Rise and shine everyone.

Today’s Focus will be on the 2nd reading of US Q4, 2023 GDP data. The first estimate in January came out at 3.3% above consensus of 2%. Just as a reference, Atlanta Fed’s current reading for Q1, 2024 GDP is currently at 3.2%.

A few interesting earnings today - TJX, Baidu, Endeavor before market; and HP Inc, Salesforce, Monster Beverage, and Snowflake after market close.

Big Stories

US Home Prices continue higher

The S&P Case-Shiller 20-city home price index saw a slight increase of 0.21% in December, which was almost in line with the expected 0.20%. The annual growth rate also picked up, reaching +6.13% in December, up from +5.41% in November. Among the 20 cities, 13 reported price increases on a month-on-month basis, with Las Vegas, Los Angeles, and Miami recording the largest gains. On the other hand, the most notable monthly price declines were observed in Portland, Minneapolis, and San Francisco. As we’ve shown earlier, home prices tend to lead Shelter Inflation, where we already saw an increase last month. This is worth keeping an eye on.

Japan’s rate hike bets heat up with hotter inflation

In January, Japan’s inflation dropped to 2.2% in January 2024 from 2.6% in the prior month, pointing to the lowest figure since March 2022, as food prices rose the least in 16 months (5.7% vs 6.7% in December). However, the level came in higher than the expected level of 1.9%. This brings back rate hike bets. The yield on Japan's 2-year government bonds reached its highest level since 2011 yesterday, reflecting rising investor expectations for returns. The TOPIX Banks index saw a 2% increase, suggesting a positive outlook for the banking sector amidst these conditions. Despite these economic shifts, the Japanese yen experienced only a slight appreciation against other major currencies.

The IPO market gaining momentum - Klarna

Klarna is back in play shopping for a $20B valuation to list in the US. Klarna is the top BNPL company out of Europe and has positioned itself as of the premier fintech players on the continent. Founded in 2005, Klarna handles around 2 million transactions per day across 45 countries, the website shows.

We’ve seen a string of IPO interest, the most recent being Reddit. But valuations still remain depressed. Reddit was looking $10B but reported now looking to list $5B. Klarna on the other hand has seen a roller coaster of valuations going from $45.6B during a funding round in 2021 to $6.7B in 2022. The company has since cut costs and its workforce and now, it would seem like they’re looking to split the difference when it comes to valuations.

The resurgence of tech stocks and the prospect of Fed cuts is opening up the IPO market again for tech startups. Nevertheless, listing by startups can largely be exit events for existing shareholders and let’s make sure you don’t end up “buying now and paying later!”.

Quote of the Day

No need to preemptively adjust policy and in no hurry to halt balance sheet runoff - Fed's Schmid

Chart of the Day

According to Credit Agricole, the current FX positioning for G10 currencies shows the GBP and NZD to be the biggest longs and the JPY and AUD to be the biggest shorts.

Other Stories

• OPEC+ said to consider extending voluntary oil output cuts into the second quarter to provide additional support for the market. Could keep them in place until the end of the year.

• Australia Jan CPI Y/Y: 3.4% v 3.6% est but remains unchanged from last month’s reading. The "annual trimmed mean inflation rate" was up 3.8% in January, down from the rise of 4.0% in December. AUD/USD fell on the news.

• RBNZ left the Official Cash Rate (OCR) unchanged at 5.50% (as expected) for its 5th straight pause in the current tightening cycle. Staff Projections lowered the OCR peak rate from 5.69% to 5.60%. The New Zealand Dollar (NZD/USD) fell -1.14% against the US Dollar is starting to look undervalued here.

• The economic sentiment indicator in the Euro Area declined to 95.4 in February 2024, down from January's revised figure of 96.1 and falling short of market expectations of 96.7.

• Standard Chartered Bank suddenly announced it was stopping new subscriptions in China for "commercial reasons"

• US Treasury Sec Yellen stated that US economic growth had been a "key driver" of better-than-expected global growth

• Commerce Sec Raimondo stated that leading edge companies sought >$70B from the Chips Act. Believed US to make 20% of leading-edge chips by end-decade

• Apple has terminated its decade-long electric vehicle project, surprising nearly 2,000 employees working on it. This decision ends a highly ambitious initiative, with the internal announcement made on a Tuesday.

• China's Country Garden has received a winding-up petition in Hong Kong, indicating legal action was initiated to dissolve the company in that jurisdiction. This process typically involves the court ordering the closure of a company, often due to insolvency or inability to pay debts.

• Amid the spring wage negotiations between Japanese corporates and unions in Japan (that will be closely watched by the BOJ), Toyota failed to reach agreement with its union’s demands in the second meeting between the parties. Note that in the past two years, Toyota has accepted the union’s demands in full on the first meeting.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)