China Two Sessions, Gold Prices, Hong Kong Stocks

Deputy Chief Cabinet Secretary Hideki Murai said there were early signs that Japan was achieving a virtuous cycle of inflation and wage increases, Reuters reported.

Murai explained that the government is stepping up efforts to curb the bargaining power of large companies, putting pressure on smaller suppliers to accept lower prices.

The government issued guidelines in November that required executives to take more control over price-setting processes and warned of possible sanctions against companies that put undue pressure on suppliers to lower prices.

While large companies have announced wage increases, the Kishida administration has focused on increasing the profits of small and medium-sized enterprises and using the profits to raise wages.

The Bank of Japan has also made sustained wage increases a prerequisite for exiting ultra-easy monetary policy, but according to Reuters, Murai declined to comment on whether the conditions are ripe for the Bank to move away from negative interest rates. .

— Lim Huijie, Reuters

China plans to increase defense spending by 7.2% in 2024, Reuters reported on Tuesday, citing an official government announcement at the start of the annual parliamentary session in Beijing.

This follows a 7.2% increase last year, a 7.1% surge in 2022, a 6.8% increase in 2021, a 6.6% increase in 2020, and a 7.5% increase in 2019.

The CSI Defense Index rose 2.2%, its highest level since January 15th. Shenzhen-listed Fujian Torch Electron rose 1.1%, Aerospace CH UAV rose 3.7%, Avic Shenyang Aircraft rose 2% and Avic Aviation High Technology rose 1.3%.

— Shreyashi Sanyal

China’s service sector expansion slowed in February compared to January, with the Caixin Services Purchasing Managers Index in February falling to 52.5 from 52.7 in the previous month.

The report said employment rose slightly for the second month in a row and businesses were generally optimistic about the outlook for 12-month activity.

A PMI reading above 50 indicates expansion in the sector, while a reading below 50 indicates contraction.

— Lim Huijie

Spot gold prices hovered near record levels on Monday, while futures prices settled at all-time highs.

Traders expect the U.S. Federal Reserve to start cutting interest rates in the second half of this year, pushing up precious metal prices.

The April gold contract rose $30.60, or 1.46%, to settle at $2,126.30 an ounce, its highest price since the contract was created in 1974.

Spot gold traded 0.16% lower on the day at $2,111.69, just shy of its all-time high of $2,135.40 set in December 2023.

— Shreyashi Sanyal, Spencer Kimball

Australia’s current account surplus surged in the fourth quarter to the highest since the first quarter, official data showed on Tuesday.

The current account surplus jumped to A$11.8 billion ($7.68 billion) in the fourth quarter. The figure was significantly higher than the A$5.6 billion surplus expected in a Reuters poll.

Data showed that iron ore and coal exports surged.

“The current account surplus reflects an increase in the trade surplus due to exports of mining primary products, while the net primary income deficit has narrowed,” said Grace Kim, head of international statistics at ABS. .

— Shreyashi Sanyal

According to a report by Reuters, the economy minister said Japan is not considering seeking “an escape from deflation.”

According to Reuters, Prime Minister Yoshitaka Shindo said at a press conference, “To prevent the Japanese economy from returning to a prolonged period of declining prices, the Japanese government will strive to ensure that wage increases exceed the inflation rate.”

The statement contradicts a report by Japanese media outlet Kyodo News over the weekend that said Japan was considering announcing an end to deflation based on the results of spring wage negotiations.

The Japanese government first acknowledged in March 2001 that Japan was in a state of deflation.

— Lim Hui Jie, Reuters

According to the central bank’s revised data, South Korea’s economy recorded 0.6% quarter-on-quarter growth in the fourth quarter.

This figure was unchanged from the central bank’s prior forecast.

South Korea’s GDP in the fourth quarter increased at an annual rate of 2.2%, which was also in line with advance forecasts.

The country’s stock prices fell, with the Kospi falling 0.2%.

