Asia Market Update: Dollar weakness continues; China strengthens yuan at more than 2-yr high
***Headlines/Economic Data***
General Trend: Asian equity markets trade mixed, energy companies outperform
- Chinese cities start to issue 2018 GDP targets: Shanghai and Beijing are both targeting around 6.5% growth
- USD/JPY trades below 110 for first time since Sept: PBoC fixed yuan at multi-year high for 4th straight session
- US Dollar (USD) Index moves below 90 for first time since late 2014
- Japan Jan Prelim Manufacturing PMI nears 4-year high
- Japan Dec exports growth at slowest pace since April 2017, yet monthly export amount hits highest since 2008 (exports to Asia and China hit record)
- Japan 2017 Trade Surplus with the US +3.1% y/y (2-year high)
Japan
-Nikkei 225 opened -0.4%; closed -0.8%
- Topix Electric Appliances Index -1.7% (Fanuc -3% due to report earnings on Friday after the close)
- Mega banks trade broadly weaker: Sumitomo Mitsui -2.5%, Mitsubishi UFJ -2.5%, Mizuho Financial -1.5%
- TOPIX Real Estate Index +1.1% (tracked Tuesday’s outperformance in S&P500 Real Estate Index)
- Nidec [6594.JP] -3% (expected to report earnings after the close)
- (JP) JAPAN DEC TRADE BALANCE: ¥359.0B V ¥535.0BE; ADJ ¥86.8B V ¥276.7BE; Exports y/y: 9.3% (13th consecutive rise, slowest growth since April 2017) v 10.0%e; Imports y/y: 14.9% v 12.4%e
- (JP) JAPAN JAN PRELIM PMI MANUFACTURING: 54.4 V 54.0 PRIOR
- (JP) Japan Trade Union Confederation Chief Kozu: Rising monthly wages will boost consumer spending
-(JP) Japan Nov Final Leading Index CI: 108.3 v 108.6 prelim; Coincident Index: 117.9 v 118.1 prelim
- (JP) BOJ announcement related to daily bond buying operation: leaves amounts unchanged
- (JP) Japan Econ Min Motegi: Believes that start date for Trans-Pacific-Partnership will not change; March 8th is the target date for signing the agreement (after the close)
- (JP) Japan Cabinet Office report indicates Japan will not be able to achieve a primary budget surplus until FY27 (2-yrs longer than prior indications) unless it manages to dramatically curb spending - Nikkei
Korea
- Kospi opened -0.1%
- Banks trade generally lower following gains on Tuesday: Hana Financial -3%, KB Financial -1.3%, Woori -1.6%
- LG Household & Health Care [051900.KR] -5.5% (reported FY17 results on Tuesday’s session)
- LG Electronics [066570.KR]: -5.5% (Reported final FY17 results after Tuesday’s close; Trade concerns)
- LG Display +2% (positive broker commentary following Q4 earnings report and guidance)
- (KR) South Korea removed from EU blacklist of tax havens - Korean press
- (KR) Main opposition party has called on North Korea to delay military parade - Korean press
- (KR) S&P: Corporates in South Korea show improvement in creditworthiness; Hyundai Motors rating faces downgrade pressure due to US market; LG Electronics may be 'greatly' impacted by US safeguard issue related to washing machines
Looking Ahead: Q4 Prelim GDP due for release on Thursday
China/Hong Kong
-Hang Seng opened -0.1%, Shanghai Composite +0.2%
- Hang Seng Info Tech Index -0.9%, Materials -0.7%, Consumer Goods -0.8%, Property/Construction -0.7%, Financials -0.3%; Energy +2.2%
- Leshi Internet [300104.CN]: Opens limit down (-10%) after being halted for 9-months
- (CN) China said to be prepared to support stocks after trading resumption for shares of Leshi Internet
- USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.3916 V 6.4009 PRIOR (strongest setting since Dec 4th, 2015)
- (CN) China PBOC OMO: Injects CNY220B v CNY170B injected in 7,14 and 63-day reverse repos prior
- (CN) China Official: CNY100B in solar subsidies are unpaid as of 2017; To roll out solar subsidy-free pilot projects in 2018
- (CN) former PBOC vice gov Zhu: Interest rates are likely to remain unchanged given govt's current focus on reducing debt levels, and a stable inflation rate - Chinese press
- (CN) China MoF sells 3-yr bonds, avg yield 3.56%, bid to cover 2.33x; 7-yr upsized bonds at 3.8592% v 3.91%e, bid to cover 2.51x
