Chinese tech — and loves a mega-cap stock
After more than two years of regulatory crackdowns and a pandemic-related slump, Chinese tech stocks are back on Wall Street’s radar, with one stock in particular standing out as a top pick for many.
Pro subscribers can read more here.
– Zavier Ong
The Fed is likely to discuss when to halt rate hikes next week, the Journal report said
According to a Wall Street Journal report, Federal Reserve officials will almost certainly approve a further slowdown in rate hikes next week while also debating when to halt hikes altogether.
The rate-setting Federal Open Market Committee is scheduled to meet Jan. 31-February 31. 1, with markets pricing in a nearly 100% chance of a quarter-point hike in the central bank’s benchmark interest rate. Most prominently, Fed Governor Christopher Waller said Friday that he sees a 0.25 percentage point hike as the preferred move for the upcoming meeting.
However, Waller said he doesn’t think the Fed is done tightening, and several other central bankers have echoed that view in recent days.
The Journal report, which cited public statements from policymakers, said slowing the pace of increases could provide an opportunity to assess the impact of previous increases on the economy. A series of rate hikes that began in March 2022 has resulted in a 4.25 percentage point rise.
According to data from CME Group, market prices are currently pointing to a quarter point increase over the next two sessions, a period of no action and then a reduction of up to half a point by the end of 2023.
However, several officials, including Gov. Lael Brainard and New York Fed President John Williams, have used the phrase “staying the course” to describe the future course of the policy.
– Jeff Cox
Nasdaq on track for consecutive gains as tech stocks rise
The Nasdaq Composite was up more than 2.2% Monday lunchtime, boosted by shares of battered tech stocks.
The move propelled the tech-heavy index on track for a straight day of gains of over 2%. The index closed 2.66% higher on Friday.
Rising semiconductor stocks helped push the index higher. Tesla and Apple, meanwhile, gained 7.7% and 3.2%, respectively, as China’s reopening spurred hopes of a rebound in their businesses. Western Digital and Advanced Micro Devices were each up about 8%, while Qualcomm and Nvidia were up about 7%.
Information technology was the best performing sector in the S&P 500, up 2.7%, partly due to gains in the chip sector. Communications services rose 1.9%, boosted by the likes of Netflix, Meta Platforms, Alphabet and Match Group.
— Samantha Subin
El-Erian says Fed should rise 50 basis points, calls smaller hike a ‘mistake’
Most of the rising inflation may have happened in the past, but a move to a 25 basis point hike at the next Federal Reserve meeting is a “mistake,” according to Allianz’s chief economic adviser, Mohamed El-Erian.
“I’m in a very, very small camp that thinks they shouldn’t switch down to 25 basis points, they should switch to 50,” he told CNBC’s Squawk Box on Monday. “They should take advantage of this growth window that we’re in, they should take advantage of where the market is and they should try to tighten financial conditions because I think we still have an inflation problem.”
Inflation, he said, has shifted from goods to services but may very well pick up again if energy prices rise as China reopens.
El-Erian expects inflation to stagnate at around 4%. This, he said, will leave the Fed in a difficult position as to whether to continue crushing the economy to reach 2% or to promise that level in the future and hope that investors will find stable 3% to 4% in the near term % can tolerate.
“It’s probably the best result,” he said of the latter.
— Samantha Subin
According to Morgan Stanley, an earnings recession is imminent
According to Michael Wilson, Morgan Stanley’s equity strategist, an earnings recession is on the horizon this year.
“Our view has not changed as we anticipate US earnings trajectory to disappoint both consensus expectations and current valuations,” he said in a note to clients on Sunday.
Some positive developments have unfolded in recent weeks – such as China’s continued reopening and falling natural gas prices in Europe – helping some investors to become more optimistic about the market outlook.
Wilson, however, advises investors to remain bearish on stocks, citing price action as a key driver of this year’s rally.
“The rally this year has been led by low quality and heavily shorted stocks,” he said. “A strong move in cyclical stocks versus defensive stocks was also observed.”
Wilson has based his guidance on margin disappointments, and he believes the case is growing. Many industries are already facing declining sales, overstocking and less productive employees.
“It’s just a matter of timing and size,” Wilson said. “We advise investors to focus on fundamentals and ignore the false signals and misleading reflections in this bear market mirror.”
— Hakyung Kim