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Subjective market review (25-Jan-2023)

Zdjęcie autora: Jarosław JamkaJarosław Jamka

This time the most important are: rate cut in China, manufacturing PMIs and Tesla's results.


1) China: after months of unsuccessful attempts to stop falling shares (already in July 2023 Politburo mentioned boosting markets, then there were bans on short selling and purchases of shares by various entities), China finally got down to specifics by lowering the RRR (reserve requirement ratio) by 0, 5% from February 5.


RRR determines the amount of cash banks have to keep in reserve. According to the People's Bank of China's Governor Pan Gongsheng, this means providing 1 trillion yuan ($139 billion) in long-term liquidity to the market. Will this be enough? It seems that at least temporarily YES - Figure 1.


The Hang Seng Index has so far rebounded from the lows by 8.3%

Hang Seng Properties by 6.7%%

Hang Seng Tech +5.8%.



 

2) Manufacturing PMIs for January 2024 change vs December 2023:


Australia +2,7 points (11-month high)

Japan +0,1 points (Manufacturing Output Index +0,6)

India +2,0 points (to the level of 56,9 !)

Germany +2,1 points (11-month high)

France +1,1 points (4-month high)

EU +2,2 points  (10-month high)

UK +1,1 points (9-month high)

US + 2,4 points (15-month high)


We clearly have a rebound! Is it possible to end the slowdown/recession in manufacturing sector without dragging the broader economy into recession? Yes. And historically this has happened.


But this PMI reflection can still be interpreted as noise. In the US, we also had weak readings of regional PMIs (New York, Philadelphia, Richmond) and we do not necessarily need to see a strong rebound of ISM Manufacturing (published on February 1).


But a possible further rebound in PMIs should not be interpreted in this cycle as a leading signal of a rebound in the broader economy/services - but the market/narrative will interpret it this way anyway….



3) Tesla belongs to the Mag7 club, so its results are important for the entire market. As a reminder, Mag7 constitutes approximately 17% of the entire MSCI ACWI global equity index.


Tesla's results were disappointing in terms of revenue growth, although it showed higher margins than the market expected (the market was supposed to focus on margins due to numerous reductions in the official selling prices of Tesla cars).


Revenues increased year-on-year by 3.5% (the market expected +6.4%). See Figure 2.

As a result, Tesla's share price is now falling (in after-hours trading) by 5.9% (after hours trading volume is now 18m of shares, for comparison, yesterday on the cash market 123.4m of shares were traded). I will review Tesla's results in a separate post.


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