MARKET WRAP 

As of Thu 23 Jan, Singapore Time zone UTC+8

FX MOVES

U.S. Dollar Index, -0.03%, 97.50 (Sentiment: Negative)
USDJPY, -0.13%, $109.74 (Sentiment: Neutral)
EURUSD, +0.11%, $1.1096 (Sentiment: Neutral)
GBPUSD, +0.72%, $1.3146 (Sentiment: Neutral)
USDCAD, +0.52%, $1.3137 (Sentiment: Positive)
AUDUSD, -0.03%, $0.6843 (Sentiment: Neutral)
NZDUSD, -0.02%, $0.6596 (Sentiment: Neutral)

Market Moves

S&P500, +0.03%, 3,321.75 (Sentiment: Positive)
Nasdaq, +0.14%, 9,383.77 (Sentiment: Positive)
Nikkei Futures, -0.26%, 23,797.5 (Sentiment: Positive)

Market Outlook : European Central Bank is unlikely to either do or say much when it meets later today. If there is any change in tone, it might be towards a less dovish one, given the signs of ‘green shoots’ in the data and deescalating political tensions. Even in this case though, any upside reaction in the euro is unlikely to be large. Rather, a much bigger force in determining the euro’s broader direction will be the preliminary PMIs for January, which are due on Friday. This is probably the most important data set for the direction of monetary policy. If they reaffirm that the economy is getting its feet under it, that could help establish a floor under the Euro – otherwise, any more weakness could reignite concerns about a potential recession.

SUMMARY OF NOTABLE EVENTS

CANADIAN MONETARY POLICY

The Bank of Canada maintained its key overnight interest rate at 1.75% as expected on Wednesday but opened the door to a possible cut should a recent slowdown in Canadian economic growth drag on. The central bank slashed its forecast for fourth quarter annualized growth to 0.3% from 1.3% in October. It also pegged annualized growth for the first quarter of 2020 at 1.3%, down from a previous internal forecast of 1.7%. Money markets now see about a 20% chance of a rate cut in March. The Canadian Dollar fell in reaction as the most hawkish central bank is signaling a dovish alley.

APPLE ASKS TAIWAN SEMI TO INCREASE A13 CHIP PRODUCTION TO KEEP UP WITH IPHONE 11 DEMAND

IBM beat earnings estimates and issued upside FY20 EPS guidance, but the resilience in Apple (AAPL 317.70, +1.13, +0.4%) and the semiconductor space should not be overlooked. Bloomberg reported that Apple will begin producing low-cost iPhones next month and asked Taiwan Semi (TSM 58.35, +0.11, +0.2%) to increase its chip supply to meet strong iPhone demand.

CHINA’S WUHAN SHUTS DOWN TRANSPORT AS GLOBAL ALARM MOUNTS OVER VIRUS SPREAD

Deaths from China’s new flu-like virus rose to 17 on Wednesday, with more than 540 cases confirmed, leading the city at the center of the outbreak to close transportation networks and urge citizens not to leave as fears rose of the contagion spreading. Any widespread contagion will weigh on risk assets as businesses will eventually be affected if people choose to stay home.

CURRENCY MARKET WRAP 

As of Wed 22 Jan, Singapore Time zone UTC+8

U.S. Dollar Index, 0.00%, 97.61
USDJPY, -0.25%, $109.91
EURUSD, -0.09%, $1.1085
GBPUSD, +0.27%, $1.3046
USDCAD, +0.18%, $1.3072
AUDUSD, -0.37%, $0.6848
NZDUSD, -0.21%, $0.6595

Asian equities were hit the hardest on Tuesday, as the virus outbreak originated in China, while the initial selling in the U.S. stock market was modest. The virus, which can be transmitted between people and has no current vaccine, fostered a narrative that economic activity could be slowed down by people deciding to refrain from public spheres like travel and shopping.

At a two-day rate review that ended on Tuesday, the BOJ kept its short-term interest rate target at -0.1% and a pledge to guide 10-year government bond yields around 0%. In a quarterly review, the BOJ also revised up its growth projection for the fiscal year beginning April 2020 to 0.9% from 0.7%, helped by the government’s fiscal package, and hiked its estimate for 2021.

