CNBC Daily Open: U.S. services activity moderates

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Hong Kong stocks lead gains
Asia markets largely rose Wednesday, with Hong Kong’s Hang Seng index leading gains, while the mainland China’s CSI 300 was down. Japan’s Nikkei 225 dipped but the Topix edged up. Overnight, U.S. markets were dragged lower by sharp declines in major tech stocks. The Dow lost over 400 points, while the S&P 500 dipped 1.02%. The tech-heavy Nasdaq fell 1.65% as Apple shares plunged almost 3%. Bitcoin also tumbled shortly after surpassing the peak for the first time in two years.

China growth push
China may need to resort to an old tactic to hit its ambitious growth target this year. Wang Dan, economist at Hang Seng Bank (China), expects “some kind of a project that is in similar size and quality of the Three Gorges Dam to really pull up domestic demand” for Beijing to meet its goal of achieving “around 5%” growth in 2024.

UK pre-election budget
U.K. Finance Minister Jeremy Hunt will announce a crucial pre-election budget amid a technical recession. This is likely to be the final fiscal event before a challenging general election for the ruling Conservative Party.

AI adoption rate
A global survey found AI adoption rate for businesses is yet to match the hype around the technology. Data privacy, regulation and lack of IT infrastructure are among the major barriers to AI’s widespread use, according to the report. 

[PRO] Diversify AI plays
Nvidia may have enjoyed a solid run on the artificial intelligence frenzy, but fund managers highlight it’s still better to diversify and seek other alternatives. Veteran tech investor Paul Meeks told CNBC Pro that even if Nvidia is a “great story,” it’s “too risky to be in just one” when it comes to AI.  

U.S. services sector growth lost some pace in February.

The Institute for Supply Management’s services-activity index slipped slightly to 52.6 from 53.4 in January. The 50-point mark separates growth from contraction.

Despite the deceleration, the services sector has expanded for the 14th straight month, which accounts for roughly 75% of the economy. It has grown in 44 of the last 45 months.

Some of the details of the survey were more positive than the headline.

Business activity crept up in February, rising 1.4 points to 57.2, while the index for new orders also edged up to 56.1 from 55.0 in January.

“The slight decrease in the rate of growth in February is a result of faster supplier deliveries and the contraction in the employment index,” said Anthony Nieves, chair of the ISM Services Business Survey Committee.

There were also encouraging signs on the inflation front as the data reflected a notable drop in the expected pace of future price increases. The pricing index declined 5.4 points to 58.6, suggesting some inflationary pressures could be easing.

“The combination of weaker, but still positive growth in activity, alongside a gradual loosening in the labour market and continued progress on wage and price inflation, would clearly be welcomed by markets and the Fed,” Pantheon Macroeconomics wrote in a note. 

“But for now, this is a forecast, not clearly visible in the current hard data, so policymakers remain cautious.”

Investors expect the Fed to start cutting interest rates this year but the timing remains uncertain.