Asian Market Update: RBA abandons easing bias, sending AUD sharply higher
***Economic Data*** - (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 2.50% (AS EXPECTED); DROPS EASING BIAS; Sees most prudent course being a period of stable rates - (NZ) NEW ZEALAND JAN ANZ COMMODITY PRICE M/M: 1.2% V 1.0% PRIOR (3-month high) - (KR) SOUTH KOREA JAN CPI M/M: 0.5% V 0.5%E; Y/Y: 1.1% V 1.1%E; CORE CPI Y/Y: 1.7% V 1.9% PRIOR - (JP) JAPAN JAN MONETARY BASE Y/Y: 51.9% V 46.6% PRIOR; MONETARY BASE END OF PERIOD: ¥200.9T V ¥201.9T PRIOR
***Observations/Insights*** - Yum Brands looks to get past its troubles in China; Shares rise over 4% in extended session after earnings and commentary that bird flu will not be an issue. - Nikkei225 leading the steep selloff in Asia, tracking more pronounced correction in the US and sharp gains in the funding Japanese Yen currency; Hang Seng is back after holidays with catch-up selling sending the index to a 5-month low. - RBA policy statement marks an abrupt shift away from an open-ended dovish bias after most recent rise in Q4 CPI; Sees monetary policy "appropriately configured" and most prudent course being "a period of stability" in interest rates; RBA also drops the language referring to AUD as "uncomfortably high", sending the currency sharply higher across the board. - BOJ Gov Kuroda affirms commitment to achieve 2% inflation by the 1st half of 2015, having first set out on course toward that target within a 2-year timeframe in April of 2013; Speaking to Parliament, Kuroda also said the easing has produced smooth progress, with domestic economy recovering moderately.
***Fixed Income/Commodities/Currencies*** - (JP) Japan MoF sells ¥2.19T in 0.6% (0.6% prior) 10-yr notes; Avg yield: 0.596% v 0.719% prior; Bid to cover: 3.21x v 3.84x prior - SLV: iShares Silver Trust ETF daily holdings rise to 10,095.1 tonnes from 10,029 tonnes (first rise since Jan 18th, highest level since Dec 20th) - USD/KRW: Rises to KRW1,090; Highest level since Sept
- The spike in AUD is all the rage in the currency markets following a far less dovish RBA policy statement. AUD/USD is up over 130pips above $0.8880, AUD/NZD hit 7-week highs above NZ$1.0930, and AUD/JPY is reversing the risk-off flows with 180pip move higher toward the ¥90 handle. NZD/USD was up after the RBA as well in sympathy with AUD, rising over 70pips from its lows above $0.8120. USD/JPY is off the low of the US session, rising about 50pips above ¥101.30.
***Speakers/Political/In the Papers*** - (AU) JPMorgan economist: RBA has "clearly moved towards a more neutral stance of monetary policy; It's going to put the burden on the data over the next few months for the RBA to ease policy any further" - SMH - (AU) Moody's: Australian prime mortgage arrears remain stable in November 2013 - (NZ) New Zealand Fin Min English: Higher rates to not have major impact on economic growth; Not comfortable with level of NZD, prefers to see it lower - (NZ) ANZ chief economist Bagrie: 6% or 10% growth in China matters little to New Zealand economy - NZ Herald - (JP) Japan BOJ gov Kuroda: Japan likely to eye 2% inflation around latter half of FY14 through early FY15; Japan making progress to achieve BOJ's 2% target - addressing parliament - (JP) Japan PM Abe: BOJ will make appropriate decision on exit strategy from current easing policy - (JP) Japan Chief Cabinet Sec Suga: To continue to closely watch financial markets - (JP) Japan Econ Min Amari: US stock market reaction overdone; Japan economy seems very favorable - financial press - (JP) Nikkei comments on proposals for Japan govt to consider a wider tax base as an offset to implementing lower corporate taxes - (JP) Japan Center for Economic Research (JCER): Japan's Real Dec GDP estimated at +0.2% m/m; Rising for 5th consecutive month - Nikkei - (HK) Hong Kong Jan existing home listings +4.4% m/m - Hong Kong press - (HK) According to Centaline Property Agency, Hong Kong property experienced 10-yr low New Year sales - financial press - (CN) China City of Shenzhen, Guangdong Province raises minimum wage to CNY1,808/month from CNY1,600/month - Chinese press - (US) Fed's Fisher (hawk, FOMC voter): Current decline in the equity markets should not deter the Fed from the taper of asset purchases
***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -3.1%, S&P/ASX -1.8%, Kospi -1.6%, Shanghai Composite closes, Hang Seng -2.4%, Mar S&P500 +0.4% at 1,739, Apr gold -0.3% at $1,256, Mar crude oil +0.1% at $96.52/brl
US markets: - YUM: Reports Q4 $0.86 v $0.80e, R$4.18B v $4.24Be; +4.2% afterhours - HOLX: Reports Q1 $0.34 adj v $0.31e, R$612M v $612Me; +3.1% afterhours - HIG: Reports Q4 $0.94 v $0.90e, R$2.97B v $2.79Be; +1.7% afterhours - APC: Reports Q4 $0.74 (adj) v $0.93e, R$3.34B v $3.76Be; +0.5% afterhours - CHD: Reports Q4 $0.65 v $0.67e, R$822.6M v $822Me; Raises quarterly dividend 11% from $0.28 to $0.31; Announces repurchase program; -0.9% afterhours - TTWO: Reports Q3 $1.70 v $1.41e, R$767.7M v $711Me; -3.4% afterhours - EW: Reports Q4 $0.91 v $0.83e, R$536M v $536Me; -3.7% afterhours - DNB: Reports Q4 $2.75 adj v $2.85e, R$476.7M v $468Me; raises quarterly dividend by 10% to $0.44/shr from $0.40 prior; announces management changes; -15.2% afterhours - GOOG: Chairman Schmidt expects US approval on Lenovo deal - financial press
Notable movers by sector: - Consumer Discretionary: Wynn Macau 1128.HK -0.3% (Q4 results); Clarion Co 6796.JP -4.9% (9M results) - Financials: REA Group REA.AU +4.2% (H1 results); Sumitomo Corp 8053.JP -4.4% (9M results) - Materials: Mitsubishi Corp 8058.JP -4.2% (9M results); Jiangxi Copper 358.HK -2.6% (LME copper fell to 2-month low); 8001.JP -4.7% (9M results) - Energy: Shandong Molong Petroleum Machinery 568.HK -4.1% (FY13 guidance) - Industrials: Nissan Chemical Industries 4021.JP -0.1% (9M results); Fuji Heavy Industries 7270.JP -3.7% (9M results); Downer EDI DOW.AU -2.1% (H1 results); Mitsubishi Motors 7211.JP -3.6% (Jan US sales results); Mazda Motor 7261.JP -5.4% (Jan US sales results); Honda Motor 7267.JP -5.1% (Jan US sales results) - Technology: Lenovo Group 992.HK -14.3% (JV with Sony)