- China Propels Asian Stocks Higher Ahead of US Jobs: Markets Wrap
A boost for Chinese tech stocks helped lift Asian stocks Friday despite selling pressure in Japan as traders
await US jobs data that will help illuminate the path ahead for interest rates. Hong Kong’s Hang Seng Index
touched the highest level since November in Friday trading as a gauge of Chinese technology stocks trading in
the city was poised to enter a technical bull market. Shares in mainland China and Taiwan also advanced,
running against the grain of declines in Japan and South Korea. The decline in Tokyo partly reflected a
stronger yen overnight that began to abate in Friday trading. The currency edged lower against the
greenback, ending a four-day run of strengthening. The mixed moves underscored a lack of direction ahead
of US nonfarm payroll figures due later Friday, which will refocus traders away from the drama over tariffs
that rattled financial markets earlier in the week. A weak print could boost expectations for further Federal
Reserve cuts, while a stronger-than-expected number may have the opposite effect. - S&P 500 posts modest gain, notching third straight winning session
The S&P 500 climbed for a third straight session on Thursday as investors weighed the latest batch of
corporate earnings. The broad market index added 0.36% to 6,083.57, while the Nasdaq Composite rose
0.51% to 19,791.99. The Dow Jones Industrial Average, however, lost 125.65 points, or 0.28%, and closed at
44,747.63. - Oil set for third straight weekly drop on tariff fears
Oil prices rose marginally in early Asian trade on Friday but were on track for a third straight week of decline,
hurt by U.S. President Donald Trump’s renewed trade war on China and threats of tariff hikes on other
countries. Brent crude futures rose 15 cents to $74.44 a barrel by 0150 GMT and were poised to fall 3.2% this
week, their steepest drop since September 2024. U.S. West Texas Intermediate crude was up 9 cents at
$71.70 a barrel, down 2.7% on a weekly basis. It would be first time in five months that there have been
three straight weeks of decline. - Gold set for sixth successive weekly gain; U.S. payrolls report looms
Gold prices rose on Friday, hovering near record-high levels and set for a sixth successive weekly gain, as
trade war concerns fueled safe-haven buying ahead of the key U.S. payrolls report. Spot gold was up 0.4% at
$2,867.69 per ounce, as of 0250 GMT, and has gained more than 2% this week. Bullion hit an all-time high at
$2,882.16 on Wednesday. U.S. gold futures gained 0.5% to $2,889.80. - India central bank cuts rates for the first time in nearly five years, forecasts faster growth next year
The Reserve Bank of India on Friday cut key interest rates for the first time in nearly five years, as cooling
inflation offers the central bank room to stimulate the economy. The Monetary Policy Committee decided to
trim the repo rate by 25 basis points to 6.25%, RBI Governor Sanjay Malhotra said in a livestreamed address
Friday. The rate cut was widely expected and marked RBI’s first interest rate cut since May 2020 when the
country battled the pandemic-inflicted downturn. The central bank set the real GDP growth forecast at 6.7%
for the fiscal year of 2026 while the inflation rate lower at 4.2%. For the fiscal year ending March this year,
the RBI projected real GDP growth at 6.4%, its worst in four years, versus 6.6% previously, while inflation rate
was retained at 4.8%. Indian stocks fell with the benchmark Nifty 50 index shedding as much as 0.5%. The
yield on 10-year bonds rose by more than 4 basis points to 6.7%. In an unanimous decision, the six-member
panel voted to keep policy stance of “neutral.” That came as a surprise to some market watchers who had
predicted a shift to “accommodative” before the announcement. Though growth is expected to recover from
the low of the second quarter ended September, it is still “much below that of last year,” Malhotra said.
“These growth-inflation dynamics open up policy space for the MPC to support growth, while remaining
focused on aligning inflation with the target,” the governor said. The benchmark repo rate had remained
steady at 6.5% for the past two years, as inflation stayed above the central bank’s medium-term target of 4%.
