Symax Fintech Daily Market Insights 23.01.24

US stocks climbed to new highs yet again  with strong signals about the economy and corporate profitability bolstering investors’ appetite for risk despite warnings that the market has run too far, too fast. Equities are quickly shaking off a rocky start to the year amid bets the Federal Reserve will cut interest rates in 2024 and the artificial-intelligence boom will fuel profit growth. Earnings season kicks into high gear this week, with Netflix, Tesla and Intel among those due to report. United Airlines, which announced results after the US market close Monday, gave a forecast for earnings this year that was stronger than most analysts had suggested they would put forward BB

The US and UK launched new airstrikes against eight Houthi targets in Yemen on Monday, the latest salvo in an allied effort to stop the group from harassing commercial shipping in the Red Sea. Monday night’s strikes, which marked the eighth round of allied attacks in 12 days, targeted an underground storage site and locations linked to the Houthis’ “missile and air surveillance capabilities,” the two countries said in a statement along with partners Australia, Bahrain, Canada and the Netherlands.BB

The Bank of Japan kept its monetary policy settings steady and indicated it was a little more confident about hitting its price goal while offering no clear hint over the likely timing of a potential end of the negative interest rate. The BOJ maintained its -0.1% short-term rate and kept yield curve control parameters intact at the end of a two-day meeting, according to its statement Tuesday. The decision initially weakened the yen against the dollar before it swung to a small gain as investors digested the implications of the decision.  BB

Christine Lagarde’s performance as the head of the European Central Bank was criticized in a staff union survey marking the halfway point of her eight-year term. A slight majority of respondents in the December poll assessed her presidency as either “poor” or “very poor,” the IPSO union said in a document summarizing the findings. More than 53% also said Lagarde wasn’t currently the right person for the job.  BB

Red Sea Tensions | The crisis in the Red Sea is roiling shipments of everything from cars to energy. Tesla and Volvocar have signaled production disruptions, while retailers Tesco, Marks & Spencer Group and Next have all flagged the risk of higher prices for consumers. BB

After years of regulatory tinkering, Washington is now forcing through the most rigorous overhaul of the world’s biggest bond market in decades. Securities and Exchange Commission Chair Gary Gensler, who once oversaw federal debt management at the US Treasury, has championed a move to require the vast majority of Treasuries trading to migrate to a central counterparty clearinghouse—an intermediary between buyers and sellers that assumes ultimate responsibility for the transaction. BB

The BOJ is expected to keep its main monetary policy settings steady when it announces the outcome of its meeting Tuesday. The focus will be on how Governor Kazuo Ueda assesses progress made toward achieving the sustainable inflation needed to bring negative interest rates to an end. All 51 BOJ watchers in a Bloomberg poll expect the bank to keep its short-term policy rate at -0.1% and leave the parameters of the yield curve control program intact. Treasuries, meanwhile, strengthened marginally across much of the curve Monday, with yields from 3 to 30 years slipping lower by around one to two basis points on the day. BB

China’s Premier Li Qiang called for more effective measures to stabilize his country’s slumping stock market after the mainland’s benchmark CSI 300 Index hit a five-year low. Chinese equities have sold off for most of the past year, hurt by factors ranging from a protracted crisis in the housing market to persistent deflationary pressures in the wider economy. A rout in Chinese stocks listed in Hong Kong intensified, pushing their discount to mainland peers to the deepest in fifteen years.

Chinese equities are in a deep-enough funk that Premier Li Qiang is urging the authorities to be more “forceful” in their efforts to stabilize the local stock market. That’s a tough ask, especially with some investors pointing out that the government is a major part of the problem because of its control of not just the commanding heights of the economy, but also most of the more modest foothills. 

There will likely be plenty of investors outside China hoping that the country can stop the relentless slide in its equities, even if turning them around could be more problematical. South Korea’s Kospi Index is one example of a benchmark that has struggled mightily along with Chinese shares. The strong trade ties between two states is part of that equation. There are also the derivatives tied to China shares hanging over Seoul investors, and the more enduring dangers of the fallout from the US’s so-called “chip war” with Beijing. 

There are a lot of other Asia-Pacific stock markets that have been similarly hamstrung by their ties to the region’s biggest economy — with Japan’s central-bank boosted rally the exception helping to prove the rule. Much of Asia is all likely to go on underperforming until China gets its equity ship in order. BB

Israel’s ground forces advanced deeper into the southern Gaza Strip on Tuesday, according to the Israeli army, with intense fighting with Hamas reported in an area where tens of thousands of displaced Palestinians are sheltering. The widened offensive came as Israel faced mounting international pressure to wind down fighting that has left thousands dead and secure a diplomatic agreement for a cease-fire and the release of Israeli hostages. BB

For years, Mexico was an afterthought among investment bankers, a perennial underperformer overshadowed by Brazil. But not anymore. Suddenly there’s growing conviction on Wall Street that the country is on the cusp of a breakout. Bank of America, Morgan Stanley and Goldman Sachs all predict investment banking revenue from Mexico will jump this year. JPMorgan CEO Jamie Dimon said his bank has “doubled or tripled” capital in the country over the past six years and sees a “great” outlook for growth. BB

UK firms in “critical” distress jumped by nearly 26% to 47,477 in the fourth quarter from the previous three months amid inflation and high rates, according to Begbies Traynor. Nearly 540,000 companies were in “significant” distress, up 12.9%. BB