South Korea’s Early Trade Data Show Export Momentum Rising

Economic

Summary:

Chip sales jump 45.5%, leading overall gains in exports.US keeps outpacing China in demand for South Korean products.

South Korea’s early trade data showed that exports are continuing to grow at a double-digit clip, boosting the prospects for an acceleration in economic growth this year.

The value of shipments adjusted for working-day differences increased 17.7% from a year earlier in the first 20 days of May, according to data released Tuesday by the customs office. Unadjusted exports rose 1.5%, while overall imports decreased by 9.8%, resulting in a trade shortfall of $304 million.

South Korea’s Early Trade Data Show Export Momentum Rising_1

South Korea posted a 1.3% economic expansion in the first quarter from the previous three-month period, with a robust recovery in exports among factors leading the way. That performance, which soundly exceeded the 0.6% forecast, will likely prompt the Bank of Korea to raise its economic growth forecast for the year from 2.1% when the board convenes later this week.

Strong exports can add to the rationale for the central bank to hold its policy rate elevated for longer. The BOK is widely expected to keep its benchmark rate steady at 3.5%, a level it has described as restrictive, when officials set policy on Thursday.

South Korea’s Early Trade Data Show Export Momentum Rising_2

Semiconductors from South Korea and other Asian economies have especially been in demand as prices pick up on orders from smartphone makers, data-center operators and artificial intelligence developers. For the first 20 days of May, semiconductor shipments jumped 45.5% from a year earlier, the customs data showed. Meanwhile, car sales declined 4.2% and the exports of wireless communications devices dropped 9%.

“Strong semiconductor demand should further lead to outperformance of the manufacturing sector and a gradual recovery of facilities investment in the rest of this year,” Citi Research said in a May 14 note.

A strong US economy has also helped offset a slump in demand from China. Exports to the US increased 6.3% and those to China rose 1.3% in the first 20 days of the month, the customs office said. Shipments to the European Union slumped 11.8%.

South Korea’s Early Trade Data Show Export Momentum Rising_3

There are still downside risks for South Korea’s growth. Credit concerns persist as developers struggle with debt that piled up during a pandemic-era construction boom. Meanwhile, China, South Korea’s biggest trading partner, has yet to rebound fully from a spending slump as its housing slump continues to weigh on activity.

The exchange rate remains a source of concern as South Korea relies heavily on imports of energy and raw materials to assemble products for export. The won has been one of Asia’s worst-performing currencies this year along with Japan’s yen and Thailand’s baht.

While the elevated dollar-won rate helps swell exporters’ earnings in local currency terms, it also is increasingly becoming a burden for those that rely on overseas manufacturing demand because a large portion of their debt is in foreign currencies, according to Lim Dong-min, an independent economist and columnist.

“It’s both good and bad for exporters, but overall it adds to uncertainties,” Lim said. South Korean firms are part of a wide range of global supply chains, especially in industries including semiconductors, automobiles and batteries.

Source：Bloomberg

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FxPro

Commodity

Economic

Oil is losing about 0.75% of its peak on Monday, having hit a strengthening sell-off as it attempts to climb above $80/bbl WTI and $84/bbl Brent.

Interestingly, oil is declining despite the death of Iran's president, which should reinforce the risk premium, and despite a strong rally in metals and other commodities in response to China's stimulus measures.

News on the US oil industry points to relative stagnation. According to Friday's report from Baker Hughes, the total number of Oil rigs in the US was 497 compared to 496 and 499 in the last two weeks. We have been seeing fluctuations around the 500 level since last October.

The official weekly report from the US Energy Information Administration last week also pointed to stagnant production at 13.1 million bpd over the last ten weeks. This volume also is the average over the period since mid-September.

The conclusion is that current prices are neutral for the industry, not creating incentives to increase production but not causing it to decline either.

The price chart also shows a clear balance of power for more than two weeks now. Since December, the price has been moving in an ascending channel. Oil briefly fell out of this range last week but found buyers in the second half of last week, rising from $76.4 to $79.8 in less than three days.

