Asia Mid-Session Market Update: USD extends post-Trump conference decline; S&P urges more governance in China bond market; Brazil cuts more than expected
***US Session Highlights***
- (US) MBA MORTGAGE APPLICATIONS W/E JAN 6TH: 5.8% V 0.1% PRIOR
- (US) Jan IBD/TIPP Economic Optimism: 55.6 v 54.8 prior
- (US) DOE CRUDE: +4.1M V +0.5ME; GASOLINE: +5.0M V +1.5ME; DISTILLATE: +8.4M V +0.5ME; US production jumped 176K barrels on the week to 8.95M bpd, highest since April 2016
- British Pound falls to lowest levels since Oct Brexit
- President-elect Trump addresses Russian intelligence report, drug pricing, defense spending, bringing jobs back to US, repealing Obama care and steps taken to separate from business dealings in first press conf since election
***US markets on close: Dow +0.5%, S&P500 +0.3%, Nasdaq +0.2%***
- Best Sector in S&P500: Materials
- Worst Sector in S&P500: Healthcare
- Biggest gainers: FSLR +4.8%, CF +4.5%, RIG +4.0%, AES +3.9%, ALB +3.8%
- Biggest losers: ENDP -8.5%, PRGO -6.9%, MNK -6.2%, BMY -5.3%, ALXN -4.9%
- At the close: VIX 11.3 (-0.2pts); Treasuries: 2-yr 1.17% (-1bps), 10-yr 2.37% (-1bps), 30-yr 2.96% (-1bps)
***US movers afterhours***
- HSGX: Announces publication of MRI data from NeoCart phase 1 and phase 2 clinical trials in the American Journal of Sports MedicineHistogenics announces the online publication in the January 2017 issue of the American Journal of Sports Medicine; +44.7% afterhours
- AAOI: Reports prelim Q4 $0.77-0.82 v $0.50e, R$84.5-84.8M v $77.4e (prior $0.46-0.51, $75-$79M); +19.7% afterhours
- KBH: Reports Q4 $0.40 v $0.37e, R$1.19B v $1.16Be; +2.4% afterhours
- ELY: Acquires OGIO International, Inc. for $75.5M all cash transaction' +1.4% afterhours
***Politics***
- (HK) Hong Kong Chief Sec Lam resigns - local media
- (US) Pharma lobby spokesperson: committed to working with Pres-elect Trump and Congress to boost US competitiveness and protect jobs - press
***Asia Key economic data:***
- (BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 13.00%; MORE THAN EXPECTED (Largest cut since Apr 2012)
- (JP) JAPAN NOV CURRENT ACCOUNT BALANCE: ¥1.42T V ¥1.46TE; ADJUSTED CURRENT ACCOUNT: ¥1.80T V ¥1.87TE; TRADE BALANCE: ¥313.4B V ¥254BE
- (JP) JAPAN DEC BANK LENDING (INC TRUSTS) Y/Y: 2.6% V 2.4% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.6% V 2.5%E
- (NZ) NEW ZEALAND DEC ANZ COMMODITY PRICE M/M: 0.7% v 3.2% PRIOR
- (KR) South Korea Nov Bank Lending to Households (KRW): 708.0T v 704.5T prior
***Asia Session Notable Observations, Speakers and Press***
- Asian equity markets are mixed, but the sentiment may be turning more bearish as evidenced by a 7pt slide in S&P emini futures and a rally in JPY, leading to outsized declines in Tokyo stocks. Shanghai Composite is still marginally positive, though S&P/ASX200 is slightly lower.
- In FX majors, USD/JPY is down some 100pips from the highs below ¥114.50, GBP/JPY is at 6-week lows below ¥140, and EUR/JPY down 80pips below ¥121.40. USD has been on the defensive in general amid disappointment that President-elect Trump's news conference had more to do with deflecting damaging press speculation related to his history with Russia rather than offering more detail about his fiscal priorities. Gold tracked USD weakness to the upside, approaching $1,200/oz level.