The 2-yr yield fell four basis points to 1.52%, and the 10-yr yield fell seven basis points to 1.77%. The U.S. Dollar Index finished flat at 97.61. WTI crude declined 0.5%, $0.30, to $58.25/bbl.

STOCK MARKET WRAP 

S&P500, – 0.27%, 3,320.79
Nasdaq, -0.19%, 9,370.81
Nikkei Futures, -1.13%, 23,807.5

Cyclical sectors were among today’s laggards, particularly the S&P 500 energy (-1.9%), materials (-1.1%), and industrials (-1.1%) sectors. The latter was weighed by the disappointment in top-weighted Boeing. The rate-sensitive real estate (+1.1%) and utilities (+0.8%) sectors outperformed, as demand for Treasuries drove yields lower.

Other notable areas included the Dow Jones Transportation Average, which fell 1.8% amid weakness in the airline stocks, and the iShares U.S. Home Construction ETF (ITB 47.80, +0.60), which rose 1.3% on the idea that the lower Treasury yields will drive mortgage rates lower.

Separately, Tesla (TSLA 547.20, +36.70, +7.2%), Costco (COST 313.26, +8.58, +2.8%), Visa (V 207.29, +2.59, +1.3%), and Intel (INTC 60.55, +0.95, +1.6%) benefited from positive-minded analyst recommendations. Uber (UBER 37.60, +2.47, +7.0%) hit a five-month high after the company sold its food delivery business in India.

CURRENCY MARKET WRAP 

As of Tue 21 Jan, Singapore Time zone UTC+8

U.S. Dollar Index, -0.01%, 97.61
USDJPY, -0.02%, $110.17
EURUSD, +0.03%, $1.1094
GBPUSD, -0.05%, $1.3004
USDCAD, -0.15%, $1.3046
AUDUSD, -0.07%, $0.6877
NZDUSD, -0.13%, $0.6610

U.S. markets were closed for holidays on monday and there were no notable economic prints or news to drive risk sentiment.

IMF slashes Global GDP forecast for 6th consecutive time, warns “Climate Change” will hit economy. According to the IMF, the downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, most notably India, where 2020 GDP is now expected to rise just 5.8% down from 7.0%, which means that in 2020 China will regain the title of the world’s fastest growing economy.

STOCK MARKET WRAP 

S&P500, – closed –
Nasdaq, – closed –
Nikkei Futures, -0.09%, 24,027.5

CURRENCY MARKET WRAP 

As of Mon 20 Jan, Singapore Time zone UTC+8

U.S. Dollar Index, +0.30%, 97.61
USDJPY, -0.01%, $110.14
EURUSD, -0.41%, $1.1091
GBPUSD, -0.53%, $1.3010
USDCAD, +0.18%, $1.3065
AUDUSD, -0.36%, $0.6874
NZDUSD, -0.39%, $0.6614

U.S. Total housing starts surged 16.9% m/m in December to a seasonally adjusted annual rate of 1.608 million (consensus 1.380 million), driven by an 11.2% increase in single-family starts and a 30% increase in multi-unit starts. Building permits, meanwhile, declined 3.9% m/m to 1.416 million (consensus 1.460 million), with single-family permits down 0.5%.

Industrial production declined 0.3% in December (consensus +0.1%), pressured by a 5.6% decline in utilities output that stemmed from unseasonably warm weather. The capacity utilization rate fell to 77.0% from an upwardly revised 77.4% (from 77.3%) in November. The preliminary reading of the University of Michigan’s Index of Consumer Sentiment for January declined to 99.1 (consensus 98.9) from 99.3 in November.

China’s economy grew by 6.1% in 2019, the lowest annual growth rate for 29 years, the National Bureau of Statistics announced on Friday. However, despite falling to a new low since 1990, when political turmoil drove economic growth down to 3.9%, the 6.1% rate met the target range of between 6.0% and 6.5% set by the central government at the beginning of last year, but was below the market expectation of 6.2%. The headline figure was in line with forecasts of the International Monetary Fund and the World Bank for China’s economic growth this year.

U.S. Treasuries finished mixed amid some curve-steepening activity. The 2-yr yield declined one basis point to 1.56%, while the 10-yr yield increased three basis points to 1.84%. The U.S. Dollar Index increased 0.3% to 97.61. WTI crude increased 0.1% to $58.55/bbl.

