Asian Market Update: Alcoa kicks off earnings season on the wrong foot; Japan bank lending growth slows to 2 1/2 year low in NIRP environment
***Economic Data***
- (JP) JAPAN MAR BANK LENDING (INCL TRUSTS) Y/Y: 2.0% V 2.2% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.0% V 2.2% PRIOR; Lowest since Oct 2013
- (AU) AUSTRALIA MAR NAB BUSINESS CONFIDENCE: 6 (9-month high) V 3 PRIOR; CONDITIONS: 12 (8-year high) V 8 PRIOR
- (AU) AUSTRALIA Q1 CBA/HIA HOUSE AFFORDABILITY: 80.9 V 78.8 PRIOR
- (AU) AUSTRALIA FEB CREDIT CARD BALANCES: A$51.9B v A$50.9B PRIOR; CREDIT CARD PURCHASES: A$24.8B v A$21.9B PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 112.0 v 113.4 prior
- (NZ) New Zealand REINZ MAR median home price +4.2% y/y v +4.7% prior; Home sales +8.2% y/y; Home sales 9.5K v 7.3K prior
- (UK) MAR BRC LFL SALES Y/Y: -0.7% V 1.4%E; first decline in 4 months
- (KR) SOUTH KOREA MAR EXPORT PRICE INDEX M/M: -1.5% v 0.8% PRIOR; Y/Y: -4.5% v -2.1% PRIOR
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +1.2%, S&P/ASX +0.8%, Kospi +0.3%, Shanghai Composite -0.7%, Hang Seng +0.2%, Jun S&P500 flat at 2,035
***Commodities/Fixed Income***
- Apr gold -0.1% at $1,257/oz, May crude oil -0.3% at $40.25/brl, May copper +0.4% at $2.09/lb
- (SA) Saudi Arabia said to keep its full supply of oil to Asia in May - financial press
- JGB: (JP) Japan MoF sells ¥400B in 0.1% 10-year CPI-linked Bonds; Bid-to-cover ratio: 2.84x v 2.47x prior
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.4616 V 6.4649 PRIOR; strongest Yuan setting since Apr 1st; 2nd straight firmer setting
- (CN) PBOC to inject CNY60B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$100M in 1% 2018 Indexed Bonds; Avg yield 0.353%; bid-to-cover: 5.41x
***Market Focal Points/FX***
- Asian equity markets are mixed, with Shanghai Composite posting a modest decline while Nikkei225 leads the key indices higher. USD/JPY is helping the recovery in Tokyo, as the pair traded up about 30pips back above 108.20 from the get-go in Japan trading session. Other USD majors are also showing some risk-on sentiment prevailing, particularly AUD/USD and its rise of 50pips above 0.7640 after an 8-year high in NAB business conditions data. NZD/USD was up over 40pips above 0.6890. Commodities were mixed, with slightly lower crude prices and gold consolidating US session gains.
- Upbeat sentiment in Asia is particularly encouraging in light of disappointing Alcoa results that launched Q1 reporting season. While ex-items earnings beat by 5c, sales were a miss. The company also added 1K to anticipated job cuts, lowered its FY16 aluminum demand growth outlook to 5% from 6%, and revised its 3-year target segment revenue to $6.0-6.2B from $7B prior forecast. Only automotive segment outlook was left unchanged, as aerospace and truck markets all saw a slight downward revision in growth forecasts. Shares of Alcoa were down over 4% afterhours.
- Negative interest rate policy (NIRP) at the Bank of Japan continued to backfire, with the latest Japan bank lending growth falling to 2 1/2 year lows. This was also the 2nd straight month of slowing lending activity. Fin Min Aso was out with an alert on Yen volatility once again, warning the govt will take measures against speculative FX moves. Although Abenomics are under attack from investors, political climate in Japan does not suggest a viable alternative, as the latest Asahi survey showed that ruling LDP still has 40% of popular support vs 15% for the opposition DPJ party.
- Some of the weakness in China stocks has been attributed to speculation that the latest inflation figures do not warrant continued policy easing by the PBoC, however troubling signs on the mainland were seen in other familiar sectors of the economy. Overnight, NDRC reported that Jan-Mar rail freight volume fell by over 9% y/y and also unveiled a negative list banning investment in steel and coal sectors.
- Australia printed its best NAB Business Conditions mark since the end of the financial crisis, as NAB chief economist noted that "recovery in the non-mining sectors of the economy have in fact stepped up a gear this month... Tighter capacity, good profitability and improving confidence levels all raise the prospects for a ramping-up of business spending and employment ahead." NAB also forecast RBA to stand pat for the rest of the year with today's report.
- Brazil Lower House Congressional Committee voted by a margin of 38 to 27 in favor of impeaching Pres Rousseff, as the process now shifts to lower house of Congress vote on Sunday. ADRs of Brazil related names traded in Asia have reportedly rallied on these developments, with investors consistently cheering what appears to be an impending conclusion to the Rousseff administration saga.
***Equities***
US equities / ADRs:
- AA: Reports Q1 $0.07 adj v $0.02e, R$4.95B v $5.27Be; Considering reduction of another 1K jobs; -4.5% afterhours
- JNPR: JNPR: Reports prelim Q1 $0.35-0.37 v $0.45e, $1.09-1.10B v $1.18Be; -6.2% afterhours
Notable movers by sector:
- Consumer discretionary: Yoshinoya Holdings Co. 9861.JP +4.4% (guidance); ABC-MART 2670.JP +0.6% (FY16 result)
- Financials: Everbright Securities Co 601788.CN -1.8% (March result); Haitong Securities 6837.HK -0.6% (Mar result); CITIC Securities 6030.HK -0.2% (Mar result); Guosen Securities 002736.CN -1.7% (Mar result)
- Technology: Acer Inc 2353.TW +0.4% (Mar result); LG Electronics Inc 066570.KR -1.9% (prelim Q1 result)
- Materials: Xiamen Tungsten 600549.CN +1.4% (Q1 result); Henan Tongli Cement Co 000885.CN -2.3% (Q1 guidance); Inner Mongolia Junzheng Energy & Chemical Industry Co 601216.CN +4.7% (FY15 result)
- Healthcare: Blackmores Limited BKL.AU -4.1% (potential impact on China cross border regulation changes)