Following a peak in October, India’s consumer price inflation has eased, dropping within the central bank’s
tolerance ceiling of 6%, coming in at 5.22% in December and 5.48% in November. The Indian government has
been steadily lowering its full-year real GDP forecasts, after the economic growth missed expectations by a
large margin in the quarter ended September, when its grew by 5.4% — its slowest expansion in nearly two
years. - Bank of England signals further easing after rate cut, slashes growth outlook
The Bank of England made its first interest rate cut of 2025 on Thursday, amid ongoing concerns over sluggish
growth in the British economy. Economists had widely expected the central bank to trim rates, following a
spate of lackluster U.K. growth data. The central bank halved the growth forecast it expected the U.K. to see
in 2025, from 1.5% to 0.75%. - Japan’s household spending massively beats expectations, boosting case for further BOJ hikes
Japan’s household spending in December rose 2.7% year on year in real terms, massively beating
expectations from economists polled by Reuters and marking its first rise since July 2024. The figure sharply
beat Reuters expectations of a 0.2% rise, boosting the case for another interest rate hike from the Bank of
Japan. According to a Friday report from the Statistics Bureau of Japan, average household expenditure in
Japan stood at 352,633 yen ($2,332) in December, up 7% in nominal terms from the previous year. Average
household monthly income in the same month was 1,179,259 yen, rising 7.2% in nominal terms and up 2.9%
in real terms year on year. The Nikkei 225 slipped 0.44% after the release, while the yen strengthened 0.18%
to 151.19. The data comes after the BOJ raised its benchmark policy rate to 0.5%, its highest since 2008. The
BOJ has long stated that it would raise rates if it sees a “virtuous cycle” of higher prices and growing wages.
While LSEG estimates after the spending data release indicated that there is a 95.7% probability of the BOJ
holding rates at its next meeting on March 19, there is a 21.2% chance of a hike at its May meeting. - US job market likely began the year strong, but faces cloudier future
The U.S. labor market probably started 2025 the way it spent most of last year: Generating decent, but
unspectacular, job growth. When the Labor Department releases January employment numbers Friday,
they’re likely to show that companies, government agencies and nonprofits added 170,000 jobs last month,
according to a survey of economists by the data firm FactSet. That would be a respectable performance but
also a downshift from 2024 which averaged 186,000 new jobs a month, including a surge of 256,000 in
December. The unemployment rate is expected to remain low at 4.1%. The first monthly jobs report of
Donald Trump’s second presidency is likely to confirm that he inherited a solid economy, one in which
consumers enjoy job security and rising wages that give them the confidence and financial wherewithal
to spend freely. “The economy is kicking off 2025 in good shape,’’ said Bill Adams, chief economist at
Comerica Bank. The future is cloudier. The federal hiring freeze that Trump imposed Jan. 20 is a “negative for
employment growth,’’ Bradley Saunders, an economist at Capital Economics, wrote in a commentary last
week. But it came after the Labor Department collected the January jobs numbers, so any impact won’t show
up in Friday’s report. Likewise, a cold snap that probably increased seasonal layoffs in the Midwest and
Northeast occurred late in January and won’t register in government jobs data until the February numbers
come out, Saunders wrote. Economists are also worried about Trump’s threat to wage a trade war against
other countries. He’s already imposed a 10% tax on imports from China. - Yum! Brands shares rallied 9.7% after sales surpassed expectations, buoyed by growth at the Taco Bell
fast-food chain
The company’s same-store sales rose 1% in the fourth quarter, just above the average estimate of analysts
and snapping three consecutive quarterly declines. Taco Bell posted 5% growth, while KFC’s same-store sales
were flat. Pizza Hut lagged the company’s other main brands with a 1% decline. The results represent an
improvement for Yum, whose results suffered earlier in 2024 after diners pinched by inflation cut back on
restaurant outings. Boycotts against American companies following the outbreak of war in the Middle East
also hurt Yum’s sizable international operations. The company said Thursday that KFC had a strong recovery
in Middle East transactions. Taco Bell has remained a standout. In the fourth quarter, it sought to lure guests
by bringing back popular items from different decades and by launching crispy chicken nuggets. For the full
year, Yum said its core operating profit grew by 9% — beating the company’s target rate. It expects to meet
its goal of at least 8% for the measure of profitability this year as well. Yum’s number of locations rose by 5%
last year, excluding 120 units it divested in the second quarter. - Eli Lilly shares rose 3.3% after the drugmaker reported adjusted earnings per share for the fourth
quarter that topped the average analyst estimate. The company also gave 2025 profit guidance that was in
line with expectations
Citi, Geoff Meacham (buy, PT $1,190): Says the EPS guidance “completes the 2025 setup, which we believe
should be a very beatable bar for the year”. Adds that the 4Q results came without surprises given the pre
announcement. “LLY shares are +9.1% YTD, which we think reflects thawing investor sentiment now that
Street expectations have largely re-aligned”. BMO Capital Markets, Evan David Seigerman (outperform, PT
$1,010): “With Lilly issuing expected 4Q24 total revenue, Mounjaro, and Zepbound revenue and its 2025
guide back in January, today’s print is unlikely to shock any investors”. Says the beat on the quarter’s bottom
line was driven by lower expense. FOURTH-QUARTER RESULTS: Adjusted EPS $5.32 vs. $2.49 y/y, estimate
$5.06. Revenue $13.53 billion, +45% y/y, estimate $13.45 billion. Zepbound revenue $1.91 billion, +52% q/q.