The bulls are also not yet able to unequivocally retake the lead, as an attempt to exceed the 200-day moving average on Monday was met with increased selling. This may be a signal that the bears are still in control of the situation and are now gathering strength for a new downward impulse. We will get confirmation of this hypothesis only in case of consolidation under $76.5. It is also relatively easy for oil to roll back to $75, where the 200-week moving average lies. However, a failure below $70-$71 could start a real corkscrew in oil with a potential first target at $50 and a final target at $30.

The ability to get back above $80 would be a sign of a bullish recovery and set the mood for a quick exit to $85 within weeks and above $92 by mid-summer.

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FOREX.com

Stocks

Forex

Economic

The performance of Chinese stock indices and minutes from the Reserve Bank of Australia's (RBA) May monetary policy meeting should be on the radar for anyone trading AUD/USD or ASX 200 futures on Tuesday. With little top tier data or event risk to navigate, they loom as the most likely drivers of Australian financial markets.

AUD/USD pullback offers improved entry levels

Starting with AUD/USD, you can see the pair remains in a solid uptrend dating back to late April, continuing to find bids on dips towards the level. Having struggled above .6700 in recent days, in part due to markets paring Fed rate cut expectations following last Wednesday's US inflation and retail sales reports, it has now pulled back towards the level providing opportunities for bulls and bears depending on how the price interacts.

AUD/USD, ASX 200: Watching for Hawkish Overtones in the RBA Minutes_1

Until the price action suggests otherwise, the near-term bias is bullish given the prevailing trend. With horizontal support located nearby at .6652, traders may consider buying dips towards the level with a stop loss order below targeting the .6710-15 zone, where the price topped out in recent sessions. With near-term price momentum moving to the downside, there may be opportunities for better entry levels.

Above the .6710-15 resistance zone, AUD/USD struggled to break above .6730 earlier this year, making that a topside level to watch. .6870 looms as the next level after that.

Under a scenario where support at .6652 or the prevailing uptrend fails, the bias would switch to selling rallies rather than buying dips. Below the levels mentioned above, .6629 and .6586 are the initial downside targets.

Key catalysts for Australian markets on Tuesday

As for catalysts to watch during Tuesday's session, this short video explains how influential the China stock market open can be on AUD/USD on occasion. With so much focus on measures introduced by Chinese policymakers to support the property sector on Friday, there's every chance this may be a key driver for the Aussie midway through the session.

Adding a layer of complexity, the minutes of the RBA May policy meeting will be released at 11.30am AEST. While they already come across as dated given Australia's Federal budget and key labour market data were released after, traders should be looking out for hawkish overtones. It didn't receive much attention at the time, but during her post meeting press conference, RBA Governor Michele Bullock acknowledged the board discussed either holding or hiking rates, not cutting them. That points to hawkish risks, something that should be supportive of AUD/USD.

Commodity gains remain supportive of ASX upside

Like the Australian dollar, ASX 200 futures may also be influenced by the RBA minutes and China market open.

Mirroring AUD/USD, SPI futures sit in an established uptrend dating back to early May. With the pullback overnight, futures are within touching distance of the trendline, allowing for traders to set longs with decent risk-reward.

AUD/USD, ASX 200: Watching for Hawkish Overtones in the RBA Minutes_2

Until proven otherwise, buying dips is preferred to selling rallies. Traders could establish longs on the open with a stop loss below the trendline for protection. The initial trade target would be 7907, the high hit on Monday. Above, 7936 and 7972 are the key levels to watch.

Should the uptrend give way, traders could sell the break with a stop above the trendline for protection. 7838, 7780 and 7762 are potential downside targets, the latter coinciding with the 200-day moving average.

While near-term momentum is biased lower, continued strength in commodity markets – including iron ore – point to the possibility for dips to be bought.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Economic

Stocks

Investors' appetite for stocks and risk assets shows no sign of waning which, in the absence of any major market-moving economic data or events in Asia on Tuesday, should pave the way for further gains across the continent when trading gets underway.

