Asia Mid-Session Market Update: RBA on hold with an upbeat view of inflation; RBNZ's forecasts rising CPI and lowest unemployment since 2008
***US Session Highlights***
- (EU) ECB's Draghi: Economic situation improving but risks to outlook remain on the downside; reiterates underlying inflation pressures remain very subdued, Euro Zone recovery is firming up
- (US) Fed Q4 senior loan officer survey: about a quarter of banks tightened credits standards for commercial real estate loans in Q4
- (US) Fed's Harker (hawk, voter): March FOMC should be on the table for rate decision - Q&A with reporters
***US markets on close: Dow -0.1%, S&P500 -0.2%, Nasdaq -0.1%***
- Best Sector in S&P500: Healthcare
- Worst Sector in S&P500: Materials
- Biggest gainers: HAS +14.1%, CBT +10.7%, NEM +3.2%, FAST +2.8%, MNK +2.7%
- Biggest losers: LH -5.7%, NWL -5.7%, XYL -4.2%, FTI -4.1%, MRO -4.1%
- At the close: VIX 11.4 (+0.4pts); Treasuries: 2-yr 1.15% (-5bps), 10-yr 2.41% (-8bps), 30-yr 3.05% (-7bps)
***US movers afterhours***
- JLL: Reports Q4 $3.95 v $3.92e, R$2.16B v $2.04Be; Guides initial FY17 fee rev +8-11% y/y; Adj EBITDA margin 10-12%; +7.8% afterhours
- ALSN: Reports Q4 $0.36 v $0.27e, R$469M v $430Me; Guides Q1 Rev net sales ~flat y/y; +5.1% afterhours
- FN: Reports Q2 $0.91 v $0.79e, R$351M v $336Me; Announces initiation of CEO succession plan; +3.9% afterhours
- GPS: Reports Jan SSS +1.0% v +2.1%e; Raises FY16 adj eps $2.01-2.02 v $1.96e ; +2.3% afterhours
- FMC: Reports Q4 $0.88 v $0.89e, R$866M v $926Me; -4.4% afterhours
- YRCW: Reports Q4 -$0.23 v -$0.09e, R$1.15B v $1.14Be- Tonnage per day up (freight), flat (regional); Adj EBITDA $57.7M v $66.0M y/y; -4.8% afterhours
- FXCM: To withdraw its CFTC registration to settle allegations that it concealed from clients that firm had relationship with its “ most important ” market maker; to pay $7.0M fine; -19.7% afterhours
***Politics***
- (US) 9th Circuit Court of Appeals to hear challenge to Trump's ban tomorrow evening - US press
- (UK) UK PM May wins commons vote on amendment to Brexit bill - financial press
***Asia Key economic data:***
- (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED
- (AU) AUSTRALIA JAN AIG PERFORMANCE OF CONSTRUCTION INDEX: 47.7 V 47.0 PRIOR (4th straight month of contraction, 4-month high)
- (NZ) NEW ZEALAND Q1 INFLATION EXPECTATION SURVEY: 2-YEAR INFLATION EXPECTATION 1.92% V 1.68% PRIOR
- (SL) Sri Lanka Central Bank (CBSL) leaves key rates unchanged (as expected); 6th straight pause in current itghtening cycle
- (PH) PHILIPPINES JAN CPI M/M: 0.3% V 0.4%E; Y/Y: 2.7% V 2.8%E; CORE CPI Y/Y: 2.5% V 2.8%E
- (UK) JAN BRC LFL SALES VALUE Y/Y: -0.6% V +0.9%E (first decline in 5 months)
***Asia Session Notable Observations, Speakers and Press***
- Asia indices little changed, tracking mixed sentiment in US session, where investor flows sought the safety of US treasuries; After market close, Fed's Harker (voter) said March rate hike possibility is still on the table, reiterating commitment to raise rates 3 times this year.
- US Circuit Court of Appeals to hear arguments for reversing Washington State federal judge who halted Pres Trump's immigration executive order.
- AUD/USD volatile with initial decline after S&P said the first step in Australia sovereign downgrade would only affect AAA states, as investors interpreted comments as a warning shot; Later in the day, RBA left rates unchanged but was more hawkish on inflation, forecasting headline CPI to pick up in 2017 above 2%. RBA also added more positive tones on the economy, stating consumption and non-mining investment are expected to pick up this year.