YEAR FORECAST: Sees adjusted EPS $22.50 to $24.00, estimate $23.17. Still sees revenue $58.0 billion to
$61.0 billion, estimate $59.41 billion. - Philip Morris gained 10.9% to a record after reporting better-than-expected profit driven by sales of
Zyn nicotine pouches
The tobacco maker, which sells Marlboro cigarettes outside the US but is shifting toward smoke-free
products, generated adjusted diluted earnings per share of $1.55 in the fourth quarter, beating analyst
estimates. It is forecasting adjusted earnings per share of $7.04 to $7.17 in 2025, also above expectations.
The performance has been driven by the growing popularity of Zyn pouches, which contain nicotine but not
tobacco and are taken orally by stuffing them under the upper or lower lip. Sales rose 25% last year, and
Philip Morris shipped almost 165 million cans in the key US market in the fourth quarter, up 42% compared
with a year earlier. Health concerns around tobacco are fueling demand, and the company was boosted by a
decision this year by the US Food and Drug Administration to approve all Zyn pouches currently marketed in
the country. Philip Morris is building a new manufacturing facility in Colorado to meet demand for Zyn
products, and expects US nicotine pouch shipments of between 780 million to 820 million cans next year,
growth of between 34% and 41%. The smoke-free business, which includes Zyn as well as IQOS heated
tobacco sticks, currently accounts for 40% of the company’s total net revenue. - Amazon.com warned investors that it could face capacity constraints in its cloud computing division
despite plans to invest some $100 billion this year, with most of the money going toward data centers,
homegrown chips and other equipment to provide artificial intelligence services
Chief Executive Officer Andy Jassy, determined for Amazon to become an AI supermarket, is spending big to
retain the company’s edge in cloud-computing services. Still, he warned growth would be “lumpy” and hinted
Amazon could face capacity issues related to delays in getting hardware and not having sufficient electricity.
The shares declined about 4.2% in afterhours trading. The concerns echo those of rival Microsoft Corp.,
which last week said its cloud sales growth was hurt because it didn’t have enough data centers to handle
demand for its AI products. Amazon spent $26.3 billion in capital expenditures in the last three months of
2024, the vast majority of which went toward AI-related projects within AWS. Jassy told analysts that the
amount was “reasonably representative” of the rate of outlays the company planned to make in 2025. The
company reported that AWS revenue jumped 19% to $28.8 billion in the quarter ended Dec. 31. It was the
third straight period of 19% growth for the cloud unit. Operating income generated by the unit was $10.6
billion, exceeding the average projection of $10.1 billion. The AI race will likely weigh down profits though.
Operating income will be $14 billion to $18 billion in the period ending in March, the company said. Analysts,
on average, projected $18.2 billion. First-quarter sales will be as much as $155.5 billion, compared with an
average estimate of $158.6 billion. Jassy’s warning on AWS growth constraints overshadowed a fairly strong
holiday quarter, suggesting the company’s main e-commerce and logistics business is fending off competition
from Walmart Inc. and discount upstarts like Temu and Shein. Total revenue in the holiday quarter increased
10% to $187.8 billion, slightly ahead of analyst estimates. Operating profit was $21.2 billion, compared with
the average estimate of $18.8 billion. While Amazon’s overall quarter was generally positive, “investors
immediate concerns are around Q1 guidance, which was below expectations, mostly because of the impact
of a big currency drag and the impact of lapping a leap year,” said Gil Luria, an analyst at DA Davidson & Co.
