Morning Wrap (31.01.2024)

Indices in the Asia-Pacific region are having a mixed session. The Japanese Nikkei 225 is up 0.61%, the Australian S&P ASX 200 gains 1.30%, and the Kospi is down 0.12%. Stock markets in China are again losing about 1.20-1.30%.

In the first part of the forex market session, larger movements are already noticeable. The dollar is the strongest currency among the G10, with the USDIDX index gaining 0.25%. On the other end is the Australian dollar. AUDUSD is down by 0.60%.

The weakness of AUD stems from inflation data released earlier in the day, which was lower than expected.

Inflation in Australia is falling faster than expected, deepening expectations that the Reserve Bank of Australia (RBA) will keep interest rates unchanged at next week's meeting:

• CPI Index (q/q) (Q4): current 0.6%; forecast 0.8%; previously 1.2%;
• CPI Index (Q4): current 4.1% y/y; forecast 4.3% y/y; previously 5.4% y/y;

In the first part of the day, investors also learned about a package of macro data from Japan for December. Both industrial production and retail sales were worse than expected. However, for industrial production, the data was higher than the previous month:

• Retail Sales: current 2.1% y/y; forecast 4.7% y/y; previously 5.4% y/y;
• Industrial Production: current 1.8% m/m; forecast 2.4% m/m; previously -0.9% m/m;

Chinese factory activity has been declining for the fourth consecutive month, but preliminary PMI data were in line with expectations. The PMI for the manufacturing sector in January remained just below the 50-point threshold, signaling that the domestic economy is trying to regain momentum:

• Manufacturing PMI: current 49.2; forecast 49.2; previously 49.0;
• Services PMI: current 50.7; forecast 50.6; previously 50.4;

Yesterday, after market close, earning reports were published from leading Tech companies. Both reports of Microsoft and Alphabet (especially Microsoft, due to AI) were strong, but the profit taking pressure persist as earnings were not good enough to drive stock market sentiments much higher from current levels.

Earnings of Big Tech were better than expected on almost any measure, while AMD report surprised with 'only' revenues beating expectations.

Cryptocurrencies are consolidating during the Asia-Pacific session. Bitcoin is holding around 43000 USD, while Ethereum is slightly down to 2340 USD.