STOCK MARKET WRAP 

S&P500, +0.39%, 3,329.62
Nasdaq, +0.34%, 9,388.94
Nikkei Futures, +0.38%, 24,030.0

Nine of the 11 S&P 500 sectors finished in the green. The communication services (+0.9%) and utilities (+0.8%) sectors outperformed, while the energy sector (-0.7%) underperformed.

The industrials sector (unch) also included its fair share of laggards. Boeing (BA 324.15, -7.85, -2.4%) extended losses on a report of another software issue, and several transportation stocks fell after issuing relatively disappointing earnings results and/or guidance.

Expeditors International (EXPD 76.82, -4.52, -5.6%), J.B. Hunt (JBHT 114.68, -5.08, -4.2%), and CSX (CSX 76.40, -0.34, -0.4%) let investors down, while KC Southern (KSU 166.52, +4.89, +3.0%) shareholders were able to look past its earnings miss.

Separately, Alphabet (GOOG 1480.39, +28.69, +2.0%) and Apple (AAPL 318.73, +3.49, +1.1%) benefited from a pair of positive analyst recommendations. UBS raised its GOOG price target to $1675 from $1460. Morgan Stanley raised its AAPL price target to $368 from $296.

CURRENCY MARKET WRAP 

As of Fri 17 Jan, Singapore Time zone UTC+8

U.S. Dollar Index, +0.08%, 97.30
USDJPY, +0.27%, $110.18
EURUSD, -0.12%, $1.1137
GBPUSD, +0.29%, $1.3076
USDCAD, -0.03%, $1.3038
AUDUSD, -0.06%, $0.6899
NZDUSD, +0.29%, $0.6637

U.S. Retail sales increased 0.3% m/m in December following an upwardly revised 0.3% increase (from 0.2%) in November. Retail sales, excluding autos, jumped 0.7% (consensus +0.5%) after a downwardly revised unchanged reading (from 0.1%) in November.

U.S. Initial claims for the week ending January 11 dropped by 10,000 to 204,000 (consensus 217,000). Continuing claims for the week ending January 4 decreased by 37,000 to 1.767 million.

U.S. Import prices for December were up 0.3%. Excluding fuel, they were flat. Export prices were down 0.2%. Excluding agricultural products, they were down 0.1%. The Philadelphia Fed Index for January jumped to 17.0 (consensus 3.0) from the revised 2.4 reading in December (from 0.3).

U.S. Treasuries finished on a lower note amid the risk-on mindset in equities. The 2-yr yield increased two basis points to 1.57%, and the 10-yr yield increased two basis points to 1.81%. The U.S. Dollar Index increased 0.08% to 97.30. WTI crude rose 1.1%, or $0.62, to $58.48/bbl.

STOCK MARKET WRAP 

S&P500, +0.84%, 3,316.81
Nasdaq, +1.06%, 9,357.13
Nikkei Futures, +0.72%, 24,082.5

It was a day replete with good news that helped extend the market’s bullish momentum and, in turn, bolster risk sentiment. Morgan Stanley (MS 56.44, +3.50, +6.6%) provided strong earnings results, retail sales increased 0.3% in December as expected, weekly jobless claims continued to reverse a modestly rising uptrend, and the USMCA deal was passed in the Senate.

All 11 S&P 500 sectors started and finished in the green, with the broader market rallying into the close. The information technology sector (+1.4%) provided the leadership amid strength in its top-weighted components and the semiconductor stocks, which got a boost from the positive earnings results from Taiwan Semiconductor (TSM 58.75, +0.36, +0.6%).

Charles Schwab (SCHW 49.00, +1.88, +4.0%) beat earnings estimates, Signet Jewelers (SIG 30.13, +8.64, +40.2%) provided upbeat holiday sales results and comparable sales guidance, Spirit Airlines (SAVE 42.65, +2.97, +7.5%) provided upside unit revenue guidance, and XPO Logistics (XPO 95.35, +12.53, +15.1%) said it may sell or spin-off some of its business units.

Notable laggards included BNY Mellon (BK 46.72, -3.97, -7.8%), Tesla (TSLA 513.49, -5.01, -1.0%), PPG Industries (PPG 127.41, -3.33, -2.6%). BNY missed revenue estimates, Tesla was downgraded to Underweight from Equal-Weight at Morgan Stanley, and PPG issued disappointing quarterly results and guidance.