Australia PMI, Japan Jibun Flash PMI, Lunar New Year holidays

CNBC Pro: These 6 Low-Debt Global Stocks Are Set to Outperform, Bernstein Says

Rising interest rates have major implications for companies with large amounts of debt, as they are likely to experience higher costs from increased borrowing.

As interest rates continue to rise, Bernstein analysts believe stocks with low debt exposure and higher quality debt should outperform.

The investment bank named a handful of low-debt global stocks with an investment-grade credit rating there as likely to outperform.

CNBC Pro subscribers can read more here.

– Ganesh Rao

Shares in Zip reverse after initial rally

Australian “buy now pay later” company Zipper fell more than 10% after a short-lived rally after its quarterly results.

Zip traded 15% lower, a sharp turnaround from earlier gains of more than 10% after revenue growth of 12%.

The company said the underlying “monthly cash burn has continued to decrease and is expected to improve further.” It said available cash and liquidity positions are “sufficient to see the company through to generating positive cash flow” and expects to deliver positive cash EBITDA by the first half of the 2024 financial year.

The week ahead: PMIs, Australia and Singapore inflation reports, South Korea GDP

Here are some of the major economic events in the Asia-Pacific that investors will be watching closely this week.

Stock markets in mainland China and Taiwan will remain closed until they resume trading on January 30.

On Tuesday, regional purchasing managers’ index readings for Japan and Australia will be in focus while most markets remain closed to observe the Lunar New Year with the exception of Australia, Japan and Indonesia.

Inflation reports will be in focus on Wednesday when Australia and New Zealand publish their consumer price index readings for the final quarter of 2022. Singapore will publish its inflation print for December.

Hong Kong’s market is scheduled to resume trading on Thursday.

Fourth-quarter gross domestic product for South Korea and the Philippines will be published on Thursday, while the Bank of Japan will release a summary of views from its latest monetary policy meeting in January. Japan also reports its service producer price index on Thursday.

Japan’s core CPI readings for the capital Tokyo will be a barometer of where monetary policy is headed.

Australia’s producer price index and trade data will also be closely watched indicators ahead of the Reserve Bank of Australia’s meeting in the first week of February.

– Jihye Lee

Australia’s business conditions worsened last month: NAB survey

National Australia Bank’s monthly business survey showed worsening business conditions for December with a reading of 12 points, down from November’s print of 20 points.

The survey reflects worsening trade conditions, profitability and employment, NAB said.

“The main message from the December monthly survey is that growth momentum has slowed significantly in late 2022 while price and purchasing cost pressures are likely to have peaked,” NAB chief economist Alan Oster said.

Meanwhile, business confidence rose in December by 3 points to -1, an improved reading from -4 points seen in November.

– Jihye Lee

Japan’s headline factory data shows second month of contraction

Au Jibun Bank Flash Japan’s January manufacturing purchasing managers’ index was unchanged for a second straight month at 48.9, below the 50 mark that separates contraction and growth from the previous month.

The reading “signaled the strongest deterioration of health [of] the Japanese manufacturing sector since October 2020,” S&P Global said.

au Jibun Bank flash composite manufacturing index rose to 50.8 in January, slightly higher than the reading of 49.7 in December.

Flash services increased further with a print of 52.4, higher than December’s reading of 51.1.

– Jihye Lee

CNBC Pro: Wall Street is excited about Chinese tech — and loves one mega-cap stock

After more than 2 years of regulatory violations and a pandemic-induced slowdown, Chinese tech names are back on Wall Street’s radar, with one stock in particular standing out as a top pick for many.

Pro subscribers can read more here.

— Zavier Ong

The Fed is likely to discuss next week when to stop hikes, the Journal report said

Federal Reserve officials next week are almost certain to approve another slowdown in interest rate hikes, while debating when to stop the hikes altogether, according to a Wall Street Journal report.

