Asian Mixed. FT President Xi's telling good stories, Chinese EV's in Europe, CATL doubts on batteries, Yen sabre rattling.
Markets in the Green: NZX, ASX, CSI 300, HSI, Nifty 50 and Sensex. Market in the Red: Nikkei, Kospi, Kosdaq, Taiex, STI. MARKETS OPEN FRIDAY: Japan, S Korea, Taiwan and China.
Asia
Last trading day of the month and quarter for some markets but Japan, S Korea, Taiwan and China will be open. We also get key data for China over the weekend and US PCE data on Friday.
Sentiment hurt this morning by comments, after US markets closed, from the US Fed’s Waller who said that the FOMC was in no rush to cut rates and he was in favour of delaying or reducing any cuts; higher for longer remains the Fed’s mantra.
Yen remains in focus after Japan's three main monetary authorities to held an emergency meeting on Wednesday; raising intervention concerns but I hope they hold their nerves in the next few day and just wait and watch.
Month and Quarter end repositioning for some; talked of selling of equities and switching to bonds to bring portfolios into balance. For Japan tomorrow will be the last day for the financial year.
Worth noting that going into the end of Q1; assets that hit highs include Bitcoin, gold, cocco. Markets that hit highs; Nikkei 225, S&P 500, ASX 200, JCI, Kospi, Taiex, Nifty 50 amongst others.
The Boao Forum for Asia Research Institute started on Tuesday; under the theme "Asia and the World: Common Challenges, Shared Responsibilities”, finishes Friday.
Not good news for Hong Kong but Hotel bookings in Zhuhai have soared for the upcoming Easter holiday, with over half of them coming from Hong Kongers, said China Travel International Investment Hong Kong (0308) at its earnings briefing. T
FTSE decides not to include S Korea and India in its bond index; not a surprise and will be reviewed again in September.
Housekeeping
If you are a paid subscriber thank you. If not please consider becoming one or make a donation to support my work; it will be much appreciated.
If you are looking for independent research, check out http://ERI-C.com a platform for vendors of interesting research and trading analysis. ERI-C is free to access, you can browse different independent research providers, most offer free trials so take a look.
At ERI-C yesterday 26 March there was a free Mifid compliant webinar;
"QT Liquidity Implications: Who will buy the bonds in the absence of QE & what this means for interest rates & financial repression policies?"
Speakers: Russell Napier, Global Macro Strategist, Orlock Advisors in conversation with Seamus Murphy Head Of Research at Financials specialist research firm, Carraighill Advisors
Click on the site to find the latest offerings from a number of leading analysts for example:
Russell Napier’s latest Solid Ground Newsletter “The BOJ Just Announced Easier Monetary Policy & Gets One Step Closer to Financial Repression: Global Implications & Problems for The Fifth Republic”.
Gerard Minack of Monaco Advisors; Micro Strategy: Good News. Bad News. US Economic Growth and Financing Pricing Implications
Sean Maher of ENTEXT Economics & Research looks at Argentinian Shock Therapy, Micon Gatecrashes HBM, AI Robots and Coding Agents
Sean has some excellent insights into how to invest in the AI sector; well beyond the chip names.
There are lots more contributors on the ERIC platform; many with free trails so let know if you have interest. Or if you’d like to know what else is there drop me a line.
Other interesting market comments and angles on portfolio construction can be found at Market Thinking https://www.market-thinking.com/
A Three Body Problem - for US Politics. Both Biden and Trump have ’their problems’ is there a third option? RFK jnr raises an intriguing possibility of a contingent Election in the US, with the new House of Representatives picking the President. Smart analysts like Dr Pippa Malmgrem are starting to talk about it, while the betting markets are also starting to move. The financial markets? Not yet.
On a personal note I am looking for a job; if you have something or know of something please; email andsullivan@gmail.com, WhatsApp me +852 9129 1016 or call +855 10 435 7116. Thank you.
