Early Morning Call: Hang Seng jumps over 4% as China PMI rises at fastest pace in a decade

Equity market overview

Equity markets rose in the Asia-Pacific region, ignoring the decline in yesterday’s session in the US.

Hong Kong’s Hang Seng led gains in the region as China's manufacturing activity expanded at the fastest pace in more than a decade. The official NBS manufacturing PMI rose to 52.6 in February from 50.1 the previous month, a figure that far exceeded analysts' forecasts of 50.5.

The Caixin/S&P PMI, a survey of China's private sector, rose for the first time in seven months to 51.6, also well above expectations.

Australia’s ASX 200 was the laggard overnight, after the release on the country’s latest GDP data. GDP rose 0.5% in the December quarter compared to the third quarter (Q3), its weakest pace in a year, and missing a forecast of 0.8%. Q3 GDP was however revised upwardly to 0.7% quarter-on-quarter (QoQ). Annual growth remained at 2.7%.

In the UK, the Nationwide house price index fell 1.1% year-on-year (YoY) after a rise of 1.1% the previous month, the first annual decline since June of 2020, and the biggest drop since November of 2012.

Later this morning, Germany's unemployment rate is expected to rise to 5.6% in February, from 5.5% in January. And at 1pm, Germany's consumer price index (CPI) is forecast to decelerate to 8.5% in February YoY, from 8.7% in January.

In the US, ISM manufacturing PMI is forecast to rise to 48 in February, from 4 7.4 the previous month.

Corporate update

On the corporate front, Persimmon posted an underlying operating profit of £1 billion, up 2%. Profit before tax, however is down to £730 million, from £966m a year ago, reflecting an increase in money set.

Reckitt Benckiser posted full year (FY) like for like (LfL) sales up 7.6% to £14.45bn. Operating profit increased by 9.2% at constant currency to £3.44bn. Full year dividend was up 5% to 183.3 pence per share.

Europe's largest meals delivery company Just Eat Takeaway.com reported EBITDA of €19 million, compared with a loss of €350 million in 2021. Revenue fell 4%.

HP reported mixed earnings yesterday after the US market close. The PC and printer maker posted earnings of 75 cents per share, one cent above analysts' expectations. Revenue fell nearly 19% to $13.8bn, the steepest drop since 2016, missing analysts' estimates of $14.12bn.

However, HP's forecast reassured investors. The group said it anticipates adjusted profit above estimates, between 73 and 83 cents for the current quarter, and maintains its full year earnings target. HP counts on benefiting from cost cuts and a recovery in demand in the China market.

Today, the market awaits reports from Dollar Tree, Snowflake and Salesforce.

Commodities

API crude oil inventories showed yet another substantial increase last week. Crude stocks rose 6.2 million barrels, taking the total number of barrels gained so far this year to nearly 59 million barrels.

Gasoline stocks rose nearly 1.8 million barrels, while distillates fell by 341,000.

Separately, the EIA revealed yesterday that US crude oil production fell in December to 12.10 million barrels per day, its lowest since August 2022.

NY frozen orange juice just set a new all-time high, after the release of new official forecast. Orange production in Florida, which accounts for 80% of US production, is expected to fall by nearly two-thirds from last year, at levels not seen since the Great Depression.

The United States Department of Agriculture now estimates that production will reach 16 million boxes, down two million boxes from the January forecast, which would be 61% less than last season's production.

In 2022, Florida was hit by Hurricane Ian, Hurricane Nicole, a January freeze, and a disease called "citrus greening". And now producers need to replant, but this takes time. At least three years are required for a tree to bear fruit, and producers won't make a profit before six to nine years. To give you an idea, economic consequences from hurricane Irma that hit Florida in 2017 are still being felt in the region.