RBA decision, Japan wages, China measures

Mainland Chinese and Hong Kong equity benchmarks surged 2% on Tuesday, led by healthcare and tech stocks, respectively.

This comes after the Chinese regulators took measures to calm a recent sell-off in markets, including a statement from the country’s securities and regulatory commission that said it would “guide institutional investors … to enter the market with greater efforts.”

The largest mover on the CSI 300 was Beijing Wantai Biological Pharmacy Enterprise, which soared 10%, while the biggest gainer on the Hang Seng index was tech giant Alibaba, whose shares jumped 5.9%.

There are opportunities in the banking sector despite a rise in volatility and concern over steep losses at some lenders, according to fund manager Cole Smead.

The portfolio manager at Smead Capital said he was bullish on two banks even as the KBW Regional Banking Index lost more than 7% last week.

One of Smead’s picks is a U.S. regional bank while the other is a former global systemically important bank.

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— Ganesh Rao

The Reserve Bank of Australia is set to release its policy statement at the end of its two-day meeting on Tuesday.

Analysts expect the RBA to hold its official cash rate steady at 4.35%, with no expectations for a dovish pivot.

While inflation for the fourth quarter of 2023 cooled to a two-year low of 4.1%, it still remained well above the RBA’s 2-3% target range, bolstering bets for a hold.

“While a dovish pivot is unlikely at this meeting, we expect changes in tone to address further traction from high rates, progress towards the CPI target and confirmation that rates have peaked,” Helen Qiao, China & Asia economist at BofA Global Research wrote in a client note.

The S&P/ASX 200 extended losses from Monday, falling 0.9%, while the Aussie dollar dipped 0.06% against the U.S. dollar.

— Shreyashi Sanyal

Goldman said in a January report that investors should be focusing on long-term AI beneficiaries, as near-term ones are already well known and their performance already reflect the “consensus view.”

Here are some names in its basket of long-term AI beneficiaries, and how much their baseline earnings could rise from AI.

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— Weizhen Tan

Household spending in Japan dipped more than expected in December, falling 2.5% year on year compared with the 2.1% estimated by economists polled by Reuters.

The decline was smaller than the 2.9% drop seen in November, with the average monthly expenditure per household at 329,518 yen ($2,217.11).

The average monthly income per household stood at 1,099,805 yen, falling 4.4% in nominal terms and down 7.2% in real terms from the previous year.

These numbers play into monetary policy considerations for the Bank of Japan, as the BOJ has said sustainable wage increases are one of the prerequisites for unwinding its ultra-loose monetary policy.

— Lim Hui Jie

Oil prices settled higher Monday after U.S. retaliatory strikes against Iranian forces and allied militias over weekend.

The West Texas Intermediate contract for March rose 50 cents, or 0.69%, to settle at $72.78 a barrel. The Brent contract for April gained 66 cents, or 0.85%, to settle at $77.99 a barrel.

The U.S. launched airstrikes late Friday against Iran’s Islamic Revolutionary Guard Corps and allied militias in Iraq and Syria. The airstrikes, which hit more than 85 targets, came in response to the deaths of three U.S. troops in a drone strike by Iran-allied militants.

— Spencer Kimball

Traders have tempered their expectations for a bit for interest rate cuts following cautionary statements from Federal Reserve officials.

The probability of a previously much-anticipated March cut tumbled to just 14.5% Monday morning, according to the CME Group’s FedWatch gauge. The expectation had been above 80% just two weeks or so ago.

For the full year, the market has switched from expecting six cuts to five and was even assigning about a 44.6% probability that the total could fall to four.

Those moves follow an interview Fed Chair Jerome Powell gave to “60 Minutes.” The interview aired Sunday and featured Powell not only casting doubt on a March cut but also backing the view, as expressed in the central bank’s December “dot plot,” of just three cuts this year.

— Jeff Cox

Shares of Boeing declined around 1.7% Monday after the company said it would rework 50 undelivered 737 Max jets following the discovery of misdrilled holes on some fuselages. The rework could potentially result in delays to near-term deliveries.

The news comes amid a period of intense scrutiny for the company after the fallout from the midflight Alaska Airlines accident on a 737 Max 9.

The stock is down 21% in 2024.

— Hakyung Kim

UBS said investors should stick with quality stocks, especially in U.S. tech. The Wall Street firm, which anticipates a soft landing scenario in its base case, says these companies can weather a slowdown in economic growth.

“In equities, we continue to see quality stocks as a core holding for investors. History shows they tend to outperform in periods of slowing economic growth, as we expect in our base case,” read a Monday note from the firm’s chief investment office for global wealth management.

“We keep a most preferred stance on the US IT sector, home to many quality stocks. By also complementing core holdings in quality stocks with tactical exposure to small caps, investors should be well positioned to capture more upside if markets continue to move higher,” the note continued.

— Sarah Min