Trade of the Day: Stocks rally after China data while oil climbs; US Treasuries extend losses but gold rebounds
Quote of the Day: “The phase-one deal is akin to step one in couples’ therapy: The two parties have agreed to talk to each other and made some promises to uphold the relationship,” said analysts at Oxford Economics. “But deeper structural tensions concerning industrial subsidies, technology rivalry and other non-tariff barriers risk further decoupling into the future.”
Stock of the day: Xiaomi rose as much as 10.1% in heavy trade after POCO, its Indian sub-brand, was spun-off as an independent brand.
Number of the Day: $40 billion – the amount that Softbank said it will invest for the development of a new Indonesian capital. Indonesia will start building a new capital on Borneo island later this year, moving away from the fast-sinking city of Jakarta.
Tip of the Day: “We remain bullish on global equities as global earnings revision ratios rise and global manufacturing PMI has turned following the de-escalation of the trade tensions,” said Nupur Gupta, portfolio manager at Eastspring Investments. “Within equities, we favour Japan and US, and remain underweight Europe and neutral Emerging Markets. In sync with improving data, we are bearish US duration and overweight US High Yield bonds. On currencies, we are marginally overweight USD vs EUR and SGD as US economic data improves. That said, USD sentiment remains bearish which reduces our overall conviction on USD appreciating significantly.”
Asian markets rallied after China GDP data showed recovery in the world’s second-biggest economy and upbeat US retail data which helped Wall Street post new highs lead by the technology sector. China’s GDP growth slowed to its lowest in almost 30 years. Data released showed Q4 expansion was at 6%, same as the third quarter and the full year GDP grew at 6.1%, down from 6.6% in 2018 and the slowest since 1990. Domestic demand showed further signs of recovery in December, with retail sales stabilizing (Nov & Dec: 8.0% y/y) and FAI improving (Dec: 5.4% ytd y/y, Nov: 5.2%), Barclays analysts wrote in a note.
The MSCI Asia ex-Japan index rose 0.4% while the Nikkei climbed 0.45% and the Australian S&P ASX 200 index was up 0.32%. Hong Kong’s Hang Seng index rallied 0.6% as healthcare, insurance and basic materials boosted the benchmark. Europe is also opening on a firm footing with the Stoxx Europe 600 leaping 0.7% and Nasdaq and S&P Futures are both up 0.2% indicating a strong session at Wall Street.
“We think this set of data is in-line with our expectation that China’s growth is stabilizing and is likely to enter a slow recovery phase in 2020. While 1Q20 growth may still dip because of a high statistical base, assuming that the full-year growth target is to be set at ‘around 6%,’ we do not think growth would decelerate much lower than that in subsequent quarters,” said Christiaan Tuntono, Senior Economist, Asia Pacific, Allianz Global Investors.
“We think a stable Chinese growth is supportive to Asia’s growth this year. Coupled with a positive outlook on the RMB and much reduced trade/geopolitical tension, we remain constructive on the outlook of the Chinese and Asian risky-asset markets over the near-to-medium term.”