Monday's global market moves encapsulated the 'FOMO' that seems to be fueling the ongoing risk rally - volatility, the dollar, bond yields and geopolitical uncertainty all rose to varying degrees, yet equities marched higher regardless.

'Fear of missing out' - which some might say isn't all that far removed 'irrational exuberance' - is a powerful force. But it can also be a red flag, especially when long-time market bears join the frenzy.

Morgan Stanley's U.S. equity strategist Mike Wilson has not been the only Wall Street bear over the last couple of years, but he has certainly been one of the most prominent.

On Monday, he and his team raised their base-case, 12-month forecast for the S&P 500 to 5400 points. That's only up around 2% from Friday's close, but 20% higher than their previous forecast of 4500.

Only time will tell if Wilson's about-turn will be an indication that investors' exuberance has become irrational. Right now, however, at least until chipmaker Nvidia's earnings on Wednesday, market bulls are firmly in control.

And Asia is enjoying the ride too. Asian Stocks Eye Best Run Since 2021_1

The MSCI Asia ex-Japan equity index on Monday rose to a two-year high with its seventh consecutive rise, its best run since January last year. Another increase on Tuesday will seal its best run since August-September 2021.

Japan's Nikkei is back above 39,000 points for the first time in over a month, and the dollar is back above 156.00 yen. The dollar is now within one yen, more or less, of where Japanese authorities are widely thought to have conducted yen-buying intervention on May 1.

Intervention seems unlikely right now, but currency traders will not be complacent. The latest Commodity Futures Trading Commission data show that speculators reduced their net short yen positions for a third week, but not by much.

The main event on the Asian and Pacific calendar on Tuesday is the release of the minutes from the Reserve Bank of Australia's May 7 policy meeting.

The RBA quashed market talk at the time of a near-term interest rate hike but also didn't hold out much chance of a cut for months to come. The Aussie dollar has regained its poise since then to climb to a four-month high just above $0.67.

Australian rates markets are not fully pricing in a 25-basis point rate cut until April next year. Asian Stocks Eye Best Run Since 2021_2

Here are key developments that could provide more direction to markets on Tuesday:

- Reserve Bank of Australia meeting minutes

- Australia consumer sentiment (May)

- Indonesia's government presents 2025 economic forecasts to parliament

Source: Reuters

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Glendon

Economic

Intuit (INTU), the maker of popular tax software TurboTax and small business accounting platform QuickBooks, recently released its third-quarter earnings report for fiscal year 2024. The report painted a positive picture, exceeding analyst expectations and prompting the company to raise its full-year guidance. Let's delve deeper into the details of the report and explore what it means for Intuit's future.

Highlights of Intuit's Q3 Earnings

Revenue Growth: Intuit reported total revenue of $6.7 billion, representing a 12% increase year-over-year. This growth surpassed analyst estimates of $6.65 billion.

Profitability: Earnings per share (EPS) came in at $9.88, beating analyst expectations of $9.37. This strong performance indicates healthy profitability for the company.

Segment Performance: All of Intuit's major segments experienced growth. The Consumer Group, which includes TurboTax, grew revenue by 9%. The Small Business and Self-Employed Group, encompassing QuickBooks, saw an impressive 18% increase. The Online Ecosystem segment, featuring products like Mint and ProConnect, reported a 19% revenue jump. Even Credit Karma, recently acquired by Intuit, contributed with an 8% revenue increase.

Guidance Raised: Impressed by its Q3 performance, Intuit raised its full-year guidance for fiscal year 2024. The company now expects revenue to land between $16.164 billion and $16.200 billion, representing growth of approximately 13%. This is an upward revision from the previous guidance of 11% to 12% growth.

