Safe bets, China down and UK retail in freefall


Chipmakers’ enthusiasm for artificial intelligence and U.S. jobs figures invigorated Wall Street and Tokyo, even as Chinese markets resumed their slide and a surprising plunge in retail trading in United Kingdom revealed difficulties in other countries.

Taiwanese chipmaker TSMC, the world’s largest semiconductor maker and major supplier to Apple, set the stage on Thursday in an unremarkable earnings season by forecasting growth of more than 20%. % of its turnover in 2024, thanks to the explosion in demand for high-end chips used in the field of artificial intelligence.

The buzz has sent the chipmaking sector surging around the world in the past 24 hours, with Taipei-listed shares of TSMC jumping 6.5% on Friday.

Tokyo’s Nikkei, one of the darlings of 2024 so far and up 7.5% year to date, rebounded 1.4% to its 34-year high hit on Wednesday, helped by the chip rally and core inflation figures that leave the Bank of Japan in no hurry to tighten its easy money policy.

Bank of America said fund data showed the biggest inflow in 12 weeks into Japanese stocks this week.

Wall Street stocks had already resumed the torch on Thursday, returning to less than 1% of their record two years ago. The Nasdaq 100 jumped 1.5%.

Futures are expected to extend those gains on Friday, with U.S. regional banks topping the earnings season agenda.

Relief also came from the fact that Congress once again averted a government shutdown before today’s funding deadline, even though it only pushed the issues out to six weeks.

The U.S. House of Representatives on Thursday approved a stopgap bill to fund the federal government through early March, and sent it to President Joe Biden for final approval.

But any balm for the Treasury market was called into question by another sign that the US labor market remains hot – with the weekly unemployment rate falling to a 16-month low and calling into question the type of easing aggressive Federal Reserve still embedded in markets. Futures contracts are still priced at over 50% for a first rate cut in March.

In contrast, the Philadelphia Fed’s latest business survey for January showed a sharp decline in sentiment, activity and prices paid. The results of construction starts were more mixed.

Existing home sales will top the list Friday, with the University of Michigan’s latest household survey for this month in focus.

In bond markets, 10-year Treasury yields hit a new one-month high, although the short end of the curve was more subdued and traders closely monitored the yield curve’s deinversion from 2 to 10 years of this year. The dollar further retreated from its recent highs and lost its highest level since November against the yen.

Markets continue to monitor high container shipping prices amid Red Sea disruptions, looking for any signs that could lead to broader price increases and complicate the disinflation picture for banks power stations.

But disruptions to trade routes are also impacting economic activity, particularly in China, where the economy was already under considerable pressure due to the real estate collapse and flight of foreign capital.

Despite renewed optimism in markets elsewhere on Friday, fresh stock losses in Shanghai and Hong Kong showed that China remained an exception.

Brokerage Citic Securities has suspended short selling for some clients in mainland markets as the country’s stock rout deepens, Bloomberg reported.

But China has also asked heavily indebted local governments to delay or halt some state-funded infrastructure projects, according to Reuters sources, as Beijing struggles to contain debt risks while trying to stimulate the economy.

This week, UK government bond traders faced an unexpected fall in retail sales in December, which led to a decline in overall retail sales for the year and muddied the waters for observers of the Bank of England after the surprise at the start of the week in terms of inflation.

The main items on the agenda that could guide US markets later on Friday:

* Results of American companies: State Street, Huntington Bancshares, Travelers, Comerica, Fifth Third, Regions Financial, Schlumberger.

* U.S. existing home sales in December, University of Michigan Consumer Survey in January, Nov TIC data on overseas Treasury holdings.

* San Francisco Federal Reserve President Mary Daly and Fed Vice President for Supervision Michael Barr speak.

* World Economic Forum in Davos, last day – Kristalina Georgieva, Managing Director of the IMF, Christine Lagarde, President of the ECB, and Christian Lindner, German Finance Minister, among the speakers.

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