Australia PMI, Japan Jibun Flash PMI, Lunar New Year Holidays

Zip shares have reversed after the initial rally

Australian buy now pay later company. Zip fell more than 10% after a brief rally following quarterly results.

Zip traded 15% lower, a sharp reversal from its previous gains of more than 10%, after it reported a 12% rise in revenue.

The company said underlying “monthly cash burn continues to decline and is expected to improve further.” It said the current cash and liquidity position is “sufficient to drive the company to generate positive cash flow” and expects to deliver positive cash EBITDA by the first half of fiscal 2024.

Week ahead: PMI, Australia and Singapore inflation reports, South Korea GDP

Here are some of the key economic developments in the Asia-Pacific region that investors will be watching closely this week.

Stock markets in mainland China and Taiwan will remain closed until they resume trading on January 30.

Regional PMI readings for Japan and Australia will be in focus on Tuesday, while most markets remain closed to mark the Lunar New Year excluding Australia, Japan and Indonesia.

Inflation reports will be in focus on Wednesday as Australia and New Zealand release their consumer price index readings for the final quarter of 2022. Singapore will release its inflation footprint for December.

The Hong Kong market is scheduled 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 will release its summary of views from its last monetary policy meeting in January. Japan also reports its services producer price index on Thursday.

Japan’s headline CPI readings for the capital Tokyo will be a barometer of the direction of monetary policy.

The Australian producer price index and trade data will also be closely watched indicators ahead of the Reserve Bank of Australia meeting in the first week of February.

— Jihe Lee

Business conditions in Australia worsened last month: NAB survey

National Australia Bank’s monthly business survey showed business conditions worsened for December with a reading of 12 points, down 20 points from November.

The survey reflects deteriorating trading conditions, profitability and employment, NAB said.

“The main message from December’s monthly survey is that growth momentum has slowed significantly in late 2022, while pressures on prices and buying costs are likely to have peaked,” said NAB chief economist Alan Oster.

Meanwhile, December business confidence rose 3 points to -1, an improved reading from -4 points in November.

— Jihe Lee

Japan’s key factory data showed a second month of contraction

au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index in January was unchanged for a second month in a row at 48.9, below the 50 points that separate contraction and growth from the previous month.

The reading “signals about the most severe deterioration of health [of] the Japanese manufacturing sector from October 2020,” S&P Global said.

au Jibun Bank’s sudden composite output index rose to 50.8 in January, slightly higher than December’s reading of 49.7.

Flash business activity rose further with a reading of 52.4, up from December’s reading of 51.1.

— Jihe Lee

CNBC Pro: Wall Street is excited about Chinese tech — and it loves a mega-cap stock

After more than 2 years of regulatory crackdowns and a pandemic-induced slump, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as the top pick for many.

Professional subscribers can read more here.

— Zavier Ong

The Fed is likely to discuss next week when to stop hikes, the Journal report said

Federal Reserve officials next week will almost certainly approve another delay in interest rate hikes while debating when to stop the hikes altogether, according to a Wall Street Journal report.

The Federal Open Market Committee, which sets rates, is due to meet Jan. 31-Feb. 1, with market prices having an almost 100% chance of a quarter-point increase in the central bank’s reference rate. Most importantly, Fed Governor Christopher Waller said on 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 yet, and several other central bankers in recent days have backed that idea.

The Journal report, citing public statements by policymakers, said slowing the pace of increases could provide an opportunity to gauge what impact the increases so far have had on the economy. A series of interest rate hikes that began in March 2022 resulted in increases of 4.25 percentage points.

The market is currently pricing in quarter-point gains in the next two meetings, a period of inactivity, and then a half-point decline through late 2023, according to CME Group data.

However, several officials, including Governor Lyle Brainard and New York Federal Reserve President John Williams, have used the phrase “stay the course” to describe the policy path ahead.

— Jeff Cox

Nasdaq on pace for consecutive gains as tech stocks rise

The Nasdaq Composite rose more than 2.2% in midday trading on Monday, lifted by shares of battered tech stocks.

The move put the tech index on pace for another day with gains of more than 2%. The index ended 2.66% higher on Friday.

A rise in semiconductor stocks helped lift the index. Tesla and An applemeanwhile rose 7.7% and 3.2% respectively as China’s reopening raised hopes of a boost to their business. Western Digital and Advanced Micro Devices rose by about 8% each, while Qualcomm and Nvidia jumped about 7%.

Information technology was the best-performing S&P 500 sector, gaining 2.7%. This was partly due to gains in the chip sector. Communications services added 1.9%, boosted by the likes of Netflix, Meta platforms, Alphabet and Matching group.

— Samantha Subin

El-Erian says Fed should hike 50 basis points, calls smaller increase ‘mistake’

Rising inflation may appear largely in the past, but moving to a 25 basis point hike at the Federal Reserve’s next policy meeting is a “mistake,” according to Allianz chief economic adviser Mohamed El-Erian.

“I’m in a very, very small camp that thinks they shouldn’t cut to 25 basis points, they should do 50,” he told CNBC’s “Squawk Box” on Monday. “They have to take advantage of this growth window that we’re in, they have to take advantage of where the market is and they have to try to tighten financial conditions because I think we still have an inflation problem.”

Inflation, he said, has shifted from the goods sector to the services sector, but may well resume if energy prices pick up when China reopens.

El-Erian expects inflation to plateau around 4%. That, he said, will put the Fed in a difficult position as to whether they should continue to squeeze the economy to reach 2% or promise that level in the future and hope that investors can tolerate a steady 3% to 4% more. near.

“It’s probably the best result,” he said of the latter.

— Samantha Subin

A recession in earnings is inevitable, according to Morgan Stanley

An earnings recession is looming this year, according to Morgan Stanley equity strategist Michael Wilson.

“Our view has not changed as we expect the US earnings path to disappoint both consensus expectations and current estimates,” he said in a note to clients on Sunday.

Some positive developments have played out in recent weeks — such as the continued reopening of China and falling natural gas prices in Europe — and have contributed to some investors being more optimistic about the market outlook.

Still, Wilson advises investors to remain bearish on the stock, citing price action as a key driver for this year’s rally.

“The rally this year has been driven by low-quality and heavily shorted stocks,” he said. “Also saw strong movement in cyclical stocks against defensives.”

Wilson bases his forecasts on margin disappointment and thinks the case for it is growing. Many industries are already facing slowing revenues as well as bloated inventories, less productive employees.

“It’s just a matter of timing and scale,” Wilson said. “We advise investors to stay focused on the fundamentals and ignore the false signals and misleading reflections in this bear market hall of mirrors.”

– Hakyung Kim

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