- RBNZ's inflation/GDP/employment outlook over next 2 years saw improved conditions across the board. GDP seen at its highest level in 2.5 years, while unemployment the lowest since Q3 2008.
- PBOC has once again skipped reverse repo operations after a 10bp increases in offer rates on Friday, claiming liquidity is ample.
China:
- (CN) China economic downward pressures are large currently, will give priority to employment amid the downward pressure - press
- (CN) China Jan new Yuan loans said to top the prior monthly record of CNY2.5T - press
- (CN) China Securities Journal: PBoC's suspension of open market operations suggests current economic fundamentals do not support a tightening of monetary policy
- (CN) China State Council plans to create more than 50M new jobs by 2020 while keeping the urban unemployment rate below 5%
- (CN) PBoC urging China banks to curb lending - The Paper
Japan:
- (JP) Japan Fin Min Aso and Foreign Min Kishida and Trade Min Seko said to travel with PM Abe to US for meetings - financial press
- (JP) Japan Fin Min Aso: FX stability is important; Improving economic links with US in both countries' benefit
Australia/New Zealand:
- (AU) S&P: First step in Australia sovereign downgrade would only affect AAA states - press
- (AU) S&P/ASX200 falls below 5,600, 6-week low
- (NZ) RBNZ Wheeler will not seek second term; Dep Gov Spencer to be acting Gov starting Sept 27th
- (NZ) Fixed income markets have started to price in some chance of RBNZ rate hike this year, but consensus among New Zealand economists is that it is unlikely - NZ press
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.1%, Hang Seng flat, Shanghai Composite -0.4%, ASX200 flat, Kospi -0.1%
- Equity Futures: S&P500 flat; Nasdaq +0.1%; Dax flat; FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0705-1.0750; JPY 111.60-111.95; AUD 0.7630-0.7680; NZD 0.7300-0.7375
- Apr Gold +0.2% at $1,235/oz; Mar Crude Oil +0.3% at $53.16/brl; Mar Copper -0.5% at $2.64/lb
- SPDR Gold Trust ETF daily holdings rise 4.2 tonnes to 818.7 tonnes; 4th straight increase; Highest since Dec 30th
- (CN) PBOC SETS YUAN MID POINT AT 6.8604 V 6.8606 PRIOR
- (CN) PBOC skips reverse repo operations (3rd consecutive halt)
- (JP) Japan MoF sells 10-yr 0.1% inflation linked bonds; bid-to-cover 2.61x v 2.85x prior
- (KR) South Korea sells 30-yr Govt bonds; Avg yield 2.19%
***Asia equities / Notables / movers by sector***
- Consumer discretionary: NEC.AU Nine Entertainment -1.5%, SWM.AU Seven West -2.3% (Deutsche Bank cuts rating); HUB.AU Hub24 +4.3% (Q2 result); 2914.JP Japan Tobacco -1.8% (FY16 result)
- Financials: 993.HK Huarong International Financial +5.2% (profit alert); SCP.AU SCA Property +2.8% (H1 result); MQG.AU Macquarie Group -1.7% (Q3 trading statement); 8053.JP Sumitomo Corp +1.4% (writedown speculation); 8031.JP Mitsui & Co +0.6% (earnings speculation)
- Industrials: 2333.HK Great Wall Motor -1.9% (FY16 result); 175.HK Geely Automobile -2.7% (Jan result); 1777.HK Fantasia Holdings +2.1% (Jan result); GNC.AU Graincorp +3.2% (Goldman Sachs raises rating); RWH.AU Royal Wolf Holdings -6.7% (H1 result); 7203.JP Toyota -2.2% (9-month result); 010140.KR Samsung Heavy Industries -3.8% (concerns on drill ship delivery)
- Technology: 1063.HK Suncorp Technologies -1.8% (profit warning); 6146.JP Disco Corp +13.6% (Macquarie raises rating, 9-month result)
- Materials: 1332.HK Qualipak International -10.6% (profit warning); RSG.AU Resolute Mining +5.5%, NST.AU Northern Star +3.3%, NCM.AU Newcrest +3.0%, EVN.AU Evolution +4.4% (gold rises); 5938.JP LIXIL Group +2.0% (9-month result); 5302.JP Nippon Carbon Co +7.8% (adjusts guidance)
- Energy: 3303.HK Jutal Offshore Oil Services -1.5% (profit warning)
- Utilities: TCL.AU Transurban +5.8% (H1 result)