Asian Market Update: China trade disappoints amid the largest drop in exports in nearly 7 years; Japan Q4 GDP confirmed back in contraction
***Economic Data***
- (CN) CHINA FEB TRADE BALANCE (CNY TERMS): 209.5B (10-month low) V 341BE; EXPORTS Y/Y: -20.6% V -11.3%E (biggest decline since May 2009); IMPORTS Y/Y: -8.0% V -11.7%E
- (JP) JAPAN Q4 FINAL GDP Q/Q: -0.3% V -0.4%E; ANNUALIZED GDP: -1.1% V -1.5%E
- (JP) JAPAN FEB CONSUMER CONFIDENCE: 40.1 V 42.2E
- (JP) JAPAN JAN CURRENT ACCOUNT BALANCE: ¥521B V ¥716BE; ADJUSTED CURRENT ACCOUNT: ¥1.49T V ¥1.65TE; TRADE BALANCE: -¥411B V -¥530BE
- (JP) JAPAN FEB BANK LENDING (INCL TRUSTS) Y/Y: 2.2% V 2.3% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.2% V 2.4%E
- (AU) AUSTRALIA JAN NAB BUSINESS CONFIDENCE: 3 V 3 PRIOR; CONDITIONS: 8 V 5 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.8 v 111.3 prior
- (NZ) NEW ZEALAND Q4 MANUFACTURING ACTIVITY Q/Q: -1.9% V +4.2% PRIOR; VOLUME Q/Q: 1.3% V 3.5% PRIOR
- (NZ) New Zealand Feb ANZ Truckometer Heavy M/M: +1.6% v -4.3% prior
- (TW) TAIWAN FEB CPI Y/Y: 2.4% (3-year high) V 0.8%E; WPI Y/Y: -4.8% V -4.5%E
- (UK) FEB BRC LFL SALES Y/Y: 0.1% V 0.5%E
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 -0.7%, S&P/ASX -0.5%, Kospi -0.8%, Shanghai Composite -1.7%, Hang Seng -0.8%, Mar S&P500 -0.3% at 1,994
***Commodities/Fixed Income***
- Apr gold +0.2% at $1,267/oz, Apr crude oil -1.1% at $37.47/brl, May copper -1.5% at $2.24/lb
- JGB: (JP) Japan's MOF sells ¥726B in 0.8% 30-year bonds; Avg yield: 0.765% v 1.068% prior; Bid to cover: 4.21x (highest since May 2014) v 3.04x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5041 V 6.5113 PRIOR (strongest setting since Jan 4th, 4th consecutive stronger setting)
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- (AU) Australia sells A$100M in 1% 2018 Indexed notes; avg yield 0.4051%
- (NZ) Fonterra cuts FY15/16 forecast milk price to NZ$3.90/kg from NZ$4.15/kg; sees cash payout NZ$4.25-4.30/kgMS
***Market Focal Points/FX***
- Asia markets are down across the board, led by Shanghai Composite which fell after 5 straight days of gains. Soft China trade numbers exacerbated the decline but sentiment turned to risk-off from the start of the session as investors took profits across asset classes. Both copper and oil are down over 1%, gold is up slightly, and USD/JPY fell as much as 70pips below 112.80 before a slight bounce late in the day. In other USD majors, AUD/USD was also hard-hit by China data with a 50pip slide to 0.7420 while NZD/USD came in 40pips to 0.6760, adding to the decline in late US session after Fonterra cut its forecast payout for the 2nd time this year.
- China trade balance hit a 10-month low in CNY terms at 209.5B V 341BE and an 11-month low in USD terms which were also well below consensus at $32.6B v $51.0Be. CNY exports marked their biggest y/y decline since May 2009 at -20.6% V -11.3%E, while the closely watched imports component was down a less onerous -8.0% V -11.7%E. In USD terms, both missed consensus as exports fell for 8th straight month by -17.8% v -14.5%e and imports for the 16th month by -16.7% v -12.0%e. Shipments to US, EU, and Japan were all down about 20% y/y, also bigger declines than high-single - low-double digit declines seen last month. Today's trade numbers speak volumes to why Premier Li decided to skip 2016 projections for the trade component of the economy after already disappointing 2015. Comments from HSBC after the trade numbers suggested that recent hopes for a global rebound need to be tempered, as exports "got pummeled again in February, highlighting the downturn in global demand."
- Japan economy is confirmed to have contracted for the 2nd time in 3 quarters. GDP declines in the final prints were revised to be smaller with mixed component trends, as Capex was stronger than expected at 1.5% v 1.2%e and v 1.4% prelim, while Consumption was slightly weaker at -0.9% v -0.8%e v -0.8% prelim. Trade numbers were unrevised with a -0.9% drop in exports and -1.4% decline in imports q/q. Speaking after the release, Econ Min Ishihara maintained that there is no change to the view of Japan fundamentals as solid, noting weakness in consumption but also pointing to recovery in corporate profits and incomes. with Japan datapoints hardly showing any substantial improvement, there was some chatter that the cabinet will consider pushing back the timing of 2nd round of sales tax increase even further from the current Apr 2017 target, with cabinet officials expected to hold an economic meeting on Mar 16th. Also of note, PM Abe's cabinet has finally ratified TPP, sending its to Parliament for the anticipated start of negotiations early next month.
- Down under, Australia NAB business confidence was slightly lower from prior month. Resident NAB economist said all but two sectors of the economy - mining and wholesale - were positive. RBA Dep Gov Lowe helped to talk down AUD early in the session, stating it would be helpful to have slightly lower currency as global economy has lost momentum and data has been mixed. Ahead of Mar 10th RBNZ rate decision, one survey saw a vast majority of analysts anticipate a hold even with a slight majority calling for another 25bp cut before the end of Q2.
***Equities***
US equities / ADRs:
- URBN: Reports Q4 $0.61 v $0.56e, R$1.01B v $1.02Be; +12.3% afterhours
- THO: Reports prelim Q2 $0.86 adj v $0.85e, R$0.98B v $1.02Be; +5.0% afterhours
- PIR: Reports prelim Q4 $0.18-0.22 v $0.20e, Rev -1.3% y/y (implies R$537M v $523Me); SSS -0.7% (prior -2% to -4%); +1.7% afterhours
- SHAK: Reports Q4 $0.08 v $0.07e, R$51.1M v $50.6Me; -8.8% afterhours
Notable movers by sector:
- Consumer discretionary: Le Saunda Holdings 738.HK -1.8% (Q4 result); Phoenix Satellite Television Holdings 2008.HK +1.3% (guidance); Skyworth Digital 751.HK -2.0% (Feb result)
- Financials: Agile Property Holdings 3383.HK -1.0% (Feb result)
- Industrials: Geely Automobile Holdings 175.HK -3.8% (Feb result); Daewoo Shipbuilding & Marine 042660.KR -9.8% (Q4 result); Broadspectrum BRS.AU -3.3% (guidance)
- Technology: MediaTek Inc 2454.TW -0.4% (Feb result)
- Materials: Fortescue Metals Group FMG.AU -9.4% (MOU with VALE)
- Energy: China Environmental Investment Holdings 260.HK -2.4% (guidance)