All eyes are on Fed, as the IMF signal increases the chance of soft landing

APAC equity markets

APAC equity markets were mixed on Wednesday, following the path of the US session on Tuesday. Most indices are poised to post a third straight month of gains in January.

The Federal Reserve

The Fed is expected to maintain its key interest rates at current levels. The Fed Funds Rate target range is almost unanimously forecast to remain between 5.25% and 5.5% for a fourth consecutive meeting. Fed funds futures currently have a 97.4% chance of no change. There is a 48% chance that the Fed will cut by at least 25 basis points at its March meeting, according to the Chicago Mercantile Exchange (CME), which is down from 59.7% earlier this week. Almost everybody agrees that a rate cut could have happened by the next meeting in April.

The IMF

The Fed hopes to navigate a soft landing for the US economy. At its December meeting, the Fed shared its latest views on US economic growth. finacial year (FY) gross domestic product (GDP) growth is seen at 1.4% in 2024. On Tuesday, the IMF raised its global growth forecast to 3.1% for 2024, up from 2.9% previously. It upgraded its outlook for the United States and China.

Japan semiconductor manufacturing indicators

A few indicators were published in Japan overnight. Industrial production rose in December, up 1.8% from the previous month, after a 0.9% contraction in November. The reading was, however, below the median market forecast for a 2.4% rise. Note that the output of semiconductor manufacturing equipment increased by 6.2%. Other data showed Japanese retail sales expanded by 2.1% in December from a year earlier. It marked the 22nd straight month of increase but fell short of the median market forecast for a 4.7% rise. Consumer confidence rose for a fourth straight month to 38 in January, its highest level since December 2021.

Reserve Bank of Australia

In Australia, Reserve Bank of Australia (RBA)-trimmed mean consumer price index (CPI) growth fell to its lowest level in two years, to 4.2% in Q4 YoY, from a 5.2% rise the previous quarter. Economists anticipated 4.3%.

Chinese manufacturing

China's manufacturing activity contracted for the fourth straight month in January, according to the official NBS survey. Manufacturing rose to 49.2 in January from 49.0 in December, driven by a rise in output but still below the 50-mark separating growth from contraction. It was in line with a median forecast of 49.2. Non-manufacturing Purchasing Managers' Index (PMI) rose to 50.7, marginally better than expectations.

German retail sales

In Germany, retail sales fell by 1.6% in December month-over-month (MoM); economists anticipated a 0.7% rise. Later today at 1 p.m., the consumer price index is forecast to rise by 3% in January year-over-year (YoY). It would be the slowest growth since June 2021.

ADP

Over in the US, ADP employment changed at 1.15 p.m.The US private sector is forecast to have created 135,000 jobs in January. Later at 3 p.m., Chicago PMI is expected to rise to 48 in January from 46.9 in the prior month.

GSK

Elsewhere on the equity market, GSK beat market estimates for fourth-quarter profit and sales. Adjusted operating profit came in at £8.78 billion plus 12%. Sales rose to £30.33 billion. The group benefited from the launch of its respiratory syncytial virus vaccine, Arexvy. GSK anticipates 2024 turnover growth between 5% and 7%.

Novo Nordisk

Danish pharmaceutical group Novo Nordisk, the largest European company by market cap, announced a better-than-expected operating profit for the fourth quarter and a 31% increase in full-year sales. The maker of Wegovy weight loss drug and diabetes drug Ozempic expects FY 2024 revenue growth between 18% and 26%.

Novartis

Another pharmaceutical group, Novartis, reported a gain of 6% in fourth-quarter adjusted net income, helped by cost cuts and the strong growth of recently launched drugs. The Swiss's quarterly core net income came in at $3.13 billion, missing an average analyst estimate of about $3.3 billion.

Over in the US, Microsoft shares ended the session lower on the IG platform, but the stock was very volatile in extended trading. Both earnings and sales beat the forecast. EPS came in at $2.93 and revenue at $62 billion as new Al features helped attract customers to its Azure cloud service. There are now 53,000 Azure Al customers, a third of whom were new to the service in the past 12 months. Revenue at Microsoft's Intelligent Cloud unit, which houses the Azure cloud computing platform, grew 20% to $25.9 billion. But investors' mood was dampened by news about rising costs to develop Al features. The company forecast operating expenses of $15.8 billion to $15.9 billion in the current quarter, up from $15.4 billion in the previous one.

Alphabet

Alphabet shares dropped 7% in extended trading as advertising sales disappointed the market. Earnings came in at $1.64 per share, 5 cents higher than forecast. Total sales were also better than expected, but ad sales of $65.5 billion fell short of expectations for $66.1 billion. Google Cloud's revenue topped Wall Street targets, boosted by Al, but investors also noted that Microsoft's Azure grew faster in the same period. Like Microsoft, Alphabet's capital expenditure shot up, up 45% to $11 billion, the highest in years. AMD shares dropped by nearly 10% in extended trading. Earnings per share came in line at 77 cents. Revenue was marginally higher than forecast at $6.2 billion, and the chipmaker boosted its 2024 forecast for its Al processors by $1.5 billion. But it wasn't enough to meet investors' expectations. For the current quarter, AMD forecasts revenue of $5.4 billion plus or minus $300 billion, compared with analysts' average estimate of $5.73 billion.

Boeing

Boeing is due to report before the market opens. The Street anticipates a loss of 80 cents per share and revenue of $21.26 billion. This quarter's conference call will be especially important to investors following the Air Alaska accident that occurred in early January when a 737 Max 9 aircraft's panel blew off during a flight.