- Brazil central Bank cut rates by a wider than expected 75bps (50bp expected) to 13.00% - the largest cut since 2012. BCB also lowered its 2017 and 2018 inflation projections as it signalled an intensification of monetary easing to address disinflation, weak economic growth, and expectations of more uncertainty in global economy.
- Outside that rate decision, economic data were limited to Japan showing slightly narrower Current Account surplus and bank lending topping expectations/prior growth.
- S&P reflected on the turbulence in the China bond market, expressing the need for better governance to prevent "inconspicuous trading practices and aggressive risk-taking." Also of note in China, PBoC was set modestly firmer, NDRC chairman reiterated economy is stable but facing increasing risks, and top developer Vanke was halted on speculation a shareholder may disclose an amended stake.
China:
- (CN) China to raise fuel prices: gasoline price by CNY70/ton; diesel prices by CNY70/ton; effective tomorrow - financial press citing ICIS
- (CN) S&P: Ineffective risk governance may impede China bond market
- (CN) China Commerce Ministry (MOFCOM) spokesman Sun Jiwen: China faces big trade downward pressure this year
- (CN) US-China Business Council: Trade with China supports about 2.6M US jobs, including jobs created directly in the US - Chinese press
- (CN) China NDRC Head: Economy is generally stable, continuing momentum from H2 2016
***Asian Equity Indices/Futures (23:00ET)***
- Nikkei -1.2%, Hang Seng -0.3%, Shanghai Composite +0.2%, ASX200 -0.2%, Kospi +0.1%
- Equity Futures: S&P500 -0.2%; Nasdaq -0.2%, Dax -0.2%, FTSE100 -0.1%
***FX ranges/Commodities/Fixed Income (23:00ET)***
- EUR 1.0570-1.0610; JPY 114.50-115.50; AUD 0.7430-0.7465; NZD 0.7045-0.7080
- Feb Gold +0.5% at 1,197/oz; Feb Crude Oil -0.4% at $52.18/brl; Mar Copper flat at $2.60/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 10,524 tonnes from 10,612 tonnes prior; lowest since July 5th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9141 V 6.9235 PRIOR; strongest Yuan setting since Jan 6th
- (CN) PBOC to inject combined CNY110B in 7-day and 28-day reverse repos v CNY120B prior
- (JP) BOJ offers to buy ¥410B in 5-10yr JGBs, ¥190B in 10-25yr JGBs and ¥110B in JGBs with maturity over 25-yr
***Asia equities / Notables / movers by sector***
- Consumer discretionary: Nexon Co 3659.JP -1.9% (Credit Suisse cuts to neutral); Kewpie Corp.2809.JP +6.0% (annual result); FamilyMart Uny Holdings 8028.JP -5.7% (Mizuho cuts rating)
- Consumer staples: Bellamy's Australia BAL.AU -16.8% (analysts expect turnaround may take time)
- Financials: Central China Real Estate 832.HK +1.9%, Everbright Securities Co 6178.HK -0.7%, China Overseas 688.HK +1.6% (Dec result); Steadfast SDF.AU +6.1% (Credit Suisse raises rating); China South City Holdings 1668.HK +5.5% (shareholder to sell stake)
- Industrials: Hanjin Shipping Co 117930.KR +25.5% (trading resumes); Hyundai Glovis Co 086280.KR +4.5% (Nomura raises rating)
- Materials: BC Iron BCI.AU +20.0% (raises guidance); Energy Resources of Australia ERA.AU +16.2% (Q4 result); Medusa Mining MML.AU -10.4% (cuts guidance)
- Energy: Tonengeneral Sekiyu 5012.JP +2.3% (Daiwa raised to outperform); Cosmo Energy Holdings Co 5021.JP +6.4% (Daiwa raises rating); JX Holdings 5020.JP +1.9% (Daiwa raises rating)
- Healthcare: Blackmores BKL.AU +3.2% (positive on China sales); Takeda Pharmaceutical Co 4502.JP -2.6% (S&P revised outlook to Watch Negative)