The major stock indices in the New York continued upwards to new highs midweek as solid earnings by Netflix pushed tech stocks higher. Chinese stocks also saw a strong rebound on Thursday after markets received support from the country’s central bank. Oil was trading around four-week highs on hopes of increased demand out of China: Brent remained above USD 80 and West Texas Intermediate above USD 75 per barrel. On Thursday, the US releases a slew of economic data and the central banks of Norway and Turkey as well as the European Central Bank (ECB) announce interest rate decisions.
In New York, stock indices jumped to new highs on Wednesday, led by gains in the tech sector. Macroeconomic data also supported the move higher: The US Composite Purchasing Managers’ Index (PMI) increased to 52.3 in January, driven by solid services activity. A reading higher than 50 signals expansion. The tech-heavy Nasdaq-100 gained 0.6% to close at 17,499 points while the S&P 500 also reached a new high, finishing the session 0.1% higher at 4868 points. The Dow Jones Industrial failed to reach new highs, losing 0.3% on Wednesday, despite one of its largest constituents, Microsoft, reaching a new record market capitalisation of more than USD 3 trillion.
Tech earnings drove the gains on Wall Street: Netflix shares gained more than 10% on Wednesday after the company published quarterly results after the bell on Tuesday. The online streaming company reported strong subscription growth during the fourth quarter. In contrast, Tesla shares were down 0.6% after the maker of electronic vehicles warned that sales are likely to slow while presenting its quarterly results. More Big Tech earnings are due next week: Microsoft and Google parent company Alphabet report on Tuesday as well as Facebook’s Meta Platforms, Apple and Amazon on Thursday.
Chip supplier ASML sent a solid signal to markets about the state of the semiconductor industry on Wednesday. The Dutch company said orders more than tripled in the fourth quarter when compared to the previous quarter. ASML stock finished Wednesday’s session up nearly 10%. Just last week, industry giant TSMC said it expects strong growth in the current quarter as it presented its quarterly figures. Intel, the next major chipmaker to report earnings, publishes its fourth-quarter results later Thursday.
The People’s Bank of China (PBOC) said Wednesday it will cut the reserve requirement ratio for banks by 0.5 percentage points in an effort to shore up markets, which struggled to perform over the last year. The move should unlock roughly USD 140 billion for the economy, which has disappointed since reopening from strict Covid measures in early 2023. A lower reserve requirement ratio means banks have to keep less money in reserve, which then frees up more cash to loan to economic participants. Hong Kong's Hang Seng Index was trading up 1.8% on Thursday, while the Shanghai Composite gained nearly 3%.
Elsewhere in the Asia-Pacific region, South Korea’s Kospi finished Thursday’s session roughly flat after the country said gross domestic product (GDP) increased 2.2% in the fourth quarter when compared to the same period of the previous year. In Tokyo, the Nikkei 225 gained 0.1%. In Australia, the S&P/ASX 200 closed 0.5% higher.
In macroeconomics out of Europe, business activity continued to contract in January for an eighth month in a row in the euro zone. Composite PMI increased to 47.9 from 47.6 in December, but remained below the level of 50, which indicates contraction. In the bloc’s largest economy, Germany, Composite PMI fell for a seventh month in a row to 47.1 in January, down from December’s 47.4 reading. The manufacturing component particularly was affected by higher delivery times and prices due to tensions in the Red Sea. The Euro Stoxx 50 gained 2.2% on Wednesday and Germany’s DAX was up 1.6%.
The Bank of Canada became the next major central bank to keep its policy rate unchanged on Wednesday. It also removed language from its communications about the need for potential rate increases in the future, signalling it believes peak rates have arrived. The Canadian dollar fell against all major currencies following the announcement. The Norwegian and Turkish central banks as well as the European Central Bank announce their policy decisions on Thursday. Next week, the Federal Reserve announces its latest rate decision.
Corporate news in focus: Quarterly figures from Givaudan, Intel, KLA, LVMH, NextEra Energy, STMicroelectronics, Visa.
Economic data in focus: Norwegian central bank interest rate decision, Germany’s ifo Business Climate Index, Turkish central bank interest rate decision, European Central Bank interest rate decision, US gross domestic product, US durable goods orders, US personal consumption expenditures, weekly US initial jobless claims, weekly US EIA Petroleum Status Report.
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.