— Shreyashi Sanyal

Top hedge fund manager David Neuhauser says the world is in the midst of an “economic renaissance” and investors should bet big on specific sectors that play to this theme.

“I think the world is in an economic renaissance right now, and we’re seeing some big moves in some stocks,” he told CNBC Pro.

He added that the stock is “not mega-tech, which is indicative of other areas associated with wealth.” [effect] This contributes to expanding profits. ”

CNBC Pro subscribers can read more here.

— Tan Weizhen

The headline inflation rate in Japan’s capital Tokyo accelerated to 2.6% in February, compared with a revised 1.8% in January.

Tokyo’s inflation rate rose for the first time in three months, recovering from a 22-month low hit in January.

Core inflation, which excludes fresh food prices, was 2.5%, in line with expectations in a Reuters poll. The so-called “core-core” inflation measure, which subtracts food and energy prices, held steady at 2.5%.

Tokyo’s inflation rate is widely considered to be a leading indicator of trends across Japan.

— Lim Huijie

Competition has intensified in the electric vehicle industry, particularly between investor-favorite Tesla and Chinese automakers such as Warren Buffett-backed BYD.

But one fund manager has serious concerns about the sector.

“We don’t own any [EV] I believe that an arms race in EV development would not be profitable for many of these companies, including Tesla. So, unfortunately, I would avoid all that,” he added.

The fund manager is instead looking to what he calls “greater integrated coverage,” citing his favorite alternative stocks.

CNBC Pro subscribers can read more here.

— Amara Balakrishna

The only other time in the past when U.S. stocks rose so relentlessly (after World War II, anyway) was after either a recession or a “bubble scenario” occurred — and the current market has both. , writes Henry Allen, macro strategist at Deutsche Bank. to the client on Monday.

“It’s rare for the S&P 500 to rise this quickly, and when it happens it’s usually because the economy is coming out of a recession and the stock market has just experienced a downturn,” Allen wrote. It pointed out that the stock fell by 19.4% in 2019. “The only time in postwar history this was not the case was during the dot-com bubble.”

Historically, what happens next after a strong rally is that “the S&P 500 index has actually continued to rise at every turn over the next six and 12 months,” Deutsche Bank said. The difference this time is that the stock market’s gains over the past year have been “unusually narrow by historical standards,” and the economy has never fallen into a recession from which it needs to recover.

Last year, for example, was the first time since 1998 that the market-cap-weighted S&P 500 outperformed the equally-weighted S&P 500 by more than 10 percentage points, the report said. Whatever the trigger, the S&P 500 has risen in 16 of the past 18 weeks since its October 2023 low, and “such sustained outperformance is rare,” Allen wrote. .

— Scott Schnipper

Tech-fueled gains have pushed stocks to new heights this year, with all three major indexes setting new 2024 closing records.

UBS says there is no end in sight for tech stocks’ rally, but believes investors are best served by diversifying their assets.

“With generative AI set to be the growth theme of the decade and large US tech companies leading the revolution, US tech stocks should make up a significant portion of investors’ equity allocations. “We continue to believe that this is a strategic large-cap U.S. stock holding for those who are underinvested,” the bank wrote. “However, we believe investors with overexposure should consider diversification.”

To that end, UBS encouraged investors to consider emerging industry trends so they can expand their portfolios and “capture the next growth opportunity.”

The bank added: “We believe Asia is an attractive destination for technology diversification and see further potential for AI customs chips and foundries.”

— Lisa Kailai Han

US gold futures prices settled at a record high on Monday, backed by market expectations for interest rate cuts.

Typically, the price of gold has an inverse relationship with interest rates, so when interest rates fall, the price rises. Gold prices began to rise after inflation reached expected levels in January, with traders widely expecting a first rate cut in the second half of 2024.

The April-dated gold contract rose $30.60, or 1.46%, to a record high of $2,126.30 at Monday’s close.