- https://tmsnrt.rs/2zpUAr4
- Fed up 25bps this week, ECB and BOE up 50bps
- Tech giants lead a variety of winning outcomes
- China shares with increasing holiday travel
SYDNEY, Jan 30 (Portal) – Asian equities turned dovish on Monday ahead of a week in which interest rates in Europe and the United States are certain to rise, along with US jobs and wages data that could influence how far they still have to go go.
Earnings from a who’s who of tech giants will also test Wall Street bulls looking to push the Nasdaq to its best January since 2001.
Asia was not sluggish either, as China’s swift reopening bolsters economic prospects, with MSCI’s broadest index of Asia-Pacific equities outside Japan (.MIAPJ0000PUS) rising 11% to a nine-month high in January.
The index lost 0.2% on Monday, with markets in the region being mixed. Japan’s Nikkei (.N225) was flat while Taiwan (.TWII) was up 3.1%.
The Nikkei newspaper reported that Renault (RENA.PA) would cut its stake in Nissan (7201.T) to 15%, while the latter would invest in Renault’s electric vehicle business.
Chinese blue chips (.CSI300) rose 1.1% after returning from vacation. Beijing reported that Lunar New Year travel within China rose 74% year-on-year, although that was still only half of pre-pandemic levels. Continue reading
S&P 500 futures and Nasdaq futures both fell 0.3%, while EUROSTOXX 50 futures and FTSE futures fell 0.2%.
Investors are confident that the Federal Reserve will hike rates by 25 basis points on Wednesday, followed by a half-point hike by the Bank of England and the European Central Bank the following day, and any deviation from that script would come as a real shock .
Equally important will be the guidance for future policy, as analysts expect hawkish inflationary news is not yet over and more needs to be done. Continue reading
“With US job markets still tight, core inflation high and financial conditions easing, Fed Chair Powell’s tone will be hawkish, emphasizing that a downgrade to a 25 basis point hike doesn’t mean a pause is coming ‘ said Bruce Kasman, chief economist at JPMorgan, who expects another rise in March.
“We also expect him to continue cracking down on market pricing for rate cuts later this year.”
There is work to be done as futures rates currently peak at 5.0% in March only to fall back to 4.5% by the end of the year.
EYEING APPLE
Yields on 10-year notes are down 33 basis points to 3.50% so far this month, essentially easing financial conditions even as the Fed talks hard about tightening.
This dovish outlook will also be tested by data on US payrolls, the employment cost index and various ISM surveys.
EU inflation figures could be important in determining whether the ECB signals a half-point hike in March or opens the door for a slowdown in the pace of tightening. Continue reading
As for the recent rally on Wall Street, much will be made of gains by Apple Inc (AAPL.O), Amazon.com (AMZN.O), Alphabet Inc (GOOGL.O) and Meta Platforms (META.O) and many depend on others.
“Apple will provide an insight into the overall demand history for consumers worldwide and provide a snapshot of China supply chain issues that are beginning to ease,” analysts at Wedbush wrote.
“Based on our recent supply chain reviews in Asia, we believe demand for the iPhone 14 Pro is stronger than expected,” they added. “Apple will likely cut some costs on the fringes, but we don’t expect any mass layoffs.”
The market’s view of early Fed easing weighed on the dollar, which is down 1.6% so far this month and stands at 101.790 against a basket of majors.
The euro is up 1.5% in January to $1.0878, just below a nine-month high. The dollar is actually down 1.3% against the yen to 129.27 despite fierce defense of the Bank of Japan’s super-loose policy.
The fall in the dollar and yields has been a boon for gold, which is up 5.8% month to date to $1,930 an ounce.
China’s quick reopening is seen as a boon for commodities in general, supporting everything from copper to iron ore to oil prices.
The oil market was dovish on Monday, with Brent down 11 cents to $86.55 a barrel while US crude was down 3 cents to $79.65.
Reporting by Wayne Cole; Editing by Christopher Cushing
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