Asian Market Update: BOJ's Kuroda sends Yen lower by keeping deeper negative rates in play; Trend of Yuan fixes weaker again
***Economic Data***
- (NZ) NEW ZEALAND Q4 CURRENT ACCOUNT BALANCE (NZ$): -2.61B V -2.9BE
- (AU) AUSTRALIA FEB WESTPAC LEADING INDEX M/M: -0.2% V +0.1% PRIOR
- (KR) SOUTH KOREA FEB UNEMPLOYMENT RATE: 4.1% V 3.6%E; highest since 2010
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -0.6%, S&P/ASX -0.1%, Kospi +0.1%, Shanghai Composite +0.1%, Hang Seng -0.5%, Jun S&P500 flat at 2,007
***Commodities/Fixed Income***
- Apr gold +0.1% at $1,232/oz, Apr crude oil +1.5% at $36.88/brl, May copper -0.5% at $2.23/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.1 tonnes to 792.2 tonnes
- (US) Weekly API Oil Inventories: Crude: +1.5M v +4.4M prior; 4th straight week of build
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5172 V 6.5079 PRIOR; 3rd straight weaker setting; Weakest setting since Mar 4th
- (CN) China MOF sells 7-year bonds at 2.75% - financial press
- (CN) PBOC to inject CNY20B in 7-day reverse repos
- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: -2.9% v +1.4% prior
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥450B in 5-10yr JGBs
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2027 Bonds; avg yield: 2.7876%; bid-to-cover: 3.41x
***Market Focal Points/FX***
- Asian equity markets are trading mixed going into the FOMC policy decision that is widely expected to see a pause along with continued expectations of higher rates this year. S&P futures are flat even though crude oil saw some electronic-session buying after a smaller build in API inventories. In FX, USD/JPY rose on comments from BOJ Gov Kuroda assuring that pushing rates deeper into the red was still a possibility. USD also some strength across the board after PBoC set its Yuan fix weaker for the 3rd straight day. USD/JPY rose over 50pips from the lows above 113.50, AUD/USD saw a low of 0.7440 on CNY fix, and NZD/USD traded down below 0.6580 - down about 40pips from the high.
- BOJ Gov Kuroda remarked again that the central bank will not hesitate to ease policy further if necessary, adding (in response to a question) that it was theoretically possible to see rates as low as -0.5%. USD/JPY jumped some 30pips on the comments given the omission of yesterday's BOJ statement to "go deeper into negative territory if necessary". Kuroda also noted there was no room for other exemptions from negative rates policy after announcing MRF would be ring-fenced, acknowledged exports and imports weakening, but maintaining that inflation trends are improving steadily. Kuroda concluded that the effect of negative rates typically involve some time lag, urging markets to remain patient. In the meantime, Japan Fin Min Aso stated the govt is closely watching the JGB market for any signs of strain from NIRP policy.
- In China, Premier Li gave the concluding remarks for the NPC. With all economic targets unveiled going into the committee, Li again assured the audience that China will not experience a hard landing despite growing downside pressure. Li also noted the govt can boost spending to support those who lost jobs due to overcapacity in certain industries, stating large-scale layoffs will not happen. Li further confirmed plans on debt to equity conversion as discussed by PBoC and NDRC to reduce corporate debt loads, acknowledging the recent rise in bad loan ratio. China premier concluded that Beijing is watching US elections but prepared to work with whoever wins, would like to maintain friendly terms with Russia, and has seen some improvement in Japan relations.
- NZD took a tumble overnight on unexpected decline in Fonterra Global Dairy trade auction against anticipated rise. Economists noted that EU announcement of measures to support farmers and dairy may have altered those results. NZD/USD fell even further below 0.6580 after RBNZ stress tests showed 50% of dairy farmers are experiencing 2nd season of losses and as much as 15% of dairy lending loans may need to be written off.
- Stateside, the US presidential race primary season lost another candidate as Marco Rubio called it quits following a 20pt loss to Donald Trump in Florida. Trump also picked up Illinois and N Carolina, but lost Ohio to Kasich and was neck in neck in Missouri with Cruz. On the Democratic side, Clinton had a big night with victories across all 5 states. White House is also planning to submit nomination of either Sri Srinivasan or Merrick Garland for Scalia's Supreme Court seat as soon as Wednesday.
***Equities***
US equities / ADRs:
- ORCL: Reports Q3 $0.64 v $0.62e, R$9.01B v $9.17Be; adds $10B to stock buyback (6.2% of market cap); +4.1% afterhours
- CMG: Reports Feb SSS -26.1% v -23.0%e; Guides Q1 EPS -$1.00 or worse v $0.00e; -3.4% afterhours
- CAL: Reports Q4 $0.26 v $0.22e, R$609M v $688Me; -7.3% afterhours
Notable movers by sector:
- Industrials: Zoomlion Heavy Industry Science and Technology 1157.HK -4.1% (reportedly raise offer for TEREX)
- Technology: FIH Mobile 2038.HK +3.1% (FY15 result); Sharp Corp 6753.JP -9.2%, Hon Hai Precision Industries 2317.TW +1.0% (deal signing may be delayed)
- Materials: RUSAL PLC 486.HK -1.1% (Norisk Nickel may impact on results)
- Energy: Huadian Fuxin Energy Corp. 816.HK -2.5% (guidance)