MARKET Moves
New Zealand
NZX 50 opened lower testing 11,960 in early trades and then bounced and trended higher to 12118 late afternoon and ticked lower at the end to close up 95pts 0.8% at 12,105 Higher despite weak confidence data.
Markets will be closed Friday and Monday; re-opens Tuesday
Data due
Consumer Confidence Mar 86.4vs 94.5 Feb. (F/cast was 97)
Later
Business Confidence Mar 22.9 vs 34.7 Feb. (F/cast is 34)
Australia
ASX200 staggered open was positive to around 7,887 up 60pts vs +41 pts Futures and worked slowly higher but saw resistance around 7,900 levels (day high was 7,901) around noon and then eased slightly but traded in a tight range to close up 77pts 1% at 7,897 All sectors rallied as inflation expectations dropped and hopes of interest rates cuts rose.
But a big Ex Div day limiting the upside along with markets being closed Friday and Monday, re-opens Tuesday.
After market China announced dropping the tariffs on Australian wine.
Ex Div today A big day for dividends with billions of dollars being paid out to Aussie investors. Among the many ASX 200 shares paying their latest dividends today are giants BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), and Telstra Group Ltd (ASX: TLS).
Data out 90 minutes after the open.
Housing Credit Feb 0.4% MoM vs 0.4% Jan (F/cast is 0.4%)
Retail Sales Prelim Feb 0.3% MoM vs 1.1% Jan (F/cast is 0.3%)
Private Sector Credit Feb 0.5% MoM vs 0.4% Jan (F/cast is 0.4%)
Private Sector Credit Feb 5% YoY vs 4.9% Jan (F/cast is 4.9%)
Consumer Inflation Expectations Feb 4.3% vs 4.5% Jan (F/cast is 4.4%)
Japan
A number of companies in Japan went Ex div which explains some of the profit taking today and tomorrow will be the end of the fiscal year Japan.
Nikkei tested 40,300 level on the open; down 438 pts vs up 70 pts the Futures had indicated then saw an initial uptick but then drifted lower to test 40,200 late morning dipped. PM market traded initially in a tight range 40,250/320 but sold down to test 40,000 in the last hour before an uptick to close -595pts -1.46% at 40,168. Talk of CTA reposition as levels of large caps hit highs; worried about waning momentum.
Markets wary; Yen weakness raises the chances of intervention if Yen hits 152
Markets will be open Friday and Monday
Yen closed 151.34 in US (a 34 yr. low) Yen trading 151.36
Data out pre market
BoJ Summary of Options
Foreign Stock Investment ¥-891.4.6B vs ¥-1461.9B prior revised from-1461.6B
Foreign Bond Investment ¥762.3B vs ¥-8188.8B prior revised from-803.9B
S Korea
Kospi opened 2pts lower despite the Tech rally overnight in the US and news of Hyundai, LG Corp and other firms announcing investment plans. Market trended lower for the first 90 minutes but then dipped to 2,745 which set the day range 2,743/757 and closed -9pts -0.3% at 2,746
Markets will be open on Friday and Monday
S Korea shifted into full-scale election mode on Thursday, with political parties launching their official campaigns ahead of the general election on April 10.
Data out pre market
Business Confidence Mar 71 vs 70 Feb (F/cast was 71)
Taiwan Market to opened 42pts lower but saw an initial uptick before selling down to 20,065( day low) before rebounding to the opening level. That set the range 20,066/222 for the day and closed -54 pts -0.27% at 20,147. Turnover of NT$442.58 billion (US$13.84 billion).
Market will be open on Friday and Monday. But markets will be close next Thursday for Qingming Festival.
No Data due
China
CSI 300 opened 4pts lower after the Golden Dragon Index closed flat (FTSE A50 China Futures -6pts). Initially dipped lower to 3,490 before rebounding to flat. Then from 10am worked better into lunch at 3,543. PM trended lower to 3,510 before an uptick to close up 18pts 0.5% at 3,520
President Xi’s address to business leaders was positive but didn’t seem to offer any new news. Markets open Friday and Monday but Stock Connect closed.
