Asian Market Update: Nikkei225 soars as another Japan GDP contraction adds to the case for deeper easing; China trade components disappoint
***Economic Data***
- (CN) CHINA JAN TRADE BALANCE (CNY TERMS): 406B V 389BE; EXPORTS Y/Y: -6.6% V +3.6%E; IMPORTS Y/Y: -14.4% V 1.8%E; Overall trade volume CNY1.88T, -9.8% y/y; USD terms: Trade Balance: $63.3B v $60.6Be
- (JP) JAPAN Q4 PRELIMINARY GDP Q/Q: -0.4% V -0.2%E; ANNUALIZED GDP: -1.4% V -0.8%E; biggest contraction in a year Q/Q and annualized
- (JP) JAPAN DEC FINAL INDUSTRIAL PRODUCTION M/M: -1.7% V -1.4% PRELIM; Y/Y: -1.9% V -1.6% PRELIM
- (AU) AUSTRALIA JAN NEW MOTOR VEHICLE SALES M/M: +0.5% V -0.5% PRIOR; Y/Y: 5.1% V 2.2% PRIOR
- (NZ) NEW ZEALAND JAN PERFORMANCE OF SERVICES INDEX: 55.4 V 58.5 PRIOR; 2nd straight month of decline
- (KR) South Korea DEC "L" Money Supply: -0.4% v 0.4% prior; M2 Money Supply: -0.1% (first decline in over a year) v 0.4% prior
- (KR) South Korea Jan Bank Lending to Households (KRW): 641T v 639T prior
- (KR) SOUTH KOREA JAN EXPORT PRICE INDEX M/M: 0.6% V0.3% PRIOR; Y/Y: -1.3% V -6.2% PRIOR
- (UK) UK FEB RIGHTMOVE HOUSE PRICES M/M: 2.9% V 0.5% PRIOR; Y/Y 7.3% V 6.5% PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +6.7%, S&P/ASX +1.3%, Kospi +1.3%, Shanghai Composite -1.6%, Hang Seng +2.7%, Feb S&P500 +0.9% at 1,874
***Commodities/Fixed Income***
- Apr gold -1.6% at $1,219/oz, Mar crude oil -0.9% at $29.19/brl, Mar copper +1.8% at $2.07/lb
- (CN) PBOC SETS YUAN MID POINT AT 6.5118 V 6.5314 PRIOR; 21st straight firmer setting relative to Close; Strongest Yuan setting since Jan 4th
- GLD: SPDR Gold Trust ETF daily holdings fall 5.0 tonnes to 711.0 tonnes
- SLV: iShares Silver Trust ETF daily holdings rise to 9,710 tonnes from 9,591 tonnes; highest since Jan 20th; first rise since Nov 13th
- FCG.NZ: Reports Jan Australia milk collection -5% y/y; NZ milk collection -2% y/y
- (CN) PBOC to inject CNY10B in 7-day reverse repos
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥450B in 5-10yr JGBs
***Market Focal Points/FX***
- Asian equity markets are generally higher, tracking a sharp rally on Wall st on Friday. Nikkei225 is soaring with about a 7% gain, boosted by weaker Yen, as disappointing Q4 GDP lifted the outlook for more policy easing from the central bank. USD/JPY was up some 80pips heading into Tokyo close, testing ¥114 handle. Shanghai Composite has returned from a week-long break, and after opening down by nearly 3% has since cut that decline in half. In other USD majors, AUD/USD is up 70pips around 0.7170, NZD/USD was up 50pips above 0.6660, and EUR/USD down about 20pips around 1.1220.
- Japan Q4 GDP registered its biggest contraction in a year - both q/q and annualized - at -0.4% and -1.4%. Just about every component was soft: Exports shrank -0.9% v 2.6% final Q3 GDP, private consumption was down -0.8% v -0.6%e, v 0.4% prior, though Capex rose 1.4% v -0.2%e, v 0.7% final Q3 GDP. Cabinet officials cheered strong investment and wrote off soft consumption to warm weather diminishing demand for winter items. Some analysts also zeroed in on GDP deflator of 1.5% v 1.6%e flashing a warning of slowing inflationary trend. Japan PM Abe spoke throughout the session - initially noting the impact of further sales tax hikes on consumers will have to be considered and then adding that the govt is prepared to take appropriate action on forex to address excessive volatility - comments which sent JPY toward session lows above 113.80. Separately, BOJ Gov Kuroda said he would not expect bank deposit rates to go negative, while Econ Min Ishihara reiterated Japan's economic fundamentals are firm. Also of note, a report in FT citing Japan Investment Trusts Association (JITA) chairman said Japan investment industry is seeking an exemption from BOJ's negative rates policy, helping Financials sector to the top of Tokyo's performers.
- China returned from holiday break with a disappointing set of trade data. While trade surplus topped expectations in both CNY and USD terms, import and export components were much weaker than expected. In CNY, Imports fell -14.4% V 1.8%E and exports fell -6.6% V +3.6%E. In USD terms, Exports Y/Y were -11.2% v -2.0%e and imports -18.8% v -3.9%e. Iron ore imports were up 4.6% y/y, but crude oil and coal were down in mid-high single digits. Some analysts attributed disappointing reports to the timing around the Lunar New Year holiday. Separately in China, PBoC Gov Zhou spoke with the press over the weekend, stating there is no basis for continued CNY depreciation and also called China balance of payments as positive, capital outflows as normal, and the exchange rate basically stable against a basket. Despite speculation of more weakening moves on Yuan currency by the PBoC, today's fix was actually surprisingly stronger. China commerce ministry also put out a report of Spring Festival holiday sales rising 11% y/y to CNY754B, similar to 11% rate of growth in 2015.
- Stateside, the death of US Supreme Court justice Scalia - one of the most conservative voices in the court - has sparked off a contested exchange between the two parties. Democrat leaders and the White House expect a nomination to take place before the end of Obama's term this year, while Republican leadership calls for the vacancy to be filled when a new President is elected.
***Equities***
US equities / ADRs:
- BP: Reaches agreement with state-owned Oman Oil Co to expand exploration and production sharing agreement of the Khazzan natural gas field - financial press
Notable Asia movers:
- AMC.AU: Reports H1 Net A$305.5M v A$321.3M y/y; Rev A$4.55B v A$5.20B y/y; +9.6%
- NCM.AU: Reports H1 Net $81M v $200M y/y, Rev $1.55B v $1.78B y/y; -0.6%
- BEN.AU: Reports H1 NPAT A$209M v A$227M y/y, Net interest income A$587M v A$604M y/y; -4.0%
- RRL.AU: Newmont Mining thought to be getting a lot of interest for its A$268M stake in Regis - AFR; -6.5%
- AZJ.AU: Reports H1 NPAT A$237M v A$308M y/y, Rev A$1.76B v A$2.08B y/y; -11.7%