Reasons Behind Intuit's Success

Several factors contributed to Intuit's strong Q3 performance:

Tax Season Momentum: The tax season typically bolsters Intuit's revenue as individuals and businesses turn to TurboTax and QuickBooks for their tax filing needs.

Growing Demand for Online Solutions: The continued shift towards online financial management solutions is benefiting Intuit. As more people manage their finances and businesses digitally, the demand for platforms like QuickBooks and Mint surges.

Credit Karma Integration: The recent acquisition of Credit Karma brings a large user base to the Intuit ecosystem. Integration of Credit Karma's services with TurboTax has the potential to unlock further growth opportunities.

Focus on Innovation: Intuit continues to invest in innovation, developing new features and functionalities for its products. This commitment to improvement strengthens its market position and attracts new users.

Looking Forward: What's Next for Intuit?

Intuit's strong Q3 performance and raised guidance suggest a company on a positive trajectory. Here are some key areas to watch for in the future:

Impact of Economic Uncertainty: While Intuit's core business is relatively resilient to economic downturns, a significant economic slowdown could impact consumer spending and business investment, potentially affecting Intuit's growth.

Tax Regulatory Changes: Any major changes in tax regulations could necessitate adjustments to Intuit's products and potentially impact its user base.

Competition: The market for financial management software is competitive. Intuit needs to stay ahead of the curve by continuously innovating and differentiating its offerings.

Expansion Opportunities: Exploring new markets and user segments could be a source of future growth for Intuit.

Conclusion: A Positive Outlook for Intuit

Intuit's Q3 earnings report provides strong evidence of the company's continued growth potential. The combination of solid financial performance, a diversified business model, and a focus on innovation positions Intuit well for the future. However, it's important to remain aware of potential challenges like economic headwinds and competition. Overall, for investors seeking exposure to the financial technology sector, Intuit presents itself as a compelling option with a proven track record and promising prospects.

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Glendon

Economic

Novavax (NVAX) has been a rollercoaster ride for investors. As a developer of COVID-19 vaccines, it surged during the height of the pandemic but has faced challenges in the post-pandemic era. This article dives into a comprehensive review of NVAX stock, analyzing its current situation, future prospects, and factors to consider before investing.

A Look Back: NVAX's Rise and Fall

Novavax's claim to fame is its Nuvaxovid COVID-19 vaccine. Unlike its mRNA counterparts from Moderna and Pfizer, Nuvaxovid is a protein-based vaccine. While its approval came later than its competitors, initial hopes were high. However, several factors led to NVAX's decline:

Delayed Manufacturing: Production issues hampered Novavax's ability to meet vaccine demands, causing delays in deliveries.

Shifting Landscape: By the time Nuvaxovid entered the market, widespread vaccination with other options had already curbed the pandemic's peak.

Waning Demand: As the urgency of the pandemic subsided, the overall demand for vaccines dropped significantly.

Current Status: A Moderate Rebound

Despite the challenges, NVAX stock has shown signs of a comeback in 2024. Here's a breakdown of its current situation:

Price Performance: Year-to-date, NVAX has outperformed the broader market, with a significant increase compared to the overall industry's slight decline. This suggests renewed investor interest.

Analyst Ratings: The current analyst consensus rating for NVAX is a "Moderate Buy," with a median price target offering some potential upside. However, the range of analyst estimates is wide, indicating some uncertainty about the future.

Financials: NVAX is still in the red, reporting negative earnings per share (EPS) in its latest quarter. However, it beat analyst expectations, which may be a positive sign for future performance.

Why Novavax (NVAX) Stock Price Appreciated 14% on May 20th, 2024

A significant factor contributing to NVAX's stock price surge in May 2024 was the news that activist investor Shah Capital Management decided to withdraw its proxy campaign to remove three board members. This withdrawal came a week after Novavax signed a critical multi-billion dollar deal with pharmaceutical giant Sanofi.

The market reacted positively to these developments for a few reasons:

Reduced Uncertainty: The withdrawal of the proxy fight signaled greater stability within Novavax's leadership, which can be attractive to investors.

