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

CNBC Pro: These 6 Low-Debt Global Stocks Should Outperform, Bernstein Says

Rising interest rates have major implications for highly indebted companies, as they are likely to face higher costs due to increased borrowing.

As interest rates continue to rise, Bernstein analysts believe stocks with low debt exposure and higher quality debt should outperform.

The investment bank named a handful of low-debt global stocks with investment-grade credit ratings likely to outperform.

CNBC Pro subscribers can learn more here.

—Ganesh Rao

Zip shares reverse after initial rally

Australian company “buy now, pay later” zipper fell more than 10% after a short-lived rally following its quarterly results.

Zip traded down 15%, a sharp reversal from its earlier gains of more than 10% after posting 12% revenue growth.

The company said “underlying monthly cash burn continued to decline and should improve further.” He said the cash and liquidity position currently available is “sufficient to allow the business to generate cash flow positive” and expects to generate cash positive EBITDA by the first half of the year. financial year 2024.

Week Ahead: PMI, Australia & Singapore Inflation Reports, South Korea GDP

Here are some of the major economic events in Asia-Pacific that investors will be watching closely this week.

Stock markets in mainland China and Taiwan will remain closed until trading resumes on January 1. 30.

On Tuesday, regional purchasing managers’ index readings for Japan and Australia will take center stage as most markets remain closed to observe the Lunar New Year. except Australia, Japan and Indonesia.

Inflation reports will be in focus on Wednesday as Australia and New Zealand release their consumer price indices for the last quarter of 2022. Singapore will release its inflation figures for December.

The Hong Kong market is expected to resume trading on Thursday.

South Korea and the Philippines’ fourth-quarter gross domestic product 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 released its Services Producer Price Index on Thursday.

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

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

—Jihye Lee

Business conditions in Australia deteriorated last month: NAB survey

National Australia Bank’s Monthly Business Survey showed deteriorating business conditions for December with a reading of 12 points, down from November’s print of 20 points.

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

“The main message from the December monthly survey is that growth momentum has slowed significantly at the end of 2022, while price pressures and purchasing costs have likely peaked,” the chief economist said. of the NAB, Alan Oster.

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

—Jihye Lee

Leading Japanese factory data shows second month of contraction

The Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index in January remained unchanged for a second consecutive month at 48.9, below the 50 mark that separates contraction from growth in the previous month.

The reading “reported the strongest deterioration in health [of] Japanese manufacturing sector since October 2020,” S&P Global said.

The flash composite index of production at Jibun Bank rose to 50.8 in January, slightly higher than the reading of 49.7 seen in December.

Flash service business activity rose further with a print of 52.4, higher than December’s reading of 51.1.

—Jihye Lee

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

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

Pro subscribers can learn more here.

— Zavier Ong

Fed will likely discuss when to halt hikes next week, Journal report says

Next week, Federal Reserve officials will almost certainly approve of another deceleration in interest rate hikes while discussing when to halt hikes altogether, according to a Wall Street Journal report.

The Federal Open Market Committee responsible for setting rates is due to meet on January 1. 31-Feb. 1, with markets pricing a nearly 100% chance of a quarter-point hike in the central bank’s benchmark rate. More importantly, Fed Governor Christopher Waller said on Friday he considered a 0.25 percentage point hike the preferred move for the next 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 from policymakers, said the slowing pace of increases could provide an opportunity to assess the impact the increases are having so far on the economy. A series of rate hikes starting in March 2022 resulted in increases of 4.25 percentage points.

Market prices are currently pointing to quarter-point increases in the next two meetings, a period of inaction, and then down to a half-point reduction by the end of 2023, according to data from the CME group.

However, several officials, including Governor Lael Brainard and New York Fed President John Williams, have used the phrase “staying the course” to describe the future policy path.

—Jeff Cox

Nasdaq on pace for back-to-back gains as tech stocks rise

The Nasdaq Composite rebounded more than 2.2% in midday trading Monday, buoyed by shares of battered tech stocks.

The move puts the tech-heavy index on pace for a straight day of gains exceeding 2%. The index ended up 2.66% on Friday.

Rising semiconductor stocks helped lift the index. You’re here and Apple, meanwhile, jumped 7.7% and 3.2%, respectively, as China’s reopening raised hopes of a boost for their businesses. western digital and Advanced micro-systems increased by around 8% each, while Qualcomm and Nvidia jumped about 7%.

Information technology was the best performing sector in the S&P 500, gaining 2.7%. This was partly due to gains in the chip sector. Communication services rose 1.9%, boosted by companies like netflix, Metaplatforms, Alphabet and Matching group.

— Samantha Subin

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

Much of the inflation spike may be in the past, but a move to a 25 basis point hike at the Federal Reserve’s upcoming policy meeting is a ‘mistake’, chief economic adviser says Allianz, Mohamed El-Erian.

“I’m in a very, very small camp that thinks they shouldn’t demote 25 basis points, they should do 50,” he told CNBC’s “Squawk Box” on Monday. “They should take advantage of this window of growth that we’re in, they should take advantage of the market situation and they should 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 could very well surge again if energy prices rise as China reopens.

El-Erian expects inflation to peak around 4%. This, he said, will put the Fed in a difficult position as to whether it should continue to crush the economy to reach 2%, or promise that level in the future and hope that investors can tolerate stability. from 3% to 4% in the shorter term.

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

— Samantha Subin

An earnings recession is imminent, says Morgan Stanley

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

“Our view has not changed as we expect the trajectory of U.S. earnings to disappoint both consensus expectations and current valuations,” he said in a note to the media on Sunday. clients.

Some positive developments have occurred in recent weeks – such as China’s ongoing reopening and lower natural gas prices in Europe – and have helped some investors view the market outlook with more optimism.

However, Wilson advises investors to stay bearish on equities, citing price action as the main influence behind this year’s rally.

“This year’s rally has been led by poor quality and heavily shorted stocks,” he said. “He also saw a strong move from cyclical stocks to defensive stocks.”

Wilson based his forecast on disappointing margins, and he thinks the case for that is growing. Many industries are already facing revenue slowdowns, as well as bloated inventories and less productive workforces.

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

—Hakyung Kim

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