Asian Market Update: Q1 Japan Tankan plummets, sending Nikkei down 3%; China manufacturing recovers, returning to expansion
***Economic Data***
- (CN) CHINA MAR CAIXIN PMI MANUFACTURING: 49.7 V 48.3E; 13-month high
- (CN) CHINA MAR MANUFACTURING PMI: 50.2 V 49.4E(1st expansion in 8 months); Non-manufacturing (services) PMI: 53.8 v 52.7 prior
- (JP) JAPAN Q1 TANKAN LARGE MANUFACTURING INDEX: 6 (lowest since June 2013) V 8E; MANUFACTURERS OUTLOOK: 3 v 7E; All-industry CAPEX: -0.9% v -0.7%e
- (JP) JAPAN MAR FINAL PMI MANUFACTURING: 49.1 V 49.1 PRELIM
- (KR) South Korea Mar PMI Manufacturing: 49.5 v 48.7 prior; 3rd straight month in contraction
- (KR) SOUTH KOREA MAR TRADE BALANCE: $9.8B V $8.5BE
- (KR) SOUTH KOREA FEB CURRENT ACCOUNT BALANCE: $7.5B V $6.8B PRIOR
- (AU) AUSTRALIA MAR AIG MANUFACTURING INDEX: 58.1 V 53.5 PRIOR; 9th straight month of expansion, highest since 2004
- (AU) Australia Mar Corelogic RPData House Prices M/M: 0.2% v 0.5% prior
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -2.8%, S&P/ASX -1.8%, Kospi -0.7%, Shanghai Composite -1.4%, Hang Seng -1.3%, Jun S&P500 -0.2% at 2,046
***Commodities/Fixed Income***
- Jun gold -0.3% at $1,232/oz, May crude oil -0.7% at $38.09/brl, May copper +0.2% at $2.19/lb
- (CN) PBOC to inject CNY140B in 7-day reverse repos; Injects net CNY15B this week v injected CNY180B prior
- (CN) PBOC SETS YUAN MID POINT AT 6.4585 V 6.4612 PRIOR; 4th straight stronger setting; Strongest Yuan setting since Dec 15th
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr and ¥450B in 5-10yr JGBs
- (AU) Australia MoF (AOFM) sells A$800M in 1.75% 2020 Bonds; avg yield: 2.0315%; bid-to-cover: 4.57x
***Market Focal Points/FX***
- Asian equity markets are notably lower across the board, as the typically uneventful Asia session on the eve of the US non farm payrolls saw an unusual amount of volatility. Nikkei225 is the worst performer by far, shedding about 3% in the afternoon trade in the wake of the lowest Manufacturing Tankan figure in nearly 3 years. China markets were also pressured despite stronger manufacturing PMIs, as investors expressed concern over less aggressive fiscal stimulus and also responded to S&P cut of China outlook to Negative overnight. In FX, USD/JPY fell about 50pips toward 112, though the 112.00-70 2-day range is holding going into volatile NFPs. AUD/USD spiked up 30pips to 0.77 after China PMIs but then erased those gains, and NZD/USD fell over 40pips below 0.6890. Yuan fix was set stronger for the 4th straight day in a catch-up move to weaker greenback.
- China official manufacturing PMI expanded above the 50-threshold for the first time in 8 months, and non-manufacturing improved to 53.8 from 52.7 - a 3-month high. Key components New export orders and Input Prices jumped to 50.2 and 55.3 from 47.4 and 50.2 respectively, portending better exports demand and higher inflation. Caixin manufacturing PMI surveying smaller firms also rose to a 13-month high, but remained in contraction. Resident economist said output and new order categories indicate that the stimulus policies the government has implemented have begun to take hold. In the property secror, China Index Academy reported continued price increases in March with top-100 city average rising to +1.90% v +0.60% m/m and +7.41% v +5.25% y/y.
- In Japan, Q1 Tankan survey undershot already soft expectations, coming in at the lowest level since June 2013 of +6 with outlook an even more feeble +3. Closely watched Capex projections component was revised sharply lower to -0.9% from +10.8%. Japan Fin Min Aso attempted to downplay the soft numbers, stating that more leading indicators show capex is rising, though acknowledging that there is some weakness in sentiment. With an eye on the BOJ policy decision in late April that will include an update on growth and inflation targets, Gov Kuroda said monetary policy has already been adjusted a lot in past 3 years.
***Equities***
US equities / ADRs:
- URBN: Sees comparable retail segment net sales "thus far in Q1 low single-digit positive which includes the benefit of a leap year" - 10K filing; +2.0% afterhours
- TROX: Increases TiO2 price by $175/metric ton; -1.1% afterhours
- MRVL: Delays 10K filing due to delay caused by audit committee investigation; expect FY16 revenue down significantly y/y; -1.6% afterhours
- HOT, MAR: Reportedly Anbang to drop its proposed takeover offer for Starwood - press; HOT -4.4%, MAR -5.9% afterhours
- SUNE: Discloses subpoena from DOJ seeking information related to acquisition of Vivint Solar and intercompany transactions with TERP and GLBL - filing; -9.3% afterhours
Notable movers by sector:
- Consumer discretionary: Gome Electrical Appliances Holdings 493.HK +2.7% (FY15 result); Beijing Enterprises Hldgs 392.HK -5.7% (FY15 result); Recall Holdings REC.AU +7.1% (divestment speculation); Panasonic Corporation 6752.JP -11.0% (cuts guidance)
- Financials: Guosen Securities 002736.CN -2.1% (clarification on dim sum bond default); Agricultural Bank of China (ABC) 601288.CN -1.3% (FY15 result)
- Industrials: Baoxin Auto 1293.HK -0.8% (FY15 result); Sound Global 967.HK -7.4% (FY15 result)
- Technology: Mesoblast Ltd MSB.AU -3.1% (update on trial)
- Materials: China Daye Non-Ferrous Metals Mining 661.HK -10.7% (FY15 result)