Asian Market Update: Markets recover as China policymakers talk up coordinated response; Yen falls on pressure for more BOJ easing from PM Abe advisor
***Economic Data***
- (AU) AUSTRALIA JAN CONSUMER INFLATION EXPECTATION: 3.6% V 4.0% PRIOR
- (AU) AUSTRALIA NOV HIA NEW HOME SALES M/M: -2.7% V -3.0% PRIOR; 3rd straight decline
- (NZ) NEW ZEALAND JAN ANZ CONSUMER CONFIDENCE INDEX: 121.4 V 118.7 PRIOR; M/M: +2.3% V -3.3% PRIOR
- (NZ) NEW ZEALAND DEC ANZ JOB ADVERTISEMENTS M/M: 1.1% V 2.4% PRIOR; 4th straight increase
- (NZ) New Zealand Dec Manufacturing PMI: 56.7 v 54.9 prior; 1-year high
- (UK) DEC RICS HOUSE PRICE BALANCE: 50% V 50%E; 4-month high
- (BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC TARGET RATE UNCHANGED AT 14.25%; NOT EXPECTED
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.5%, S&P/ASX +0.7%, Kospi +0.4%, Shanghai Composite +0.5%, Hang Seng +0.3%, Mar S&P500 +0.3% at 1,860
***Commodities/Fixed Income***
- Feb gold flat at $1,101/oz, Mar crude oil +0.5% at $28.47/brl, Mar copper flat at $1.98/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.4 tonnes to 660.3 tonnes; highest since Nov 20th
- (US) API Petroleum Inventories: Crude: +4.6M v -3.9M prior; first build in 3 weeks
- (US) US interest rate futures now imply less than 1% chance of 4 FOMC rate hikes in 2016 - FT
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5585 V 6.5578 PRIOR
- (CN) PBOC to inject CNY110B in 7-day reverse repos and CNY290B in 28-day reverse repos (largest injection in 3 years); For the week, net injection of CNY315B v CNY40B in prior week
- USD/JPY: (JP) According to a Nikkei survey, many Japan companies wish to see USD/JPY stabilize in ¥115-125 range - Nikkei
- JGB: (JP) Japan's MoF sells ¥1.09T in 1.0% (1.0% prior) 20-year JGBs; Avg yield: 0.924% (1-year low) v 1.041% prior; bid-to-cover: 3.49x v 3.07x prior
- (JP) Japan investors sold net ¥375B in foreign bonds v bought net ¥324B in prior week; Foreign investors sold net ¥358B in Japan stocks v sold ¥746B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian indices are up modestly, lifted by chatter of bargain-hunting from key technical support levels as well as speculation over a coordinated response from the far east. Overnight, PBoC Vice Gov Chen Yulu mentioned the need for policy coordination to prevent risks amid ongoing reduction of overcapacity and deleveraging. China Securities regulator CSRC official also stated that Beijing will not allow the domestic economy to slow too much. And while PBoC chief economist Ma Jun backed up his remarks overnight with suggestion that overuse of RRR cut may be harmful for FX rate, Chinese central bank injected a multi-year high amount of liquidity through reverse repos in its open market operations. At the time of writing in the afternoon part of the Asia session, the risk-on rally has been dented by comments from China state economist forecasting GDP growth to slow to 6.5%.
- Volatility in Japan centered around commentary from an unnamed PB Abe advisor urging the central bank to announce more QE at its upcoming meeting later this month. Abe's aide noted conditions for more QE are in place, the risks of further Yen strength cannot be underestimated, and that the BOJ risks a credibility problem if it continues to push back expectations for reaching inflation target. Later in the day, BOJ Gov Kuroda merely reiterated that the timing of reaching 2% CPI target is determined by oil prices, though economic fundamentals remain firm. USD/JPY hit session highs above 117.40 - up nearly 50 pips from the lows - on PM Abe's aide comments.
- Other USD majors are also volatile - AUD/USD rose 50pips above 0.6950 and has since erased most of those gains while NZD/USD was up 40pips above 0.6470. Crude oil prices slid as low as $28.25/brl in the wake of a large build in API petroleum inventories. S&P e-mini traded up as much as 1% to 1,874, but gains are also coming undone in afternoon hours.
- High-profile rate decision from Brazil Central Bank saw a hold against expected 50bp rate hike due to rising inflation and falling exchange rate. The decision was not unanimous - 2 out of 8 members voted for a hike - but the statement erred on the side of caution noting "increased domestic and particularly external uncertainties."
***Equities***
US equities / ADRs:
- XLNX: Reports Q3 $0.49 v $0.49e, R$566M v $555Me; +8.1% afterhours
- FEYE: Guides Q4 EPS loss in line with prior guidance (-$0.38 to -$0.36 v -$0.37e), R$184-185M v $188Me; Acquires iSIGHT Partners for $200M in cash; +6.5% afterhours
- KMI: CFO: expect more impairments ahead if markets continue to decline - earnings call comments; +3.7% afterhours
- OGXI: Announces Update on Phase 2 Spruce Trial in Previously Untreated Metastatic Non-Small Cell Lung Cancer; -32.6% afterhours
Notable movers by sector:
- Consumer discretionary: Boyaa Interactive International 434.HK -3.9% (guidance)
- Financials: China CITIC Bank 998.HK +0.7% (FY15 result); Ping An Bank Co 000001.CN +1.3% (FY15 guidance)
- Industrials: Guangzhou Baiyun International Airport Co 600004.CN +0.4% (guidance); Aurizon Holdings AZJ.AU +1.1% (Q2 result); Broadspectrum BRS.AU -1.2% (raises guidance)
- Technology: Sharp Corp 6753.JP +2.5%, Hon Hai 2317.TW +0.8% (Hon Hai said to have offered to take over Sharp)
- Materials: Yunnan Tin Co Ltd 000960.CN +3.5% (Chinese tin smelters agree to cut production); Kingsgate KCN.AU -7.3% (Q1 result); Drillsearch Energy DLS.AU -0.7% (revises FY16 guidance); South32 S32.AU -0.3% (Q2 result); Independence Group IGO.AU +4.0% (cuts FY16 capex); OZ Minerals OZL.AU +8.3% (Q4 result); Iluka Resources ILU.AU +0.6% (Q4 result)
- Energy: Kunlun Energy Co 135.HK +2.5% (guidance); China Coal Energy 1898.HK +0.4% (Dec result); Woodside Petroleum WPL.AU -1.4% (Q4 result); Yanzhou Coal Mining Co 1171.HK +0.3% (Q4 result)
- Utilities: Yaskawa Electric 6506.JP -6.1% (9-month result)