Chinese markets will be close next Thursday for Qingming Festival.
No Data due Thursday but on Friday Company Account Final due
Then PMI data on Sunday
Hong Kong
HSI opened -15pts vs +43pts ADR’s; and traded around flat in the first 40 minutes but then worked better in line with China to 16,672 before a down tick into lunch at 16,661. PM trended lower to 16, 553 and then traded sideways into the close.
At the close HSI rose 148 pts or 0.9% to 16,541. HSTI rose 84 pts or 2.5% to 3,477. HSCEI gained 82 pts or 1.4% to 5,810. Market turnover reached $117.26 billion; light considering its ahead of a long weekend.
Markets will be closed Friday and Monday for Easter weekend re-opens Tuesday. Market will also be closed next Thursday 4 April Qingming Festival; so expect light trading next week.
Earnings on Thursday include: China Merchants Ports, KWah, Melco, CITIC, Maanshan Iron & Steel, Greenland, Angang Steel, Dah Sing Financial, Dongfeng Mer, Inspire Digital, China Eastern Air, China Overseas Land and Investment, Air China, China Rare Earth, Global Bio, Tianneng Power, Digital China, CIFI, CCB, SMIC, TCL, Brilliance China, Qingling Mtr, Zoomlion, Sino Biopharm, Cosco Shipping, Agricultural Bank of China, Hua Hong Semi, Hidili, Guangzhou Rural Bank, Kaiser Group, Postal Savings Bank of China, Macau Legend, Ganfeng Lithium, South Gobi, China Mingsheng Bank, County Garden, Great Wall Motor, Bank of China HK and Bank of Hong Kong, Guangzhou R&P Property, China Shineway Pharmaceuticals, Anton Oilfield Services, Lonking, Agile Property, Haitong Securities and others.
No Data due
Singapore
STI opened -3pts but initially ticked higher to 3,260 but then trended lower through the day; currently -19pts -0.6% at 3,233 in the last hour
Market will be closed Friday but open on Monday
Data due on the open
Bank Lending Feb S$801.5B vs S$794.3B Jan
At lunchtime
Export Prices Feb -1.7% YoY vs -4.7% Jan revised
Import Prices Feb -5.1% YoY vs -5% Jan revised
PPI Feb -2.8% YoY vs -2.7% Jan revised (F/cast was 0.9%)
India
Nifty 50 opened slightly higher and worked better seeing resistance around 20,435 around 1pm local time.
Sensex opened higher and drifted higher with resistance approaching 74,000
Markets will be closed Friday but open on Monday
Data due after market
External Debt Q4 vs $635.3B (F/cast $638B)
Europe opened higher UK Data confirmed that its economy fell into recession in Q3 2023 Travel stocks led gains, but construction slipped.
UK & German Markets closed on Friday and Monday
France open Friday but closed Monday
Data due
Eurozone Loans to Companies & Household, M3 Money Supply. ECB’s Knot speaks Services), Consumer Confidence Final, Consumer Inflation & Selling Price Expectations
Germany Retail Sales, Unemployment (Persons, Change, Rate)
France No data due
United Kingdom Car Production out Feb 14.6% YoY vs 215 Jan (F/cast was 17%)
Due later Current Account, GDP Growth Rate Final, Business Investment Final, BoE’s Mann speaks
United States
Futures opened Dow -32pts -0.08%, S&P -0.09% and NDX -0.12%.
Bond markets will close early on Thursday. Markets are closed Friday but government remains open hence the release of data Friday; including the PCE data which the market is watching for.
Data due GDP Growth Rate & Price Index Final, Corporate Profits, Initial Claims, 4 week Average Claims, Continuing Claims, GDP Sales Final, PCE Prices Final, Real Consumer Spending Final, Chicago PMI, Michigan Consumer Data Final (Sentiment, 5yr Inflation Expectations, Expectations, Inflation Expectations), Pending Home Sales, EIA Gas Report, Kansas Fed Manufacturing and Composite Indexes, 4 & 8 week Bill Auction, 15 & 30 year Mortgage Rate, Prospective Plantings Report, Quarterly Grain Stocks Report, Baker Hughes Rig Report.
