Wednesday, March 22, 2023

Asia markets mixed ahead of U.S. inflation report; Japan to nominate new central bank head

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Japan’s economy grew 0.6% in fourth quarter, lower than expected

Japan’s economy expanded by 0.6% on an annualized basis for the fourth quarter of 2022, lower than expectations to see a growth of 2% in a Reuters poll.

The figure was a rebound from a revised contraction of 1% seen in the third quarter of 2022 compared to a year ago.

Private consumption rose 2% in the fourth quarter on an annualized basis, while government demand climbed 1.3% in the same period.

—Lim Hui Jie

CNBC Pro: Yields are popping. Here’s how investors can take advantage of that, according to the pros

Yields are popping again.

“Markets are coming round to the threat that the Fed will maintain a ‘higher for longer’ stance if sequential pick-up in prices, despite the continued moderation in [year-on-year] inflation, is pronounced,” Vishnu Varathan, head of economics and strategy at Mizuho Bank, said Monday. He added there was also the threat of hot jobs data for January.

“This could underpin the run-up in UST yields, alongside a Greenback that is discernibly more buoyant (than it has been late-Jan into start-Feb); whilst continuing to dampen, if not drag, equities,” he added.

How can investors ride on higher yields? Here’s what the pros say.

CNBC Pro subscribers can read more here.

— Weizhen Tan

CNBC Pro: Morgan Stanley is bullish on this Chinese tech giant — giving it upside of nearly 20%

Investors have been flocking back into Chinese tech stocks amid China’s reopening and an easing of regulatory headwinds.

Morgan Stanley has doubled down on its “buy” call on one Chinese tech giant, and raised its price target on the stock. Its bullishness comes hot on the heels on a similar call by Goldman Sachs.

Pro subscribers can read more here.

— Zavier Ong

Stocks end Monday higher

Stocks climbed Monday as traders looked ahead to Tuesday’s key inflation report, regaining their footing after the S&P 500 and Nasdaq Composite suffered their worst weekly declines in nearly two months.

The Dow Jones Industrial Average traded 377 points higher, or 1.11%, to close at 34,246.32 its best daily performance in February. The S&P 500 climbed 1.15% to close at 4,137.40 and the Nasdaq Composite advanced 1.48% to 11,891.67.

—Carmen Reinicke

Credit Suisse says this is the “worst earnings season” in 24 years, excluding recessions

With 80% of the S&P 500’s market cap having already reported earnings, Credit Suisse is forecasting overall fourth-quarter EPS estimates to have contracted by 2.2% as a result of margin weakness.

EPS estimates have dropped 1.7% since the fourth quarter ended on Dec. 31. The firm said that on average, earnings estimates increase by 2.8% following the end of the quarter. 

“This is the largest decline in 24 years, outside of the 2001 recession, the financial crisis, and the initial pandemic quarter,” Credit Suisse’s Chief U.S. Equity Strategist Jonathan Golub wrote in a note to clients on Monday. The firm said EPS growth is also expected to decline in the first quarter of 2023.

— Pia Singh

Bowman sees Fed ‘far from’ inflation goal, indicates more rate hikes

Federal Reserve Governor Michelle Bowman expects interest rates to continue to rise until the central bank makes more progress against inflation.

In a speech Monday morning, Bowman did not provide a specific forecast for rates. But she indicated that there’s more work to be done, following eight increases since March 2022.

“We are still far from achieving price stability, and I expect that it will be necessary to further tighten monetary policy to bring inflation down toward our goal,” she said in remarks before the American Banking Conference in Orlando, Fla.

“While there are costs and risks to tightening monetary policy to lower inflation, I see the costs and risks of allowing inflation to persist as far greater,” she said.

Bowman also spoke on banking regulation, saying she does not think it’s the Fed’s place to direct institutions on which sectors where they should be allowed to lend. Congressional Democrats have pushed the Fed to discourage lending to fossil fuel companies.

—Jeff Cox

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