The rate-setting Federal Open Market Committee will meet Jan. 31-Feb. 1, with markets pricing in an almost 100% chance of a quarter-point increase in the central bank’s benchmark interest rate. Most prominently, Fed Governor Christopher Waller said on Friday that he sees a 0.25 percentage point increase as the preferred move for the upcoming meeting.

However, Waller said he doesn’t think the Fed is done tightening yet, and several other central banks in recent days have backed that view.

The Journal report, citing public statements from policymakers, said a slowdown in the pace of increases could provide an opportunity to assess the impact of the increases so far on the economy. A series of interest rate increases starting in March 2022 has resulted in increases of 4.25 percentage points.

Market prices currently indicate quarterly increases at the next two meetings, a period of no action, and then up to a half-point reduction by the end of 2023, according to CME Group data.

However, several officials, including Governor Lael Brainard and New York Fed President John Williams, have used the phrase “stay the course” to describe the future policy path.

-Jeff Cox

Nasdaq on pace for back-to-back gains as tech stocks rise

The Nasdaq Composite rose more than 2.2% in midday trading Monday, lifted by shares of battered tech stocks.

The move boosted the tech-heavy index to a day in a row of gains of more than 2%. The index ended 2.66% higher on Friday.

Rising semiconductor stocks helped push the index higher. Tesla and apple, meanwhile, rose 7.7% and 3.2%, respectively, as China’s reopening raised hopes of a boost for their businesses. Western Digital and Advanced Micro Devices rose about 8% each, while Qualcomm and Nvidia jumped around 7%.

Information technology was the best performing S&P 500 sector, up 2.7%. That was partly due to gains in the chip sector. Communication services increased by 1.9%, boosted by the likes of Netflix, Meta platforms, Alphabet and Match group.

– Samantha Subin

El-Erian says Fed should hike 50 basis points, calls smaller hike a ‘mistake’

Australia PMI, Japan Jibun Flash PMI, Lunar New Year holidays

Rising inflation may appear largely in the past, but a shift to a 25 basis point hike at the next central bank meeting is a “mistake”, according to Allianz Chief Economic Advisor Mohamed El-Erian.

“‘I’m in a very, very small camp that thinks they shouldn’t cut down to 25 basis points, they should do 50,'” he told CNBC’s “Squawk Box” on Monday. “They should take advantage of this growth window that we’re in, they should take advantage of where the market is, and they should try to tighten financial conditions because I think we still have an inflationary problem.”

Inflation, he said, has shifted from the goods to services sector, but may well pick up again if energy prices rise when China reopens.

El-Erian expects inflation to be around 4 percent. This, he said, will put the Fed in a difficult position as to whether to continue crushing the economy to reach 2%, or promise that level in the future and hope investors can tolerate a steady 3% to 4% nearer term.

“It’s probably the best result,” he said of the latter.

– Samantha Subin

An earnings recession is imminent, according to Morgan Stanley

An earnings recession is imminent this year, according to Morgan Stanley equity strategist Michael Wilson.

“Our view has not changed as we expect the US earnings trajectory to disappoint both consensus expectations and current valuations,” he said in a note to clients on Sunday.

Some positive developments have unfolded in recent weeks – such as China’s ongoing reopening and falling natural gas prices in Europe – and have contributed to some investors taking a more optimistic view of the market outlook.

However, Wilson advises investors to remain bearish on stocks, citing price action as the main influence for this year’s rally.

“The rally this year has been led by low quality and heavily shorted stocks,” he said. “It has also witnessed a strong movement in cyclical stocks relative to defensive ones.”

Wilson has based his forecasts on margin disappointment, and he believes the case for this is growing. Many industries are already facing declining revenues, as well as inventory bloat, less productive workforces.

“It’s simply a matter of timing and size,” Wilson said. “We advise investors to stay focused on fundamentals and ignore the false signals and misleading reflections in this bear market hall of mirrors.”

– Hakyung Kim

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