Australia/New Zealand
-ASX 200 opened flat; closed +0.3%
- ASX 200 Energy Index +0.8%, Utilities +0.6%, Financials +0.4%
- Santos, STO.AU Reports Q4 Rev $861M v $753M y/y; FY17 sales volumes 83.4Mt (record high)
- (AU) Australia Dec Westpac Leading Index M/M: 0.3% v 0.1% prior
- (NZ) New Zealand Dec Credit Card Spending M/M: 0.6% v 0.8% prior; Y/Y: 6.3% v 9.1% prior
-(NZ) New Zealand government delays law banning foreigners from purchasing property - NZ press
-(AU) Australia Treasury is expected to boost its global forecasts in the May budget, due to a surge in confidence across advanced and emerging market economies - AFR
Looking Ahead: New Zealand Q4 CPI to be released on Thursday
Other Asia
- (MY) MALAYSIA DEC CPI Y/Y: 3.5% V 3.5%E [**Note: The data is above Malaysia’s 2-3% inflation target for the 12th straight month]
- (MY) There is press speculation that Malaysia Central Bank (BNM) may raise interest rates by 25bps at Thursday’s meeting – US financial press
- (TW) Taiwan Jan 1-22nd foreign capital flow $3.28B - Taiwan press
- UMC Corp [2303.TW]: -1.5%: expected to report Q4 earnings after close
- AU Optronics [2409.TW] +3.5% (positive broker commentary)
- TSMC [2330.TW] Chairman: Sees negative impact from NT$ gains
- Moody's: Asia high-yield corporate bond covenant quality score declines to weakest level on record
- (VN) Vietnam shut main Ho Chi Minh City stock exchange for second day amid technical malfunction
North America
- US equities closed mostly higher: Dow -0.1%, S&P500 +0.2%, Nasdaq +0.6%, Russell 2000 +0.1%
- S&P500 Real Estate Sector +1.5%, Utilities +1%
- Texas Instruments [TXN] Down over 6% afterhours: Reports Q4 $1.09*(ex $0.75 tax expense) v $1.09e, Rev $3.75B v $3.73Be; Guides Q1 $1.01-1.17 (adj) v $1.07e, Rev $3.49-3.79B v $3.64Be
- United Continental [UAL]: Down over 4% afterhours Guides initial FY18 $6.50-8.50 v $6.63e; Guides initial FY18 non fuel CASM -1% to 0%; FY18 capacity +4-6% - earnings call comments
- (US) Senate confirms Jerome Powell as incoming Fed Chair (as expected)
- (US) Fed nominee Goodfreind: transparency could be improved regarding reference rules for monetary policy
- (US) White House Econ Adviser Cohn: Trump's message at Davos will be to invest in America, not that hes withdrawing the US from the global trade scene – press
- (US) TREASURY SELLS $26B IN 2-YEAR NOTE AUCTION; DRAWS 2.066%; BID-TO-COVER RATIO: 3.22 V 2.52 PRIOR AND 2.82 AVG OVER THE LAST 12 (first 2-year auction above 2.00% since 2008)
- (US) Weekly API Oil Inventories: Crude: +4.8M v -5.1M prior
- (US) US AIA Dec Architecture Billings Index: 52.9 v 55.0 prior; New projects inquiry index 61.9 v 61.1 prior
Looking Ahead: US Dec Existing Home Sales due for release, along with Weekly DoE Crude Oil Inventories
- Corporate earnings are expected out of companies including Comcast, Discover, Ford, General Dynamics, GE, Las Vegas Sands, SL Green, United Technologies, Whirlpool
Europe
- (UK) Conservative MPs have told PM May that the UK must not be bound by EU rules during the Brexit transition period
- (UK) EU Chief Brexit Negotiator Barnier: hope UK will indicate what it wants in Brexit talks by March
- (EU) EURO ZONE JAN ADVANCE CONSUMER CONFIDENCE: 1.3 V 0.6E; *(EU) EURO ZONE JAN ADVANCE CONSUMER CONFIDENCE: 1.3 V 0.6E ( Reading is highest since Aug 2000)
Looking Ahead: Euro Zone Prelim Jan Manufacturing and Services PMIs due for release (Euro Zone, France, German); UK Nov Avg Earnings and Unemployment Rate, Dec Claimant Count Change; France Jobseekers data (US session)
***Levels as of 01:00ET***
- Nikkei225 -0.8%, Hang Seng -0.1%; Shanghai Composite +0.3%; ASX200 +0.3%, Kospi -0.0%
- Equity Futures: S&P500 +0.0%; Nasdaq100 +0.0%, Dax +0.1%; FTSE100 -0.2%
- EUR 1.2335-1.2291; JPY 110.34-109.81; AUD 0.8017-0.7993;NZD 0.7377-0.7349; GBP 1.4049-1.3997
- Feb Gold +0.3% at $1,340/oz; Mar Crude Oil +0.0% at $64.45/brl; Mar Copper +0.6% at $3.14/lb