Asia Mid-Session Market Update: Yuan fix set at lowest level since mid-2008 as China authorities conduct stress tests around accelerating outflows this year
***US Session Highlights***
- (US) DEC ISM MANUFACTURING: 54.7 V 53.7E (highest since Dec 2014); PRICES PAID: 65.5 V 55.5E (highest since June 2011); new orders index: 60.2 v 53.0 prior (highest since Nov 2014)
- (US) NOV CONSTRUCTION SPENDING M/M: 0.9% V 0.5%E (to $1.18T, highest in 10 years)
- GM: President-elect Trump tweets: General Motors is sending Mexican-made model of Chevy Cruze to U.S. car dealers-tax free across border. Make in U.S.A. or pay big border tax!
- F: To invest $700M to expand factory in Michigan for electrified and autonomous vehicles and add 700 new jobs; to cancel $1.6B plant in Mexico; to add Electrified F-150, Mustang, Transit by 2020
***US markets on close: Dow +0.6%, S&P500 +0.9%, Nasdaq +0.9%***
- Best Sector in S&P500: Materials
- Worst Sector in S&P500: Utilities
- Biggest gainers: CTL +6.6%, ENDP +6.1%, FTR +5.9%, ABC +5.7%, MPC +5.1%
- Biggest losers: XRX -21.1%, SWN -7.9%, RRC -5.1%, KSU -4.8%, NVDA -4.4%
- At the close: VIX 12.9 (-1.2pts); Treasuries: 2-yr 1.23% (flat), 10-yr 2.45% (flat), 30-yr 3.55% (-2bps)
***US movers afterhours***
- CBAY: Enters agreement with Kowa Pharma to license Gout compound; +56.9% afterhours
- SHAK: Shake Shack to enter SmallCap600 index; +4.5% afterhours
- CC: Chemours to enter MidCap400 Index; +1.5% afterhours
- TSLA: Reports Q4 deliveries 22.2K v 24.5K q/q (Model S deliveries 12.7K v 15.8K q/q, Model X deliveries 9.5K v 8.7K q/q) vs "just over 25K" prior forecast; -2.1% afterhours
- AGRX: AGRX: Announces positive top-line Phase 3 results for contraceptive Twirla; 51% of subjects discontinued prematurely; Pearl Index of 4.80 (**above tolerated FDA threshold); Plans to resubmit its NDA to the FDA in H1 of 2017; -72.2% afterhours
***Asia Key economic data:***
- (IN) INDIA DEC PMI SERVICES: 46.8 V 46.7 PRIOR (2nd straight month of contraction)
- (CN) China Dec Westpac Consumer Confidence Index: 116.6 v 114.9 prior
- (JP) JAPAN DEC FINAL PMI MANUFACTURING: 52.4 V 51.9 PRELIM (confirms 4th consecutive month of expansion; 1-year high)
- (KR) SOUTH KOREA NOV CURRENT ACCOUNT BALANCE: $9.0B V $8.7B PRIOR; GOODS BALANCE: $10.5B V $9.8B PRIOR
- (TH) THAILAND DEC CPI M/M: 0.1% V 0.2%E; Y/Y: 1.1% V 1.0%E; CPI CORE Y/Y: 0.7% V 0.8%E
- (UK) DEC BRC SHOP PRICE INDEX Y/Y: -1.4% V -1.7% PRIOR (44th consecutive month of decline)
***Asia Session Notable Observations, Speakers and Press***
- Asian equity markets are little changed despite the decisive bounce on Wall St, consolidating recent gains; Nikkei225 is an outsized gainer as it finally returns from holiday, thanks to catch-up buying and weaker JPY.
- USD strength remained among the dominant themes in early 2017; USD/JPY tested above ¥118 handle, while EUR/USD broke below $1.0350 - those USD gains were also consolidated in the Asian session; PBoC also carried the trend of softer Yuan with the weakest fix since mid-2008
- China officials increasingly more concerned over one-way Yuan depreciation, with speculation the govt may look to be more proactive in curbing outflows; PBoC adviser has warned that corporates could start to buy FX to repay debt before it is due on expectation of rising exchange rates; China govt was also reported to have conducted stress tests to assess scenarios around the yuan and capital outflows this year.
- BOJ Gov Kuroda reiterated commitment to the central bank's easing program, expressing confidence that more progress on reaching 2% inflation will be made this year; Separately, Japan final Dec Manuf PMI confirmed 4th month of expansion thanks to stronger growth in both production and new orders. All key components saw improvement - input prices increased at the fastest rate since July 2015, new order growth hit a 12-month high, and new export orders expanded for the fourth month running.
China:
- (CN) China State Council said to consider options to support CNY and curb outflows - financial press
- (CN) China National Development and Reform Commission (NDRC) economist Zhang Liqun: Expect a "soft landing" for China economy; Proactive fiscal policy to continue to play a role - China Daily
- (CN) HSBC Asia researcher: China credit engine is running out of gas - financial press
- (CN) PBoC senior adviser Sheng Songcheng: One way depreciation of CNY may lead companies to buy foreign currencies to repay debts before they're due - financial press
Japan:
- (JP) Bank of Japan (BOJ) Gov Kuroda: Economy is at a critical point to end deflation; BOJ to continue easing program
- (JP) Japan Fin Min Aso: Japan govt policies are improving economy
Australia/New Zealand:
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -3.9% v -0.5% prior; 2nd straight decline
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +2.3%, Hang Seng -0.1%, Shanghai Composite +0.4%, ASX200 flat, Kospi flat
- Equity Futures: S&P500 +0.1%; Nasdaq +0.2%, Dax +0.2%, FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0390-1.0425; JPY 117.55-118.20; AUD 0.7215-0.7240; NZD 0.6890-0.6925
- Feb Gold -0.1% at 1,161/oz; Feb Crude Oil +0.8% at $52.74/brl; Mar Copper +0.4% at $2.50/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 8.3 tonnes (1%) to 813.9 tonnes; 26th straight decline; Lowest since Apr 29th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9526 V 6.9498 PRIOR (weakest setting since May 2008)
- (CN) PBOC to inject combined CNY20B in 7-day and 14-day reverse repos v CNY40B prior
- (CN) China MOF sells 1-yr upsized bonds at 2.7105%; bid-to-cover 2.28x; Sells 10-yr upsized bonds at 3.096% v 3.06%e; bid-to-cover 2.14x
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥190B in 10-25yr JGBs and ¥110B in JGBs with maturity over 25-yr
***Asia equities / Notables / movers by sector***
- Financials: Guangzhou R&F Properties 2777.HK -1.0% (Dec result); Ardent Leisure Group AAD.AU -3.9% (cuts costs); Shanghai Pudong Development Bank 600000.CN -0.4% (prelim FY16 result)
- Industrials: Takata Corp 7312.JP +17.5% (settlement report); Hyundai Motor Co 005380.KR +1.3% (guidance); China Railway Group 390.HK +2.4% (Nomura raised to buy)
- Technology: Renesas Electronics Corp 6723.JP +12.2% (created prototype for self-driving car); Sunny Optical Technology Group Co. 2382.HK +7.1% (Morgan Stanley raised to overweight)
- Materials: Alumina AWC.AU -2.1% (to take charges tied to Suriname, Western Australia); St Barbara SBM.AU +2.2% (S&P raises rating)
- Energy: China Shenhua Energy 1088.HK +3.8% (UBS raises to buy)
- Healthcare: China NT Pharma Group Co 1011.HK +13.4% (new drug approval)
- Telecom: TPG Telecom TPM.AU +3.1% (Singapore telco shares falls)