Asian Mid-session Update: Fed liftoff taken in stride; Japan trade deficit smaller than expected as exports plunge
***Economic Data***
- (JP) JAPAN OCT TRADE BALANCE TOTAL: -¥380B V -¥450BE; ADJUSTED: -¥3.3B V -¥207BE
- (NZ) NEW ZEALAND Q3 GDP Q/Q: 0.9% V 0.8%E; Y/Y: 2.3% V 2.3%E
- (CN) China Banks Nov net forex sales CNY276.2B for clients v sold CNY190.9B prior - SAFE
- (HK) Hong Kong Monetary Authority (HKMA) raises base rate by 25 bps to 0.75% (tracking FOMC hike)
- (SG) SINGAPORE NOV ELECTRONIC EXPORTS Y/Y: 0.7% v 5.2%e; NON-OIL DOMESTIC EXPORTS M/M: -3.8% v +0.4%e; Y/Y: -3.3% v +1.5%e
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +1.8%, S&P/ASX +1.6%, Kospi +0.2%, Shanghai Composite +1.5%, Hang Seng +1.0%, Mar S&P500 -0.3% at 2,058
***Commodities/Fixed Income***
- Feb gold -0.8% at $1,067/oz, Feb crude oil +0.1% at $36.77/brl, Mar copper -0.3% at $2.06/lb
- JGB: (JP) Japan's MoF sells ¥1.09T in 1.0% (1.2% prior) 20-year JGBs; Avg yield: 1.041% v 1.078% prior; bid-to-cover: 3.07x v 3.59x prior
- (JP) Japan investors bought net ¥319B in foreign bonds v bought net ¥81.3B in prior week; Foreign investors sold net ¥488B in Japan stocks v bought ¥105B in Japan stocks in prior week
- (CN) PBoC to inject CNY30B in 7-day reverse repos (48th consecutive injection); Injects net CNY10B this week v drained CNY50B prior
- USD/CNY: (CN) PBoC sets yuan mid point at 6.4757 v 6.4626 prior; weakest Yuan setting since June 2011
***Market Focal Points/FX***
- As widely anticipated, the FOMC has departed from ZIRP for the first time since 2008, citing economy operating close to potential, household spending improving, labor underutilization diminishing, and inflation anticipated to return to 2% over the medium term. Market action across asset classes was choppy as the statement contained something for doves and hawks. On the dovish hand, Yellen stressed the gradual nature of liftoff trajectory, Fed funds target was set at a 0.25-0.5% range rather than 0.5% target, and Committee also maintained the policy of reinvesting principal payments from its MBS holdings and rolling over Treasuries held on its balance sheet. Conversely, the decision was unanimous with no dovish dissents, 2016 median dot plot projections was intact at 1.375% implying 4 hikes next year, while 2016 and 2017 were revised down by only 25bps and 12.5bps respectively.
- Subsequent press conference by Chair Yellen was also interpreted as more balanced than underscoring the "dovishness" of the hike, and USD saw its most pronounced gains during the address. EUR/USD initially spiked to 1.10 but traded back down to 1.09 by the end of Yellen comments and below 1.0840 in Asia. USD/JPY post FOMC low was below 121.50 but rose above 122.60 late in Asia. Higher yielding commodity currencies were sold even more aggressively on USD strength - both AUD/USD and NZD/USD were down over 1% from the highs. 2-year Treasury note yields climbed over the 1% mark for fresh multi-year highs.
- Despite the worries over the spillover on emerging markets from the Fed tightening, there is hardly any panic in Asia with more gains in local indices. Japan fin min Aso said the rate hike was appropriate, India econ advisor said the impact would be minimal, Korean fin min official said rate hike was not hawkish and in line with expectations, and Thailand official noted the Fed liftoff has little effect. Hong Kong's HKMA, which also raised its rate due to its USD peg, noted there would be some gradual outflows after the rate hike but that would largely depend on the pace of tightening.
- Outside the Fed, there were some notable economic data points from Japan and New Zealand. Japan Trade Deficit was lower than expected but mainly because imports decline of -10.2% was much worse than -7.3%e. Likewise, exports fell more than anticipated at -3.3% v -1.6%e - the largest decline since Dec 2012. Shipments to Asia and China were down over 8%, with China exports particularly soft at -8.1% v -3.6% prior - the biggest decline since Feb. In New Zealand, Q3 GDP was slightly higher than expected sequentially and in line y/y, as strong growth in private consumption and exports made up for the 3% contraction in capital investment. New Zealand Fin Min English warned that the especially acute El Nino this year could shave off over 0.3% from growth.
- In China, CASS researcher noted that any disruption from US rate hike is likely to be limited as it was expected. Overnight, CASS forecast 2016 GDP at 6.6-6.8%, CPI at 2.1%, exports falling 0.6%, and forecasting a rebound in property despite ongoing negativity in heavy industry. Weekly open market operations returned to net injection, while PBoC's Yuan fix was once again at the weakest level since mid-2011.
***Equities***
US equities / ADRs:
- P: Copyright Review Board (CRB) publishes rates judgment for 2016-2020; +19.4% afterhours
- FDX: Reports Q2 $2.58 v $2.51e, R$12.5B v $12.4Be; +5.0% afterhours
- JBL: Reports Q1 $0.85 v $0.80e, R$5.21B v $5.19Be; +0.8% afterhours
- ORCL: Reports Q2 $0.63 v $0.61e, R$8.9B v $9.09Be; -1.6% afterhours
- APOG: Reports Q3 $0.63 v $0.63e, R$238.3M v $260Me; -3.8% afterhours
- PIR: Reports Q3 $0.13 v $0.12e, R$472.5M v $495Me; -13.3% afterhours
Notable movers by sector:
- Consumer discretionary: Slater & Gordon SGH.AU -15.4% (withdraws guidance); Nomura Research Institute 4307.JP -1.1% (9-month result)
- Financials: Poly Real Estate Group Co 600048.CN +10.0% (approved on private placement)
- Industrials: Broadspectrum BRS.AU +2.0% (sets up JV)
- Technology: Hon Hai Precision Industries 2317.TW +1.5% (speculation to buy Sharp's LCD business); Mesoblast MSB.AU +8.0% (Q2 result); Sony Corp 6758.JP +3.6% (said to introduce high capacity battery); Rakuten Inc 4755.JP +4.8% (to open flagship store on JD)
- Materials: General Mining Corp. GMM.AU +2.6% (placement); Sekisui Chemical Co Ltd 4204.JP +2.0% (guidance); Triton Minerals TON.AU -9.7% (withdraws entitlement offer); Pangang Group Vanadium Titanium & Resources Co 000629.CN +10.0% (starts battery production)
- Energy: Shunfeng Photovoltaic International 1165.HK +8.6% (asset disposal); Woodside Petroleum WPL.AU -0.9% (adjusts guidance); Caltex Australia CTX.AU +6.0% (guidance); Beach Energy BPT.AU -1.1% (update on merger with Drillsearch)
- Healthcare: Arts Optical International Holdings 1120.HK +5.1% (guidance)
- Utilities: Beijing Enterprises Water Group 371.HK +2.4% (clarification)