China Two Sessions, gold price, Hong Kong stocks

Japan is seeing early signs of achieving a positive cycle of rising inflation and wages, Deputy Chief Cabinet Secretary Hideki Murai said, according to a Reuters report.

Murai explained the government was ramping up efforts to curb the bargaining power of big companies, which pressure smaller suppliers into accepting price cuts.

In guidance released in November, the government mandated that company executives take more ownership in the price-setting procedures, warning of possible sanctions on firms that put undue pressure on suppliers to cut prices.

While large companies have announced pay hikes, the Kishida administration has focused on boosting profits of smaller firms, which they can then use to hike wages.

The Bank of Japan has also made sustainable wage increases a prerequisite for exiting its ultra-loose monetary policy, but Reuters reported that Murai declined to comment on whether conditions have been met for the BOJ to exit negative interest rates.

— Reuters, Lim Hui Jie

China is set to increase its defense spending by 7.2% in 2024, Reuters reported Tuesday, citing the official government release as the country’s annual parliamentary meetings started in Beijing.

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

The CSI Defense index jumped 2.2% to its highest level since Jan.15. Shenzhen-listed Fujian Torch Electron rose 1.1%, Aerospace CH UAV added 3.7%, Avic Shenyang Aircraft Co gained 2% and Avic Aviation High Technology gained 1.3%.

— Shreyashi Sanyal

China’s services sector expanded at a slower pace in February compared with January, with the Caixin services purchasing managers’ index slipping to 52.5 in February from 52.7 in the prior month.

The report noted that employment rose slightly for a second straight month, and companies were generally upbeat about the 12-month outlook for activity.

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

— Lim Hui Jie

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

Traders bet the U.S. Federal Reserve will start cutting interest rates in the second half of the year, lifting prices of the precious metal.

The gold contract for April gained $30.60, or 1.46%, to settle at $2,126.30 per ounce, the highest level dating back to the contract’s creation in 1974.

Spot gold prices inched 0.16% lower on the day, trading at $2,111.69, just shy of a record high at 2,135.40 which it hit in December 2023.

— Shreyashi Sanyal, Spencer Kimball

Australia’s current account surplus jumped in the fourth quarter to its widest since the first quarter, according to official data on Tuesday.

The current account surplus jumped to $11.8 billion Australian dollars ($7.68 billion) in the fourth quarter. The reading was much higher than a Reuters poll forecast of AU$5.6 billion surplus.

Iron ore and coal exports surged, according to data.

“The current account surplus reflected a higher trade surplus, driven by mining commodity exports. Meanwhile, the net primary income deficit narrowed,” Grace Kim, ABS head of international statistics, said.

— Shreyashi Sanyal

Japan is not thinking of calling for an “end to deflation,” its economy minister said, according to a Reuters report.

Yoshitaka Shindo said during a news conference that “the government will strive to ensure Japan sees wage growth exceeding inflation, so that the economy would not revert to a period of prolonged price declines,” the Reuters report added.

The statement contradicted a report from Japanese media outlet Kyodo News over the weekend, saying the country was considering to announce an end to deflation based off the results of the spring wage negotiations.

Japan’s government had first acknowledged that the country was in a state of deflation in March 2001.

— Lim Hui Jie, Reuters

South Korea’s economy clocked a quarter-on-quarter growth of 0.6% during the fourth quarter, according to revised central bank data.

The number was unchanged from the central bank’s advance estimates.

South Korea’s GDP rose 2.2% in the fourth quarter on an annual basis, which was also in line with the advance estimate.

Stocks in the country dipped, with the Kospi down 0.2%.

— Shreyashi Sanyal

Top hedge fund manager David Neuhauser says the world is in a “boomer renaissance” and investors should be betting big on certain sectors that play the theme.

“I think the world is in this boomer renaissance now and there are some stocks that are seeing great moves,” he told CNBC Pro.

He added that the stocks “are not mega tech which shows you other areas tied to the wealth [effect] are helping broadening out gains.”

CNBC Pro subscribers can read more here.

— Weizhen Tan

Headline inflation in Japan’s capital city of Tokyo accelerated to 2.6% in February compared with the revised figure of 1.8% seen in January.

This is the first time that Tokyo’s inflation rate has risen in three months, rebounding off the 22-month low recorded in January.

Core inflation, which strips out prices of fresh food, came in at 2.5%, in line with expectations from a Reuters poll. The so called “core-core” inflation metric, which strips out prices of food and energy, held steady at 2.5%.

Tokyo’s inflation numbers are widely considered to be a leading indicator of nationwide trends in Japan.

— Lim Hui Jie

Competition is heating up in the electric vehicle industry, especially between investor favorite Tesla and Chinese automakers like the Warren Buffett-backed BYD.

However, one fund manager has some serious reservations about the sector.

“We don’t own any of the [EV] auto manufacturers and I think the arms race to develop EVs is going to be profitless for a lot of these businesses, including Tesla. So, I would avoid it all, I’m afraid,” he added.

The fund manager instead has his sights on what he calls “bigger integrated covers,” naming his favorite alternative stocks.

CNBC Pro subscribers can read more here.

— Amala Balakrishner

Prior instances when U.S. stocks have risen this relentlessly (since World War II, anyway) have only come in the wake of either a recession or a “bubble scenario” — and the current market has elements of both, Deutsche Bank macro strategist Henry Allen wrote to clients Monday.

“It’s rare to see a rally this fast, and when they happen it’s usually because the economy is emerging from recession and the stock market has just been through a slump,” Allen wrote, noting that the S&P 500 slumped 19.4% in 2022, its fourth-worst annual performance since 1945. “The only time in post-war history that this wasn’t the case was during the dot com bubble.”

Historically, after strong rallies, what happens next is “the S&P 500 has actually continued to advance over the next 6 and 12 months on every occasion,” Deutsche Bank said. What’s different this time is that the economy never fell into a recession from which it had to recover, at the same as the stock market rally over the past year “has been unusually narrow by historical standards.”

Last year, for example, was the first time since 1998 that the market cap-weighted S&P 500 outdistanced the equal-weighted S&P 500 by more than 10 percentage points, the report noted. Whatever the impetus, with the S&P 500 having advanced in 16 out of the past 18 weeks since the October 2023 low, “it is rare to see such a sustained period of outperformance,” Allen wrote.

— Scott Schnipper

The tech-powered rally has propelled stocks to new heights this year, with all three major indexes notching new closing records in 2024.

UBS sees no end in sight yet for the tech rally — but believes investors would be best suited to diversify their assets.

“With generative AI looking set to be the growth theme of the decade and US large-cap tech companies leading the revolution, we continue to believe that US tech stocks should make up a substantial portion of investors’ equity allocations. This means building up a strategic US large-cap holding for those underinvested,” the bank wrote. “But investors with excessive exposure should consider diversification, in our view.”

To do so, UBS recommended investors consider emerging trends in the industry, so they can broaden their portfolios to “capture the next growth opportunities.”

“We think Asia is a compelling destination for tech diversification, and see further potential in AI customs chips and foundries,” the bank added.

— Lisa Kailai Han

U.S. gold futures settled at a record high on Monday on the back of market rate cut expectations.

Gold prices typically have an inverse relationship with interest rates, meaning prices rise when rates fall. Gold prices began gaining after January inflation came in at the same level as expectations, with traders widely anticipating an initial rate cut in the second half of 2024.

April-dated gold contracts gained $30.60, or 1.46%, to settle at a record close of $2,126.30 on Monday.