Asia Mid-Session Market Update: CNY spikes overnight on reports of mandated SOE sales of USD; China, Hong Kong composite PMIs hit new highs
***US Session Highlights***
- (US) Nov ISM New York: 63.8 v 52.5 prior (business conditions across NYC rose last month as optimism grew)
- US Dec auto sales stay strong, boosting shares
- Fed minutes show that apart from unanimous agreement to raise interest rates, the committee expressed concerns about the outcome of future Trump policies, with a view to maintain a wait-and-see approach.
***US markets on close: Dow +0.3%, S&P500 +0.6%, Nasdaq +0.9%***
- Best Sector in S&P500: Services
- Worst Sector in S&P500: Utilities
- Biggest gainers: FCX +7.6%, NRG +5.9%, GM +5.5%, AA +5.0%, F +4.6%
- Biggest losers: VLO -3.6%, TSO -3.4%, MPC -3.2%, CERN -3.0%, ISRG -1.9%
- At the close: VIX 11.9 (-1.0pts); Treasuries: 2-yr 1.21% (-2bps), 10-yr 2.45% (flat), 30-yr 3.05% (flat)
***US movers afterhours***
- MG: Reports Q2 $0.26 v $0.36e, R$176.6M v $183Me; -8.9% afterhours
- M: Cuts FY16 EPS $2.95-3.10 v $3.26e (prior $3.15-3.40); affirms FY16 SSS -3.0% to -2.5%, expects to come in lower end of guidance; -10.9% afterhours
- KSS: Reports Nov/Dec SSS -2.1%; Cuts FY16 guidance to $3.60-3.65 v $3.94e (guided $3.80-4.00); -15.1% afterhours
- COST: Reports Dec SSS (ex-gas) 2% y/y; US SSS (ex-gas) 1.0% y/y
***Asia Key economic data:***
- (CN) CHINA DEC CAIXIN PMI SERVICES: 53.4 V 53.1 PRIOR (17-month high); Composite PMI: 53.5 v 52.9 prior; 45-month high
- (HK) HONG KONG DEC COMPOSITE PMI: 50.3 v 49.5 PRIOR; first expansion and highest reading since Feb 2015
- (AU) AUSTRALIA DEC AIG PERF OF SERVICES INDEX: 57.7 V 51.1 PRIOR; 3rd consecutive expansion; highest since May 2007
- (JP) JAPAN DEC SERVICES PMI: 52.3 (highest since Jan 2016) V 51.8 PRIOR; COMPOSITE PMI: 52.8 (highest since Aug 2015) V 52.0 PRIOR
- (JP) JAPAN DEC VEHICLE SALES Y/Y: 10.8% V 13.9% PRIOR
- (JP) JAPAN DEC MONETARY BASE Y/Y: 23.1% v 21.5% PRIOR; MONETARY BASE END OF PERIOD: ¥437.4T v ¥419.8T PRIOR
- (SG) SINGAPORE DEC PMI COMPOSITE: 52.0 V 52.8 PRIOR (8th consecutive expansion)
- (TW) TAIWAN DEC CPI Y/Y: 1.7% V 2.1%E
- (PH) PHILIPPINES DEC CPI M/M: 0.3% V 0.2%E; Y/Y: 2.6% V 2.6%E; CORE CPI Y/Y: 2.5% V 2.5%E
***Asia Session Notable Observations, Speakers and Press***
- Asia equity markets are largely positive, led by Hong Kong; Energy is the top performing sector on the Hang Seng; Kospi is down marginally amid KRW strength after local think tanks speculated the new US govt could name Korea a currency manipulator. Nikkei225 is also softer on stronger JPY.
- FX majors were extra volatile, with heavy USD selling against JPY and EUR. After initial sea-saw, US short term rates have come in on perception the latest Fed minutes were somewhat less hawkish then anticipated. USD/JPY fell as much as 100pips on the greenback selloff.
