Asian Market Update: China official PMIs fall to 4-year lows; RBA stands pat, statement little changed
***Economic Data***
- (CN) CHINA FEB CAIXIN PMI MANUFACTURING: 48.0 V 48.4E; (11th month of contraction and a 5-month low)
- (CN) CHINA FEB MANUFACTURING PMI: 49.0 V 49.4E (7th month of contraction and a 4-year low); Non-Manufacturing PMI (services) 52.7 (4-year low) v 53.5 prior
- (JP) JAPAN FEB FINAL PMI MANUFACTURING: 50.1 V 50.2 PRELIM; 8-month low
- (JP) JAPAN Q4 CAPITAL SPENDING Y/Y: 8.5% V 8.7%E; CAPITAL SPENDING EX-SOFTWARE Y/Y: 8.9% V 8.7%E
- (JP) JAPAN JAN JOBLESS RATE: 3.2% V 3.3%E; 3-month low
- (IN) INDIA FEB PMI MANUFACTURING: 51.1 V 51.1 PRIOR
- (AU) AUSTRALIA JAN BUILDING APPROVALS M/M: -7.5% V -3.0%E; Y/Y: -15.5% V -8.5%E
- (AU) AUSTRALIA Q4 CURRENT ACCOUNT BALANCE (A$): -21.1B V -20.0BE; NET EXPORTS OF GDP: 0.0% V 0.3%E
- (AU) AUSTRALIA FEB CORELOGIC RPDATA HOUSE PRICES M/M: 0.5% V 0.9% PRIOR
- (AU) AUSTRALIA FEB AIG MANUFACTURING INDEX: 53.5 V 51.5 PRIOR; 8th straight month of expansion
- (KR) SOUTH KOREA FEB TRADE BALANCE: $7.4B V $6.0BE
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.3%, S&P/ASX +0.9%, Kospi -0.2%, Shanghai Composite +0.1%, Hang Seng +0.5%, Mar S&P500 -0.1% at 1,928
***Commodities/Fixed Income***
- Apr gold +0.9% at $1,246/oz, Apr crude oil +0.4% at $33.88/brl, May copper -1.2% at $2.10/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 14.9 tonnes to 777.3 tonnes; Highest since Sept 2014
- JGB: (JP) Japan MoF sells ¥2.19T in 10-yr 0.1% JGBs; Avg yield: -0.024% (first ever negative yield for 10-yr auction) v 0.078% prior; bid to cover: 3.20x v 3.14x prior
- (CN) PBOC SETS YUAN MID POINT AT 6.5385 V 6.5452 PRIOR; First stronger setting in 6 sessions
- (CN) PBoC won't conduct open market operations (OMO) in today's session due to ample liquidity / weak demand
***Market Focal Points/FX***
- Asian equity markets are mixed and volatility is surprisingly light given some high-profile economic events and datapoints over the past 24 hours. Overnight, PBoC announced another 50bp RRR cut - the first since Oct 2015 - to 17%. Chinese central bank also shifted on FX settings and open market operations, while Beijing unveiled more disappointing PMI figures. Australian central bank decision was as anticipated, with a slightly less dovish outlook at first glance. Finally Japan jobless rate ticked lower, while manufacturing sector notched an 8-month low PMI. In FX majors, USD/JPY plunged to 112.10 at the start of the day but regained lost ground, AUD/USD rose about 30pips on RBA before consolidating gains, and NZD/USD was in a 30pip range around $0.66 handle ahead of tomorrow's GDT auction.
China:
- Economists with ICBC viewed the overnight RRR cut as a long-overdue necessity to counter ongoing capital flows, as investors seem to have shrugged this injection of liquidity. Note that PBoC also skipped today's open market operations for the first time in weeks, citing a glut in liquidity and low demand for its recently favored 7-day reverse repo instrument. Interestingly, after 5 days of weaker setting, PBoC also set its currency firmer, presumably to solidify FX policy as a two-way trade.
- Official PMIs hit 4-year low for both manufacturing and services. Key manufacturing components - New Export Orders and Input prices measuring external demand and inflation trends - were surprisingly resilient. Orders rose to 47.4 from 46.9 and input prices bounced to 50.2 v 45.1 m/m. Private Caixin survey was in contraction for the 12th straight month and also fell to a 5-month low. Researchers said firms recorded lower headcounts with downsizing policies as part of cost-cutting initiatives, along with the non-replacement of voluntary leavers. Here, cost deflation also slowed to the weakest level in 18 months.
- PBoC Dep Gov Chen remarked that Yuan is basically stable against the basket of currencies, with no reason for continued depreciation. Chen added weaker CNY has had no impact on exporters, estimating January survey-based unemployment just above 5%.
Australia:
- RBA left rates on hold as forecast by unanimous consensus of analysts, although the statement was somewhat more neutral than anticipated given the recent uptick in unemployment and reduction in growth forecasts. RBA mainly pasted last month's statement with a notable exception being a warning that "low inflation would provide scope" for easier policy - RBA previously said "may" provide.
- Ahead of tomorrow's Q4 GDP data, Australia current account was weaker than expected, prompting a slight revision in consensus for quarterly growth to the downside.
Japan:
- Despite comments from Fin Min Aso to the contrary, PM Abe may announce that the govt is creating a panel to consider an extra stimulus budget for FY16/17 as soon as today.
- Japan PMI data - previously more impressive than the faltering manufacturing figures from China - have continued to deteriorate to reach an 8-month low. After today's release, Markit economist said both consumer and intermediate goods producers indicated softer rates of expansion, with the first contraction in new orders in 8 months.
- Negative rates have now bled over to Japan's benchmark 10-year JGB auction, where the avg yield has fallen below zero for the first time on record.
***Equities***
US equities / ADRs:
- HTZ: Reports Q4 $0.05 adj v $0.05e, R$2.41B v $2.52Be; +1.8% afterhours
- WDAY: Reports Q4 -$0.01 v -$0.04e, R$323.4M v $319Me; +0.6% afterhours
- CROX: Reports Q4 -$1.01 (gaap) v -$0.35e, R$208.7M v $203Me; -1.9% afterhours
- MRO: Announces Public Offering of 135 shares of Common Stock (20% of shares outstanding); -2.6% afterhours
- DPLO: Reports Q4 $0.21 v $0.21e, R$987M v $978Me; -21.8% afterhours
Notable movers by sector:
- Consumer discretionary: Park24 Co 4666.JP +2.1% (Q1 result)
- Financials: Cathay Financial 2882.TW -0.7% (H1 result); China Life -3.7% (to purchase shares of CGB)
- Technology: Hynix Semiconductor 0000660.KR -2.6% (expects to build new chip plant)
- Materials: Fortescue Metals Group FMG.AU +6.4% (to appeal decision on rail access); NEC Corp 6701.JP -11.5% (guidance)