China Bounces Back Ahead Of Holidays

The big story overnight has been a rebound in Chinese stocks with Hong soaring 4.0% and Shanghai gaining 3.2% after Chinese securities regulators tried to shore up support by indicating plans to “guide” institutional investors to invest more in equities. This comes following several weeks of declines for Chinese markets and just ahead of the upcoming Lunar New Year holidays which start on Friday. It’s unclear if this move has followed through to other China-sensitive markets as US Crude Oil is up 1.0% this morning but Copper is flat.

US index futures are flat as investors digest yesterday’s US index declines of 0.2% to 0.7%. The US 10-year treasury note yield is steady near 4.15%, while the German 10-year Bund yield is steady near 2.30%. In Europe today, the Dax is up 0.2% and the FTSE is up 0.6%. Gold is up 0.1% while Bitcoin is up 1.1%.

Overnight earnings reports have been coming in better than expected so far and the market response has generally been positive with Palantir Technologies (up %) and Eli Lilly* (up %) posting significant premarket gains. After the close today, results are due from Chipotle Mexican Grill*, Ford, and Prudential Financial. Canadian earnings season picks up starting on Thursday.

The Reserve Bank of Australia came out with a “Hawkish Hold” overnight, keeping its benchmark rate unchanged but indicating it remains open to further rate hikes if needed, which appears possible since its overnight rate of 4.35% is still lagging behind the Federal Reserve Board and the Bank of Canada. On that note, Bank of Canada Governor Macklem and Cleveland Fed President Mester are speaking today. 

Economic data reporting starts to slow down today but there have still been several positive signs as German factory orders (8.9% vs street 0.0%) and UK Construction PMI (48.8 vs street 47.3) both beat expectations. Canadian Ivey PMI is due at 11:00 am EST (street 55.0). Yesterday US ISM Service PMI beat expectations (53.4 vs street 52.0), but the prices paid component (64.0 vs previous 56.7) indicated inflation pressures have started to increase once again.

*Shares of Eli Lilly and Chipotle Mexican Grill are held in some portfolios managed by SIA Wealth Management.

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