Market Update

In the shortened trading week due to the Lunar New Year, Asian markets, including China, South Korea, and Taiwan, remained closed on Friday. Investors absorbed China’s CPI data, revealing a 0.8% decline in January, surpassing the expected 0.5% drop and marking the fourth straight month of decline.
While seasonal factors influenced the decline, it highlights the potential for additional fiscal stimulus to reinvigorate the markets. The People’s Bank of China, in its latest quarterly policy report, pledged to provide flexible and precise policy support to enhance domestic demand, anticipating a “modest rebound” in consumer prices. Despite China implementing measures such as releasing long-term cash for banks and issuing more government bonds for construction projects, this data may prompt Beijing to unveil further stimulus measures amid challenges like a property market downturn, weak consumer demand, and deflationary pressures.
In the Asia-Pacific region, Japan’s Nikkei reached a fresh 34-year high on Friday, propelled by the central bank’s commitment to an easy monetary policy stance. Bank of Japan (BoJ) Governor Ueda echoed the Deputy Governor’s remarks, expressing a cautious approach towards raising interest rates despite the central bank’s contemplation of concluding its negative interest rate policy. Rising service-sector prices, driven by companies increasing wages and passing on labor costs, contribute to the bank’s growing conviction that conditions for phasing out stimulus are aligning. These remarks increase the likelihood of the BOJ pulling short-term interest rates from negative territory and making broader changes to its stimulus framework.
Corporate America had a positive week as another round of corporate earnings unfolded, with nearly 80% of S&P 500 companies surpassing Q4 2023 earnings estimates. The S&P 500 reached a historic high, hitting 5,000, driven by a renewed surge in big tech and optimism surrounding potential Federal Reserve rate cuts, enhancing the outlook for corporate profits. Earnings results underscore the resilience of the US, even in the face of higher interest rates and looming recession risks. Impressive gains from major players like Nvidia, Alphabet, Intel, Apple, Amazon.com, Microsoft, and Applied Materials infused Wall Street with positive momentum on Friday as investors grew more optimistic about the economic outlook.
Looking ahead, investors await next week’s US consumer price data to gauge if the recent strength in the US economy sparks an inflationary rebound, potentially impacting rate cut expectations.
European markets experienced minimal movement this week, as limited economic data was available for investors to analyze. However, a notable development was the welcomed decrease in inflation in the continent’s largest economy. Official data released on Friday revealed that German inflation dropped to 2.9% in January, aligning with preliminary data and down from December’s 3.7%. This decline was primarily attributed to a significant drop in energy costs.
In the upcoming week, key economic data includes US and UK CPI, UK and Japanese GDP for Q4 2023, US core annual inflation rate, UK unemployment rate, US retail sales, and initial jobless claims. Hong Kong will be closed for trading on Monday and Tuesday, and China’s mainland markets will remain closed throughout the week in celebration of the Lunar New Year.