Market 01/24: 5-year bond auction disappoints, Netflix drags tech after ER

5-year bond auction disappoints

Today's massive 61 billion USD 5-year bond auction disappointed the market with yield at 4.055%, higher than expected 4.035%. This is the highest tails since 09/2022.

China: reduces reserve requirement ratio for banks - boost growth

PBOC cuts reserve requirement ratio (-0.5%) for banks starting 02/05 to stimulate growth.

→ Expected ~1,000 billion CNY (~139.8 billion USD) in long-term capital to be injected into the market.

• Hang Seng China Enterprises Index achieves the largest two-day gain since November 2022 (following positive policy news over the past 2 days).

• Chinese authorities also require funds to limit short selling of stock index futures contracts.

• Some of China's largest provinces are targeting at least 5% GDP growth in 2024

• In addition, China added +12.44 million urban jobs in 2023, meeting the set target.

Red Sea tensions continue: freight rates continue to rise

Houthi - Yemen attacks continue to disrupt shipping flows, especially energy shipping routes:

• Fuel shipping costs from Middle East surge amid Red Sea chaos

• QatarEnergy announces delays in some LNG shipments to European customers due to tensions on the voyage.

US PMI unexpectedly rises in January

US January preliminary PMI data surges with:

• Manufacturing index back >50: 50.3 - highest in 15 months, higher than expected 47.6)

• Services rise to 52.9 (highest in 7 months)

WTI oil price continues to rise due to supply decline

Crude oil inventory data from 2 reports:

• API

  • Crude -6.67 million barrels (exp. -1.4 million)

  • Cushing crude -2.03 million barrels

  • Gasoline +7.18 million barrels (exp. +1.5 million)

  • Distillates -245,000 (exp. -700,000)

• DOE

  • Crude -9.2 million barrels (exp. -1.4 million) - largest draw since Aug 2023

  • Cushing crude -2 million barrels

  • Gasoline +4.9 million barrels (exp. +1.5 million)

  • Distillates -1.4 million barrels (exp. -700,000)

• Biden administration added 920,000 barrels to SPR last week - 9th consecutive week of oil additions

• US crude production fell -1 million barrels last week due to storm impacts

WTI hovers around $74.80 before official data and recovers after oil supply drop

Mortgage applications last week continue to rise - though momentum slows

MBA mortgage applications for week ending 01/19 rise +3.7% W/W, (lower than previous week: +10.4%) — but still a good sign showing improving demand.

Business results update

1. ASML Q4 FY23

• Net revenue +12.5% Y/Y to €7.2B (higher than expected by €0.3B).

• Gross margin 51%, unchanged Y/Y

• Operating margin 33%, unchanged Y/Y

• Net bookings €9.2B (including EUV €5.6B).

• Backlog €39B.

• Expected business results:

  • FY24: revenue similar to FY23

  • FY25: strong growth

ASML orders recover strongly in Q4

2. Netflix Q3 FY23

Netflix added 13 million new subscribers in Q4.

• New members +13M Q/Q to 260M.

• Revenue +12.5% Y/Y to $8.8B (higher than expected by $0.1B).

• Operating margin 17% (+10 bps Y/Y).

• EPS $2.11 (missed expectations by $0.11).

• Expected business results: Q1 FY24

  • Revenue +13% Y/Y

  • Operating margin 26%.

3. Texas Instruments Q4 FY23

• Revenue: -13% Y/Y to $4.08B in Q4.

• Diluted EPS: -30% Y/Y to $1.49

• Invested $3.7B in R&D and SG&A, $5.1B in capex and paid dividends $4.9B

4. AT&T Q4 FY23

• Revenue $32B (expected: $31.46B)

• EPS $0.54 (expected $0.56)

• 2024 adjusted EPS guidance $2.15 to $2.25 (expected $2.44)

Other news

1. Nvidia, officially reaches record market cap: 1.5 trillion USD and +27% (+$320B) in the past 3 weeks.

   

2. Goldman Sachs: momentum traders will sell stocks in any scenario next week

3. CBOE $VIX volatility index drops to near 4-year lows

4. S&P 500 officially hits 4,900 for the first time in history.

5. European Commission unveils economic security plan: tight monitoring of foreign investment, exports, and technology flows, especially with China.