FINANCIAL TIMES
Online
Investors bet an election win by Narendra Modi will extend India’s stock market boom
Some analysts are increasingly concerned about lofty valuations and shallow markets.
'The BSE Sensex index hit a record high this month, having risen every year since 2016, while the total value of its equity market has now eclipsed Hong Kong. Some analysts see no reason why years of market gains should not continue.'
Digital
Header Xi’s pep talk for US chiefs
He told the group of about 20 US business figures, which included Blackstone’s Stephen Schwarzman and Bloomberg chair Mark Carney, that Beijing was committed to reform.
Inside Xi sells upbeat China outlook to US bosses
'China’s economy has not “peaked” and its growth prospects remain “bright”, President Xi Jinping told US chief executives yesterday as Beijing sought to revive foreign investor confidence.'
Opening up to continue, reforms will not stall etc. etc. the message was the same as we have heard before. Whilst the meeting lasted 90 minutes and evidently he took questions too but we are not hearing that there would be an easing on the treatment of data, secrets and other security issues. No insights into how the ‘around 5%' growth target would be achieved.
It was about ’telling good stories’ and Xi’s was to say '“promoting the recovery of the world economy and solving international and regional issues need China and the US to co-ordinate co-operation” and countries should “seek common ground while reserving differences”.'
He talked about commitment to reform but it will be reform with ‘Chinese characteristics’ It was the same talk as we have heard before.
Interestingly sitting next to him were Commerce minister Wang Wentao, top diplomat Wang Yi and the head of China's state planner, Zheng Shanjie. No sign of Premier Li; which is strange considering that historically he should be in charge of the economy whilst Xi is in change of the State. Clearly that has now changed and everything is about Xi. It will also lead to questions about Premier Li’s future and whether or not he has Xi’s confidence. Premier Li had lots of good things to say about Xi in his annual report at the ’Two Session’ and earlier at the China Development Forum but maybe that is about trying to save his job?
Headline. Blockbuster M&A begins to recover after a long drought for dealmakers
▸ Big takeovers more than double ▸ Rebound fuelled by rate cut hopes ▸ JPMorgan leads advisers
'According to data from the London Stock Exchange Group, deals worth at least $10bn more than doubled in the quarter compared with the same period last year, driven by large US takeovers in the energy, tech and financial sectors.’
Below the fold. Former City trader Hayes loses appeal to clear his name over Libor rigging
INSIDE
China’s EVs sweep into Europe
It will manufacture quarter of electric models sold in the EU this year
'About 19.5 per cent of battery cars sold in the bloc last year were made in China, according to the research, owing to rising European sales of brands such as MG and BYD and factors such as Tesla using its Shanghai factory to supply parts of the European market. That will rise to 25.3 per cent in 2024, according to T&E, as Chinese makers continue to take share from European brands.’
'Chinese-branded EVs alone are set to account for 11 per cent of the EU’s electric car market this year, rising to 20 per cent by 2027. Chinese brands such as BYD have risen from 0.4 per cent of the European EV market in 2019 to 8 per cent of sales last year.'
The EU is looking at increasing the current tariff to 25% from 10%; that makes money for the EU, makes European made vehicles competitive but doesn’t help consumers. Especially as the Chinese companies will still be making money at this levels; because they are higher than the prices they are achieving in their home market.
'“Tariffs will force carmakers to localise EV production in Europe, and that’s a good thing because we want these jobs and skills,” said Julia Poliscanova, policy director at T&E. “But tariffs won’t shield legacy carmakers for long. Chinese companies will build factories in Europe and when that happens, our car industry needs to be ready.”’
Whilst that is true it will be interesting to see if the Chinese can make EV in Europe profitability without the backing that they get in China.
'BYD Europe boss Michael Shu said last month that subsidies were less important than “technology” and “efficiency” in making vehicles cheaper. “We invested in this technology much earlier, and much more, than competitors. It’s not because of the subsidy.”’
