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HomeLatest NewsGlobal NewsMarkets React to Chinese Economic Indicators: Futures Signal a Rocky Start.

Markets React to Chinese Economic Indicators: Futures Signal a Rocky Start.

Markets

Market

Boeing

S&P futures  -0.5%, Dow futures -0.4% and Nasdaq 100 futures  -0.6%.

Fed’s Waller dashes rate-cut optimism.

Fed Governor Christopher Waller said there was no rush for the world’s most powerful central bank to cut interest rates from more than two-decade highs, dampening hopes that policymakers could drop borrowing costs early this year.

Waller told the Brookings Institution in Washington, D.C., that economic activity and labor markets are “good shape,” and inflation is “gradually” falling near the Fed’s 2% target.

Based on these developments, Waller “see[s] no reason to move as quickly or cut as rapidly as in the past.”

On Tuesday, the rate-sensitive 2-year Treasury yield and benchmark 10-year yield rose after the comments. At 05:10 ET on Wednesday, the 2-year yield rose 0.044 percentage points to 4.27% and the 10-year yield fell 0.015 percentage points to 4.05%. Yields move opposite prices.

Disney rejects activist board noms

Walt Disney rejected activist investor board nominees, claiming its current leadership team had made “considerable” progress in transforming the company.

Disney CEO Bob Iger wrote to shareholders about the company’s plans to make its streaming business profitable, make ESPN a “preeminent” digital platform, boost its film studios, and “turbocharge” its theme parks operation.

“[W]e are continuing to move forward with urgency and clarity,” added Iger.

Dissatisfied with dismal streaming returns and box office flops that have lowered Disney’s stock price, activist stakeholders are trying to acquire board seats to influence this makeover. Nelson Peltz of Trian Fund Management has called Iger the “root cause” of Disney’s difficulties.

Peltz and ex-Disney finance head Jay Rasulo were Trian’s board nominees, while activist Blackwells Capital had three. Disney said Peltz had not “presented a single strategic idea.” in a securities filing rejecting these contenders.

2023 Chinese growth exceeds objective, but difficulties persist

China’s economy grew slightly less than predicted in the fourth quarter due to sluggish spending and a property market slump, but it narrowly beat government expectations for 2023.

Gross domestic product rose 5.2% year-over-year in the three months to Dec. 31, the National Bureau of Statistics reported Wednesday. The reading was weaker than 5.3% predictions but up from 4.9% the quarter before.

This raised 2023 growth to 5.2%, above Beijing’s 5% target. Despite COVID-19 limits, activity increased from 3% in 2022 due to a lower base for comparison. Except for the three pandemic-era closures, it was the lowest yearly expansion rate since 1990.

Last year, the Chinese economy was hampered by falling consumer spending, a housing market crash, and deflation. The world’s second-largest economy has demographic concerns, as shown by new data showing a faster population fall in 2023.

Major Global News

  • China 4Q GDP y/y 5.2% vs 5.3% estimate (and 4.9% prior), Dec factory output 6.8% vs 6.6% estimate, retail sales 7.4% missing the 8.0% estimate, and jobless rate 5.1% vs 5.0% estimate.
  • China’s home prices fell the most in almost nine years. China’s December 1st-tier cities’ new home prices fell (-0.4%) m/m and (-0.3% y/y), 2nd-tier down (-0.4%) m/m and +0.1% y/y. There are 62 cities out of 70 with m/m decreases in sales prices of new homes and 70 decrease in 2nd-hand, compared to 59 and 69 in November respectively.
  • US spending bill to avert shutdown clears first Senate hurdle. Congress has four days to act as the Senate plans first vote on deal to avert shutdown Tuesday. Transportation, housing, energy, and other federal programs are at risk if Congress doesn’t pass a stopgap budget before midnight Friday. Congress is facing fast-approaching deadlines on Friday and on Feb. 2.
  • UK consumer price inflation (CPI) sped up for the first time in 10 months in December, rising to 4.0% from November’s more-than-two-year low of 3.9% and denting market expectations for an early Bank of England rate cut.
  • ECB’s Simkus is “far less optimistic” than markets on rate cuts ‘ “If we don’t see any surprises that would change the data and the thinking, I’m positive about rate cuts this year,” Simkus said Tuesday in Vienna. “But I’m far less optimistic than markets about rate cuts in March or April.” – Bloomberg.
  • ECBs Muller said “market expectations for 2024 ECB rate cuts are aggressive; Wage growth is not in line with the inflation target.

Economic Calendar

7:00 AM ET MBA Mortgage Applications Data
8:30 AM ET Import Prices for December…est. (-0.5%)
8:30 AM ET Export Prices for December…est. (-0.6%)
8:30 AM ET Retail Sales M/M for December…est. +0.4%
8:30 AM ET Retail Sales – Less Autos M/M for December…est. +0.2%
8:55 AM ET Johnson/Redbook Weekly Sales
9:15 AM ET Industrial Production M/M for December…est. 0.0%
9:15 AM ET Capacity Utilization for December…est. 78.7%
10:00 AM ET Business Inventory M/M for November…est. (-0.1%)
10:00 AM ET NAHB Housing Market Index for January…est. 39 (prior 37)
1:00 PM ET US Treasury to Auction $13B in 20-year notes.
2:00 PM ET Federal Reserve Releases Beige Book
3:00 PM ET Fed’s Williams Speaks at NY Fed Event
4:30 PM ET API Weekly Inventory Data

Other Key Events:

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2023 Chinese growth exceeds objective, but difficulties persist

China’s economy grew slightly less than predicted in the fourth quarter due to sluggish spending and a property market slump, but it narrowly beat government expectations for 2023.

Gross domestic product rose 5.2% year-over-year in the three months to Dec. 31, the National Bureau of Statistics reported Wednesday. The reading was weaker than 5.3% predictions but up from 4.9% the quarter before.

This raised 2023 growth to 5.2%, above Beijing’s 5% target. Despite COVID-19 limits, activity increased from 3% in 2022 due to a lower base for comparison. Except for the three pandemic-era closures, it was the lowest yearly expansion rate since 1990.

Last year, the Chinese economy was hampered by falling consumer spending, a housing market crash, and deflation. The world’s second-largest economy has demographic concerns, as shown by new data showing a faster population fall in 2023.

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