Sanofi Partnership Boost: The Sanofi deal provided a much-needed financial boost to Novavax, alleviating concerns about its ability to continue operating ("going concern"). This financial security allows for further investment in research and development.

Increased Market Potential: With Sanofi's vast reach and resources, Novavax's COVID vaccine, Nuvaxovid, could gain access to a wider global audience.

Future Prospects: Beyond COVID-19

NVAX's future hinges on its ability to diversify beyond the COVID-19 vaccine. Here are some key areas to watch:

Booster Shots: The need for booster shots to maintain COVID-19 immunity could provide ongoing revenue for NVAX, especially if Nuvaxovid is included in booster recommendations.

New Vaccine Development: NVAX's pipeline includes vaccines for other respiratory diseases like influenza and RSV. Success in these areas could significantly improve its long-term prospects.

Partnership Potential: Collaborations with other pharmaceutical companies for vaccine development and distribution could be a strategic move for NVAX.

Factors to Consider Before Investing in NVAX

While NVAX's recent upswing is promising, there are still factors to consider before investing:

Market Competition: The COVID-19 vaccine market is crowded, and established players like Moderna and Pfizer have a significant head start.

Regulatory Landscape: Regulatory hurdles for new vaccines and booster approvals could delay NVAX's progress.

Financial Stability: NVAX needs to turn a profit to ensure its long-term sustainability.

Conclusion: A Calculated Bet

Novavax's stock offers a chance for high returns, but it also comes with inherent risks. Investors should carefully weigh the potential for future vaccine demand, NVAX's pipeline progress, and the competitive landscape before making a decision.

For those with a high-risk tolerance and a long-term investment horizon, NVAX could be an interesting option. However, for conservative investors, it might be best to wait for a clearer picture of the company's future before diving in.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Economic

Joanne Hsu, who is the director of the University of Michigan's consumer sentiment survey, told CNBC on Friday that she thinks Americans have abandoned plans to save money as they see their financial goals look less attainable and are spending money instead.

“This positive spending is not a reflection of some sort of internalized secret sense of confidence that consumers have,” he explained. “And instead my interpretation is that consumers see that a lot of aspirational goals that we talk about as part of the American Dream—homeownership, paying for college, paying for college for your kids, having a comfortable retirement—with high prices and high interest rates right now, those aspirational goals just feel increasingly out of reach.”

And as a result, consumers have “given up” on saving for those goals, Hsu added, noting that the still-strong labor market allows them to spend now.

The latest reading of the University of Michigan's survey showed sentiment plunged to a six-month low of 67.4 in May from a final reading of 77.2 in April as Americans cited stubbornly high inflation and interest rates, as well as fears that unemployment could rise.

While that report was followed days later by the April consumer price index that showed inflation cooled, it followed three straight months of unexpectedly high prices. Consumer-facing companies have sounded the alarm on the impact that inflation and high rates are having, especially on lower-income shoppers.

To be sure, inflation has come down sharply from the four-decade-high 9% rate in mid 2022 to 3.4% last month. But that means prices are going up less quickly rather than returning to pre-pandemic levels, and the cumulative sticker shock over the last few years still weighs on sentiment.

Meanwhile, gauges for consumer demand have held up. In the first quarter, it continued to drive GDP growth. And despite a weak retail sales report, analysts have noted the overall trend points to continued spending.

For now, consumers expect the strong labor market to persist, giving them enough confidence to spend, but the latest data show some softening, Hsu warned.

“That's possibly an early sign of oncoming weakness for consumers. But as of now, strong incomes are supporting consumer spending,” she added.

But the labor market has also hinted at some cooling off after blockbuster gains earlier this year. The Labor Department's April jobs report came in well below expectations, while the unemployment rate ticked up to 3.9% from 3.8% in March.

Further cooling in the job market could also help nudge the Federal Reserve to start cutting interest rates, giving consumers a reason to be slightly less dour.