The company said the extra day in the quarter in 2024 boosted sales by about $1.5 billion. - Microchip Technology (NASDAQ:MCHP) Misses Q4 Analysts’ Revenue Estimates
Analog chipmaker Microchip Technology (NASDAQ:MCHP) missed Wall Street’s revenue expectations in Q4
CY2024, with sales falling 41.9% year on year to $1.03 billion. Next quarter’s revenue guidance of $960
million underwhelmed, coming in 9.2% below analysts’ estimates. Its non-GAAP profit of $0.20 per share was
28.8% below analysts’ consensus estimates. Microchip Technology (MCHP) Q4 CY2024 Highlights:
Revenue: $1.03 billion vs analyst estimates of $1.07 billion (41.9% year-on-year decline, 3.9% miss); Adjusted
EPS: $0.20 vs analyst expectations of $0.28 (28.8% miss); Adjusted Operating Income: $210.7 million vs
analyst estimates of $242.9 million (20.5% margin, 13.3% miss); Revenue Guidance for Q1 CY2025 is $960
million at the midpoint, below analyst estimates of $1.06 billion; Adjusted EPS guidance for Q1 CY2025 is
$0.10 at the midpoint, below analyst estimates of $0.27; Operating Margin: 3%, down from 30% in the same
quarter last year; Free Cash Flow Margin: 24.7%, down from 45% in the same quarter last year; Inventory
Days Outstanding: 266, up from 246 in the previous quarter; Market Capitalization: $28.73 billion
“Our December quarter performance reflects the need for the decisive steps we are taking to realign our
business, as revenue declined to $1.026 billion and inventory levels reached 266 days,” said Steve Sanghi,
Microchip’s CEO and President. - Volvo Cars weighs tariffs-led production move, warns of ‘hyper-competitiveness’ in China
Sweden’s Volvo Cars on Thursday reported a 12% rise in full-year operating income and record revenue, but
warned of severe market challenges ahead from intensifying electric vehicle competition and global tariffs.
The automaker, which is majority-owned by China’s Geely Holding, said operating income came in at 22.3
billion Swedish kronor ($2.04 billion) in 2024 amid an 8% sales increase. However, profit slid 28% in the final
three months of the year, which the company said was affected by a one-off 1.7 billion kronor impairment
related to its joint venture with Swedish battery developer Northvolt, Novo Energy. Year-on-year sales for the
fourth quarter nudged 1% higher, but shed 6% in China and 2% in the U.S. The company reiterated 2026
guidance to deliver a core earnings before interest and taxes (EBIT) margin of 7-8%, but said 2025 would be a
“challenging and transition year” toward Volvo Cars’ long-term growth ambitions, as it expected slower
market growth and “increased discounts” across the industry. This will make it difficult to match the
company’s 2024 volumes and profitability, it added. Shares slid 11.1% at the European market close
Thursday. Many automakers are struggling with increased competition and high expenditure in the electric
vehicle space, including leading players such as Tesla. Volvo Cars in September scrapped its plan to sell only
EVs by 2030, citing “different speeds of adoption” by customers. In its 2024 results, the share of battery EV
sales rose to 23% from 16% during the previous year. - Tapestry Q2 Earnings Beat, Gross Margin Rises Y/Y, FY25 View Hiked
Tapestry, Inc. TPR has reported impressive second-quarter fiscal 2025 results that exceeded the Zacks
Consensus Estimate for both revenues and earnings. Also, the top and bottom lines increased year over year.
Driven by the fiscal second-quarter results, Tapestry has raised its fiscal 2025 outlook. Tapestry reported
adjusted earnings of $2.00 a share for the fiscal second quarter, which surpassed the Zacks Consensus
Estimate of $1.74 and increased from $1.63 in the prior-year period. Net sales were $2,195.4 million, beating
the consensus estimate of $2,108 million. Also, net sales reflected a 5.3% year-over-year increase. The
appreciation of the United States dollar caused a 30-basis-point headwind in the quarter due to foreign
exchange impacts. In the second quarter, Tapestry achieved growth in customer acquisition, adding 2.7
million customers to the company’s brands in North America, with more than half belonging to Gen Z and
Millennial demographics. The company achieved 4% growth in direct-to-consumer sales, driven by a high
single-digit increase in digital sales and a low-single-digit rise in global brick-and-mortar sales, with strong and
improving profitability across all channels. For the quarter, Coach’s net sales were $1.71 billion, beating the
Zacks consensus estimate of $1.58 billion. This is marking an 11% year-over-year increase on a reported basis
and 10% on a constant-currency basis. Kate Spade’s sales were $416.4 million, lagging the consensus
estimate of $443.7 million, marking a 10% decline both on a reported and constant-currency basis from the
year-ago period. Stuart Weitzman’s net sales totaled $69.7 million, missing the consensus estimate of $82.1
million. This is marking a 15% year-over-year decrease on a reported basis and 16% on a constant-currency
basis
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