- Chinese Yuan was up over 1% in offshore market overnight after press reports that authorities plan to order SOE's to sell USD. Today's Yuan fix by the PBoC was also a 3-week high.
- Last set of Asia Composite/Services PMIs feature prints from China Caixin, Hong Kong, Singapore, and Japan. Caixin Services hit a 17-month high and composite reached a near-4 year high. China conditions saw "improved rates of new order growth" and much higher input costs against reduced employment. In Hong Kong, the PMI data was even less rosy, as "improvement was not driven by expansions in output and new orders, but pre- production stock levels", with declines in output, new business and employment along with reduced orders from the mainland.
China:
- (CN) China MOFCOM spokesperson Jiwen: China faced record high trade frictions last year; More than half of disputes were over steel - press
- (CN) China National Energy Administration (NEA): To invest $360B in renewable power from 2016-2020
- (CN) China Financial News commentary: China should improve coordination between financial regulators to prevent systemic risk in capital markets - Chinese press
- USD/CNY: Offshore Yuan strength attributed to reports China is considering options to support currency, including ordering SOEs to sell USD - press
Japan:
- (JP) Japan PM Abe: Global economy is improving; Japan has bright signs - press
Australia:
- AUD/USD: Westpac's Speizer: AUD/USD has potential to go higher in the short term, but likely lower below $0.72 in 1-3 months - AFR
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.3%, Hang Seng +1.3%, Shanghai Composite +0.1%, ASX200 +0.4%, Kospi -0.1%
- Equity Futures: S&P500 flat; Nasdaq -0.1%, Dax flat, FTSE100 flat
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0480-1.0540; JPY 116.30-117.40; AUD 0.7270-0.7300; NZD 0.6955-0.6700
- Feb Gold +0.8% at 1,175/oz; Feb Crude Oil -0.1% at $53.23/brl; Mar Copper +0.2% at $2.56/lb
- (US) Weekly API Oil Inventories: Crude: -7.4M v +4.2M prior (largest draw since Oct 4th)
- JGB: (JP) Japan MoF sells ¥2.17T in 10-yr 0.1% JGBs; Avg yield: 0.056% v 0.032% prior; bid to cover: 3.59x v 3.78x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9307 V 6.9526 PRIOR; strongest Yuan setting since Dec 15th
- (CN) PBOC to inject CNY10B in 7-day reverse repos v combined CNY20B in 7-day and 14-day prior
- (CN) Offshore yuan overnight deposit rate +16.5ppts to 30% (1-yr high)
***Asia equities / Notables / movers by sector***
- Consumer discretionary: H2O Retailing Corp 8242.JP +2.0% (Dec sales); Suntory Beverage & Food 2587.JP -0.6% (denies speculation on listing); Aeon Co 8267.JP +1.0% (9-month result speculation)
- Consumer staples: China Modern Dairy 1117.HK +5.0% (Mengniu increases stake)
- Financials: Greentown China 3900.HK -0.3% (Dec result); Country Garden Holdings Co 2007.HK -1.7% (names new CFO)
- Industrials: Guangzhou Automobile Group 2238.HK -0.4% (Dec result); Takata Corp 7312.JP -6.5% (profit-taking); Mitsubishi Motors 7211.JP +3.3% (Dec result); Mazda Motor Corp 7261.JP -2.1% (Dec result); Hanjin Shipping Co 117930.KR +22.0% (to close asset sales next week); Samsung Heavy 010140.kr ($1.3B contract)
- Technology: Truly International Holdings 732.HK +6.2% (Dec result); Sony Corp 6758.JP -1.8% (holiday season PS4 sales); Toshiba Corporation 6502.JP +4.5% (writedown estimates)
- Materials: China Minmetals Resources 1208.HK +11.3% (acquisition); Newcrest NCM.AU +1.9%; Saracen Mineral Holdings SAR.AU +4.6% (gold prices higher)
- Telecom: TPG Telecom TPM.AU +2.3% (Credit Suisse raised to neutral)