ASIA STOCKS: Asian Equities Lower As Tech Stocks Struggle, BOK Cuts Rates
Feb-25 05:04
Asian equities broadly declined, led by losses in technology and semiconductor stocks amid fresh US restrictions on Chinese investments. The Hang Seng Tech Index fell on the open before paring loses as investors looked to buy the dip, while TSMC and Samsung Electronics weighed on Taiwan and South Korea. The BOK cut rates, but the Kospi still ended lower. Australia saw weakness in consumer stocks following disappointing results from a number of companies.
- China & Hong Kong equities plunged on the open with the HS Tech Index down over 4% at one stage, however we have seen a strong reversal with the index now trading flat for the session. Investors seem to largely ignoring both the slump in the SOX and Nasdaq overnight and the headlines out about Trump tightening chip controls. The CSI 300 is 0.40% lower, while the HSI is -0.60%, property and consumer staples are the worst performing sectors with both sectors trading roughly 1% lower.
- Japan's Nikkei 225 is 1% lower, with tech stocks leading declines due to concerns over US semiconductor restrictions on China. However, trading houses like Mitsubishi Corp. and Marubeni gained after Berkshire Hathaway reaffirmed confidence in the sector. The broader TOPIX is trading better, although still down 0.20% for the session.
- South Korea's Kospi declined 0.4%, even as the BOK cut rates to 2.75%, as expected. Semiconductor stocks weakened amid US-China chip tensions, with Samsung Electronics and SK Hynix underperforming.
- Taiwan's TAIEX is 0.8% lower, with TSMC among the biggest drags on worsening US-China chip restrictions. Investors turned cautious following Trump’s latest executive order targeting Chinese investments.
- Australia's ASX 200 is 0.60% lower as corporate earnings drove stock-specific volatility, with consumer stocks the worst performing. Viva Energy and Johns Lyng plunged after weak earnings, Adairs tumbled 12%, extending Monday’s losses after reporting 1H25 EBITDA of A$39.1M, well below the A$61.5M consensus estimate, Domino’s fell 11% after reiterating a 1H loss, citing ongoing weakness in France and Japan, while Zip surged 16% after providing strong full-year revenue guidance, posting record cash earnings, and reporting a 40.3% YoY increase in US TTV, reinforcing confidence in its FY25 two-year targets. In New Zealand, Ryman Healthcare tumbled 23% after resuming trade post NZ$1 billion capital raise.
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AUSSIE 10-YEAR TECHS: (H5) Resistance Remains Intact
Jan-24 23:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.615/851 - High Dec 31 / High Dec 11
- PRICE: 95.510 @ 15:51 GMT Jan 24
- SUP 1: 95.275 - Low Nov 14 (cont) and a key support
- SUP 2: 94.477 - 1.000 proj of the Dec 11 - 23 - 31 price swing
- SUP 3: 94.495 - 1.0% 10-dma envelope
The Aussie 10-yr futures contract continues to trade below the Dec 11 high of 95.851, and has traded through the Dec low. A stronger bearish theme would expose 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish theme. For bulls, a confirmed reversal and a breach of 95.851, the Dec 11 high, would instead reinstate a bull cycle and refocus attention on resistance at 96.207, a Fibonacci retracement point.
FED: MNI Fed Preview-Jan 2025: Keeping Rate Cut Hope Alive
Jan-24 21:35
We've just published our preview of the January FOMC meeting:
- The FOMC will keep the benchmark Fed funds rate on hold on January 29 for the first time in four meetings, as it shifts to a more patient phase of its easing cycle after delivering 100bp of cuts.
- The forward guidance adopted in December points to a data-dependent approach to assessing the “extent and timing” of additional rate adjustments. To this end, there has been only limited inflation and labor market data since then, while the Trump administration’s policies and their potential impact on the economic outlook are still in a formative stage.
- With minimal Statement changes expected and no new rate/macro projections, the focus will be on Chair Powell’s press conference which will likely repeat the same themes heard six weeks earlier.
- As such, the risks to the market reaction to the meeting lean slightly dovish in the context of only one more full rate cut being priced for the cycle.
- While he won’t be able to add any additional commentary on the Fed’s response to prospective fiscal/trade/immigration policy shifts, we suspect Powell will remain optimistic on the inflation trajectory and reiterate that 50bp of cuts remain the FOMC’s baseline scenario this year. In other words, the bias toward easing remains intact.
- Additionally, Powell probably won’t completely rule out another cut as soon as the next meeting in March, while being careful to couch any future moves as data- and outlook- dependent, and emphasizing that the Fed can afford to be patient so long as the economy and labor market remain solid.
Note to readers: MNI’s separate preview of sell-side analyst summaries to follow on Monday Jan 27
MACRO ANALYSIS: MNI US Macro Weekly: Fed Remains Firmly On Track To Hold
Jan-24 21:34
- Data in the week ahead of the January Fed meeting was thin and overall mixed, with President Trump’s apparently softer tone on tariffs helping implied rates soften slightly toward end-week.
- January’s preliminary Services PMI reading unexpectedly fell to its lowest since April 2024, though had some slightly less dovish details.
- Weekly continuing claims provided a surprise on the weak side, just exceeding recent highs, but the broad report (including initial claims a touch higher than expected) didn’t materially change the story of firms dampening down on re-hiring rather than turning to layoffs to manage headcount.
- Looking ahead to next week, the FOMC will keep the benchmark Fed funds rate on hold on January 29 for the first time in four meetings. With minimal Statement changes expected and no new rate/macro projections, the focus will be on Chair Powell’s press conference.
- He won't totally rule out a cut at the next meeting in March, but he’ll probably reiterate that the Fed can remain patient on its next move until receiving more clarity on both inflation data and the government policy outlook (i.e. not until later in the year). Markets continue to price between 1 and 2 cuts by end-2025.
- Aside from Tuesday’s preliminary durable goods report, data for the coming week is backloaded with the highlights being the first estimate of real GDP growth in Q4 on Thursday before the monthly PCE report for December on Friday.
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