Thursday, March 23, 2023

Asia markets, U.S. FOMC minutes, PMI, RBNZ, RBA minutes, Australia wage prices

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South Korean and Japanese defense stocks mixed after North’s missile launch

Defense stocks in Japan and South Korea are trading mixed after North Korea launched two short-range ballistic missiles off its east coast on Monday.

This comes after an earlier launch where the North fired an intercontinental ballistic missile into the sea on Saturday off Japan’s west coast, which led to the U.S. holding separate joint air exercises with South Korea and Japan on Sunday.

South Korean aircraft engine producer Hanhwa Aerospace is trading 1.13% down, but aircraft manufacturer Korea Aerospace is up 0.44%.

Other companies like weapons manufacturer Firstec and Victek, which specializes in electronic warfare systems, have risen 1.48% and 1.99% respectively.

In Japan, Kawasaki Heavy Industries, which mainly manufactures aircraft for Japan’s Self-Defense Forces, rose 0.66%, while pyrotechnics firm Hosoya Pyro-Engineering traded 1.10% up. On the other hand, Mitsubishi Heavy Industries traded 0.33% lower.

South Korea’s foreign affairs ministry has also imposed sanctions on nine entities following the launch, including two Singaporean companies, saying that they “contributed to the evasion of sanctions” on North Korea.

— Lim Hui Jie

China leaves loan prime rates unchanged

The People’s Bank of China left its 1-year loan prime rate unchanged for February at 3.65%, the central bank said in a release on Monday.

It also left its 5-year loan prime rate unchanged at 4.30%, widely in line with expectations.

The offshore yuan traded at slightly stronger levels at 6.8736 against the U.S. dollar after the announcement.

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CNBC Pro: Unsure about the market rally? Strategist picks 3 stocks to stay ‘defensively offensive’

Stock markets have rallied this year, but market watchers are uncertain if this is just another bear market rally or the start of a new bull market.

Against this backdrop, Ghosh said investors should look to be “almost defensively offensive,” and named three stocks he recommends.

Pro subscribers can read more here.

— Zavier Ong

China largely expected to hold loan prime rates

The People’s Bank of China is largely expected to make no changes to its 1-year and 5-year loan prime rates later today, according to a Reuters poll.

21 our of its 27 respondents expected the central bank to hold the rates, while 6 of its economists called for a marginal cut for the 5-year rate.

Economists pointed to the latest government data showing new loans having jumped to a record 4.9 trillion yuan ($713B) in January.

A recent statement from the central bank had also reiterated its pledge to strengthen financial support, though with an emphasis on targeted measures.

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CNBC Pro: Goldman names 2 global stocks to play the ‘clean hydrogen revolution,’ giving one 50% upside

The “revolution” in clean hydrogen is picking up pace, according to investment bank Goldman Sachs, which pointed to a few factors driving the boom.

It named these buy-rated stocks to play this theme.

CNBC Pro subscribers can read more here.

— Weizhen Tan

Week ahead: FOMC minutes, RBA, Bank of Korea, Xi speech

Here are the major events investors in the Asia-Pacific will be watching this week.

The U.S. Federal Open Market Committee will release minutes for its latest meeting concluding Feb. 1 later in the week.

On Monday, China will release its 1-year and 5-year loan prime rates for February. Malaysia will report its trade data later in the day.

On Tuesday, private surveys will release Australia and Japan’s purchasing managers’ index readings. U.S. will also release its PMI and New Zealand is slated to publish its producer price index for the fourth quarter.

Investors will also be closely watching for minutes from the Reserve Bank of Australia’s latest rate decision meeting.

Japan will also release its producer price index on Wednesday. Australia’s composite leading index for January and the nation’s wage price index for the fourth quarter will be published on this day as well.

New Zealand will also release its trade balance for January on Wednesday.

The Bank of Korea will announce its rate decision on Thursday morning. Economists polled by Reuters are expecting to see the central bank pause and leave its benchmark interest rate unchanged. Singapore’s consumer price index for January will be released as well.

Chinese president Xi Jinping will reportedly be delivering a ‘peace speech’ on the one-year anniversary of Russia’s invasion on Ukraine, according to Reuters.

— Jihye Lee

Leading indicators down 0.3%, still indicating recession ahead

Forward-looking economic data is still pointing to a recession ahead, though perhaps less so, The Conference Board reported Friday.

The board’s Leading Economic Index registered a decline of 0.3%, in line with market expectations and at least on relative terms better than the 0.8% slide in December. On a six-month basis, that puts the LEI down 3.6%, compared to the 2.4% contraction over the previous period.

“While the LEI continues to signal recession in the near term, indicators related to the labor market —including employment and personal income — remain robust so far,” said Ataman Ozyildirim, the Conference Board’s senior director of economics.

“The Conference Board still expects high inflation, rising interest rates, and contracting consumer spending to tip the US economy into recession in 2023,” he added.

—Jeff Cox

Market’s lack of reaction to inflation data may suggest a shift

“Markets have settled following an impressive start to the year, though the lack of a reaction to inflation data or “good news is bad news” mentality suggests a dramatic shift in the complexion of markets relative to last year,” said Mark Hackett, chief of investment research at Nationwide in a Friday note.

He added that Friday’s trading will determine the week’s overall direction – the S&P 500 is relatively flat on the week.

“Leadership has shifted to the risk-on asset classes, with technology and small caps leading, and the Dow underperforming the S&P 500 this year by the largest gap since 1934,” he said. “Bond investors, however, remain reactive, with the 10-year Treasury yield up 0.16% this week to 3.90%, the highest level since November.”

The shift is good news for bulls, who are looking at a narrative backed by a stronger economy than expected and a market that’s less reactive to the economy, inflation data or rising rates.

—Carmen Reinicke

Fed’s Bowman says ‘a lot more progress’ needed on inflation

Federal Reserve Governor Michelle Bowman said Friday there’s still much work to be done before policymakers can feel they have inflation under control.

“I think there’s a long way to go before we reach our 2% inflation objective and I think we’ll have to continue to raise the federal funds rate until we see a lot more progress on that,” Bowman said during an appearance in Tennessee, according to Reuters

The remarks come a day after regional presidents James Bullard of St. Louis and Loretta Mester of Cleveland said they advocated for a half-point rate hike at the last meeting, rather than the quarter-point move eventually approved.

Data this week has indicated that after abating in recent months, inflation is moving up again.

“We were seeing some progress in lowering inflation at the end of last year, but some of the data that we’re seeing early this year is not tracking with consistently lowering inflation in a way that I would like to see,” Bowman said.

—Jeff Cox

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