That could be tested in Europe declined to offer BDY any grants for setting up its plant in Hungary.
The fact that Europe is offering these companies grants which is rather odd, if Europe subsides are wrong.
But it is worth remembering Chinese companies coming to Europe can do on a stand alone basis. When western auto makers went into China they have to be a minor part of a JV with a local company. They had to handover IP and industry knowledge. Chinese firms are not being subject to such requirements which makes you think that Europe will still be taken advantage of!
It also notes that Tesla, BMW and Renault’s all make EV’s in China that they ship to Europe and so those imports would be subject to the tariffs too.
I think that the Chinese have been well supported by the Chinese government in various ways; fresh sites without legacy issues, good logistics, good power, cheap labour etc. Where as the Europeans face having to deal with legacy issues, high wages and in some cases power shortages.
CATL founder says vaunted solid-state batteries for cars are years from viability
Toyota projections questioned and problems of functionality, durability and safety spelt out
Solid state batteries are like the ‘holy grail’ of battery makers. As the article makes clear everyone is trying to get there but most insiders believe it will take years. I wrote on the Toyota ‘breakthrough’ a few weeks ago, the fact that they have presented to the world a commercial solid state battery seems to suggest that they don’t have a good working model.
'Robin Zeng, founder and chief executive of CATL, said that the much-hyped technology did not work well enough, lacked durability, and still had safety problems.’
In the meantime battery makers are experimenting with various different battery types;
'Rather than solid state, Zeng said his group was targeting sodium-ion batteries and condensed-matter ones (which use a semi-solid material) with prototypes already in production. The semisolid material can store about double the energy of conventional lithium-ion batteries, CATL claims.’
It is interesting to note that CATL is looking to move from just batteries to 'everything from power transmission to energy generation through the recyclable solar cells the group is developing.
“We don’t want to make only components. We are thinking about how we can make a system, the hardware and software, to help localities get to carbon neutral,” he said.
Going green is going to require a huge range of batteries for more than EV’s and CATL wants to be at the centre of it all; that I think is what makes the company attractive.
The article mentions 'Tensions between Beijing and Washington are threatening Zeng’s aspirations, the most recent flare-up coming in December when CATL customer Duke Energy disconnected the group’s batteries installed at a North Carolina Marine Corps base.
“Batteries are like rocks or bricks. You buy them to build a house. When we were selling the bricks [to Duke], we told them no military use . . . So this actually violates our agreements. But if you think about it, something like a brick actually, how can bricks spy?” ‘
I doubt they were worried about bricks spying but there would be concerns about 'on line' battery controls. But it has resulted in CATL looking to license its tech in the US rather than building battery manufacturing plants in the US.
Another worry from the geopolitical tensions; that the west actually lags behind in the technology.
Tokyo steps up intervention warnings as yen slides to weakest level since 1990
The yen slumped against the dollar yesterday, pushing the currency towards its lowest level in 34 years and significantly raising the risk of market intervention by Japanese authorities.
As normal the establishment stepped up verbal warnings but so far no follow through. The weakness seems to have surprised a lot of people but really shouldn't have done.
Whilst the BoJ’s decision to pivot on policy was a big change the actual impact on the currency and economy will be very slow.
The Finance ministry noted some speculative action which is to be expected after such a big pivot. But the reality is that the fundamentals in Japan are fragile but improving along with general sentiment. The wage negotiations with unions went well from the governments point of view and labourers but we need to wait and see if those rises are replicated in the non. Union sectors which is 70% of the working population and so far more important.
Hence the risk that the current revival could run out of steam. I don’t think it will and the rlly in the stock market gives the BoJ a cushion too. I think it would be a mistake for the government to step in, the BoJ has moved away from yield curve control; the government should stop shouting about the currency and let the market work its magic.
Read also Making sense of a wrong-way bet on yen strength. By Rebecca Patterson a former chief investment strategist at Bridgewater AssociatesMaking sense of a wrong-way bet on yen strength.