US and Asian markets were mixed as investors turned their attention from last week's hawkish central bank comments out of the World Economic Forum in Davos to corporate earnings. The major US indices took a breather from their strong march to new highs to start the week. The Dow Jones Industrial ended Tuesday's session down 0.3%, while the S&P 500 gained 0.3% and the Nasdaq-100 closed 0.4% higher.
Investors are increasingly shifting their attention towards earnings season as more top-tier companies deliver quarterly results in the coming days and weeks. Ahead of releasing its quarterly earnings, Netflix surprised markets with an announcement on Tuesday that it will dive into the world of live events by announcing a deal to broadcast World Wrestling Entertainment content. Netflix shares closed 1.3% higher on Tuesday and shot up nearly another 9% in after-hour trading, after the company published quarterly results after the bell. Netflix fourth-quarter revenue beat analysts' estimates and the company showed particularly strong subscription growth.
More Big Tech earnings are due out next week with Microsoft and Google parent company Alphabet expected to report on Tuesday as well as Facebook's Meta Platforms, Apple and Amazon on Thursday. Investors are watching for any potential signs coming from the corporate world about what is going on in the US economy. The world's largest economy managed to consistently beat pessimistic forecasts last year, largely due to strong consumer demand. Whether that demand is sufficient to keep corporate margins high remains to be seen. Investors will also digest companies' 2024 outlooks for signals about where the broader economy is likely headed this year.
In the Asia-Pacific region, stock markets were mixed midweek. Hong Kong's Hang Seng Index was trading up 1.9%, after shooting up much higher in early trading. The main driver of the gains were tech stocks with tech giant Alibaba gaining 5.2%. The Shanghai Composite was also trading up 1.6%. In Tokyo, the Nikkei 225 saw the largest regional losses, ending Tuesday's session 0.8% lower, despite solid trade balance data released earlier in the day. Exports out of Japan beat market expectations in December, creating a 62-billion-dollar surplus despite economists predicting a deficit. In South Korea, the Kospi lost 0.4%. In Australia, the S&P/ASX 200 finished the day with a marginal gain after the flash Purchasing Managers' Index signalled expansion of manufacturing activity following 11 months of contraction.
In Europe, the European Commission's flash consumer confidence indicator for the European Union fell slightly in January when compared with December. While it was down only 0.2 percentage points at -16.2 points for the EU, it dropped one percentage point to -16.1 for the euro area. Both of those values are far below the indicator's long-term averages. On a more positive note for the continent's economies, the European Central Bank's (ECB) survey of banks showed that while demand for loans in the euro zone was still falling, banks expect a net increase in loan demand to companies and private households to start 2024. The ECB is due to announce its latest interest rate decision on Thursday. The Stoxx 50 lost 0.3% on Tuesday.
In politics, the US presidential primary elections race continued in New Hampshire on Tuesday with former president Donald Trump victorious over former UN ambassador Nikki Haley. Florida Governor Ron DeSantis dropped out of the race for the Republican nomination at the weekend, leaving Trump and Haley as the only likely candidates for the conservative party. Despite Haley vowing to continue to campaign, the victory in New Hampshire puts Trump in a position to take the Republican nomination and likely face off again against President Joe Biden in the autumn.
Corporate news in focus: Quarterly figures from ASML, Freeport-McMoRan, IBM, SAP, ServiceNow, Tesla.
Economic data in focus: Purchasing Managers' Indices from several countries throughout the day, including France, Germany, the euro area, the UK and the US; Bank of Canada interest rate decision; weekly US EIA Petroleum Status Report.
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.