Today’s Big Picture
Asia-Pacific equity markets ended today mixed. South Korea’s KOSPI was down 0.85%, led by Technology Services and Health Technology names. Hong Kong’s Seng closed 0.79% lower while both Australia’s ASX All Ordinaries and China’s Shanghai Composite declined a mere 0.10%. Taiwan’s TAIEX was essentially flat, eking out a 0.04% gain as India’s Sensex rose 0.94% and Japan’s Nikkei advanced 1.23% on speculation ahead of the Bank of Japan rate decision. By mid-day trading, European equity indices are down across the board, and U.S. futures point to a lower market open.
Setting the tone for the first day of this shortened trading week is PwC’s 26th Annual Global CEO Survey that showed 73% of CEOs think global growth will decline in the next year. Those findings, which surveyed 4,410 CEOs across 105 countries, follow last week’s Conference Board’s annual “C-Suite Outlook” survey that showed corporate leaders seeing a “soft and shallow” recession ahead. These survey results are expected to loom over the December quarter earnings season, which kicks up a notch this week. On top of that, the 2023 World Economic Forum (WEF) in Davos, Switzerland is underway. There too, the WEF shared results from a survey of public and private sector chief economists that found two-thirds expect a global recession in 2023.
Rubbing salt into the market’s mood, European Central Bank Chief Economist Philip Lane said interest rates will have to move into restrictive territory to bring inflation back to target. That comment sets the tone for several Federal Reserve officials making the rounds this week amid a wave of key December economic data.
One potential tailwind for the economy in the first half of 2023 is China’s re-opening; however, the upcoming Chinese New Year celebration that begins on January 22 is expected to bring with it a spike in Covid cases. Once the current Covid wave passes, economists see a recovery in the coming months, predicting growth of close to 5% in 2023.
The Chinese economy expanded 2.9% YoY in Q4 2022, easing from a 3.9% growth in Q3 but above market estimates of a 1.8% rise. For the full year of 2022, China’s economy grew by 3.0%, missing the official target of around 5.5%, and marking the second slowest pace since 1976, underlining the impact of Beijing’s zero-COVID strategy before it was abruptly scrapped last month. China’s leaders are set to announce the 2023 GDP growth target in March at an annual parliamentary meeting.
China’s retail trade dropped by 1.8% YoY in December, softer than a 5.9% decline in the prior month and better than market expectations for an 8.6% fall. However, December marked the third straight month of decrease in retail trade. China’s industrial production expanded 1.3% YoY in December, more than market estimates of a 0.2% rise but far slower than the 2.2% increase posted in November. Finally, according to data released by China’s National Statistics Bureau, the country had 1.41 billion people at the end of last year, 850,000 fewer than at the end of 2021. This marks the first time China’s population has shrunk in six decades, making it the latest milestone in a worsening demographic crisis for the world’s second-largest economy.
The annual inflation rate in Germany was at 8.6% in December, the lowest in four months and in line with preliminary estimate, but still well above the European Central Bank’s target of about 2%.
The ZEW Indicator of Economic Sentiment for the Euro Area rose by 40.2 points from a month earlier to +16.9 in January, well above the market forecast of -15.0, and the first data point in positive territory since February. The January report also showed the indicator of the current economic situation went up by 2.6 points to -54.8 and inflation expectations fell by 4.4 points to 83.7.
At 9:30 AM ET, the Empire State Manufacturing Index for January will be published. The consensus view sees a -8.7 reading for the month vs. -11.2 for December.
Friday saw markets continue their end-of-week rally as the Dow was up 0.33%, the S&P 500 gained 0.40%, the Russell 2000 rose 0.58% and the Nasdaq Composite closed 0.71% higher. Sectors were mixed, with Real Estate (-0.58%), Utilities (-0.36%), and Industrials (-0.12%) getting drowned out by the rest of the sectors, led by Consumer Discretionary (0.94%) and Financials (0.75%). Interestingly, Aerospace and Defense names took a hit with General Dynamics (GD), Lockheed Martin (LMT), Raytheon Technologies (RTX), and Northrup Grumman (NOC) combining to contribute to over 330% of the Industrials sector’s negative return for the day. The move in those stocks reflects new leadership in the House of Representatives and its declaration to rein in government spending.
Here’s how the major market indicators stack up year-to-date:
- Dow Jones Industrial Average: 3.49%
- S&P 500: 4.16%
- Nasdaq Composite: 5.85%
- Russell 2000: 7.14%
- Bitcoin (BTC-USD): 19.71%
- Ether (ETH-USD): 20.93%
Stocks to Watch
Microsoft (MSFT) will add OpenAI’s viral artificial intelligence bot ChatGPT to its cloud-based Azure service “soon,” as Microsoft mulls taking a far larger stake in OpenAI. For those who are not familiar with ChatGBT and OpenAI, and the possibilities this technology can unlock, more can be found here.
Following Tesla’s (TSLA) recent price cuts, Chinese automaker Xpeng (XPEV) announced price cuts for some models as well. Xpeng reduced the starting prices for its best-selling P7 electric sedan to CNY 209,900, down 12.5% from previous prices. It has also cut prices between 10%-13% for all versions of its P5 sedan and G3i SUV.
Embraer SA (ERJ) secured a new order for an undisclosed customer for 15 new E195-E2 aircraft valued at $1.17 billion.
Diageo (DEO), the owner of Johnnie Walker whisky and Tanqueray gin, agreed to buy Don Papa Rum, a high-end dark rum from the Philippines, in a deal worth up to about $473M.
The near-term IPO calendar is relatively light so there are no significant IPOs slated to price this week. Readers looking to dig more into the upcoming IPO calendar should visit Nasdaq’s Latest & Upcoming IPOs page.
After Today’s Market Close
Interactive Brokers (IBKR), Pinnacle Financial (PNFB), Progress Software (PRGS), and United Airlines (UAL) are slated to report their latest quarterly results after equities stop trading today. Those looking for more on which companies are reporting when, head on over to Nasdaq’s Earnings Calendar.
On the Horizon
Wednesday, January 18
- Japan: Core Machinery Orders, Industrial Production – November
- UK: Car Registrations – December
- Eurozone: Consumer Price Index – December
- Japan: Bank of Japan Interest Rate Decision
- US: Producer Price Index – December
- US: Retail Sales – December
- US: Industrial Production & Capacity Utilization – December
- US: NABH Housing Market Index – January
- US: Fed Beige Book – January
Thursday, January 19
- US: Housing Starts & Building Permits – December
- US: Philadelphia Fed Index – January
Friday, January 20
- Japan: Consumer Price Index – December
- UK: Retail Sales – December
- Germany: Producer Price Index – December
- US: Existing Home Sales – December
Thought for the Day
“Keep calm and enjoy the short week.” ~ Anonymous
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.