Asia Mid-Session Market Update: BOJ scraps monetary base framework in favor of "
***BOJ Decision Observations***
- BOJ policy review acknowledges its policy has not produced inflation rate recovery to 2% target, in part due to low energy prices; Maintains Japan is no longer in deflation.
- Discontinues monetary base expansion target framework in favor of "QQE with Yield Control" whereby short-term rate for IOER maintained at -0.1% and long-term targets 10-yr around zero through JGB purchases.
- Maintains ETFs and J-REITS purchases, includes Topix index ETF buying.
- Commits to make further policy adjustments with view of maintaining momentum toward achieving 2% inflation target.
- Would consider additional easing tools - cutting interest rates further, expanding asset purchases, and accelerating monetary base expansion.
- Reiterates all economic views; Overall assessment is "Japan continued moderate recovery trend."
***Top US session headlines***
- (US) AUG HOUSING STARTS: 1.14M V 1.19ME; BUILDING PERMITS: 1.14M V 1.17ME; most pronounced dip in Southern housing market
- OPEC Sec Gen Barkindo reportedly confident an accord will be made at Algiers meeting on Sept 28th
- (RU) Russian govt official: Russia supports the idea of a 1-year agreement on oil stabilization - Russia press
- (CA) Bank of Canada (BOC) Gov Poloz: need stimulative monetary policy to counteract strong headwinds in economy
***US markets on close: Dow +0.1%, S&P500 flat, Nasdaq +0.1%***
- Best Sector in S&P500: Healthcare (Biotech)
- Worst Sector in S&P500: Basic Materials
- Biggest gainers: RCL +4.5%, GILD +3.5%, SWN +2.8%, HOT +2.4%, MAR +2.3%
- Biggest losers: URI -4.6%, TGNA -3.8%, CHK -3.7%, LEN -3.5%, AYI -3.5%
***VIX 15.92 (+0.39pts); Treasuries: 2-yr 0.78% (flat), 10-yr 1.69% (-1bp), 30-yr 2.43% (-1bp)***
***US movers afterhours***
- ADMS +7.7%; EASE LID 3, a Pivotal Trial of ADS-5102 for treatment of Levodopa-induced Dyskinesia (LID) in Parkinsons Disease patients meets primary endpoint
- ADBE +5.1%; Reports Q3 $0.75 v $0.72e, R$1.46B v $1.45Be; Guides Q4 $0.83-0.89 v $0.77e, R$1.55-1.60B v $1.58Be; Confirms raising FY16 to EPS $2.94-3.00 v $2.85e, Rev $5.80-5.85B v $5.81Be
- CPRT +4.1%: Reports Q4 $0.59 v $0.54e, R$333M v $318Me
- NUS +3.6%; Reaches resolution with SEC, agrees to pay $766K; adjusts Q3 Rev 'to the high end or slightly above' $560-580M v $578Me (prior $560-680M) - filing
- FDX +3.0%; Reports Q1 $2.90 v $2.79e, R$14.7B v $14.4Be; Raises FY17 $11.85-12.35 (Excluding TNT Express integration, Outlook restructuring program costs and TNT Express intangible asset amortization) v $11.89e (prior $11.75-12.25)
- KBH +2.5%; Reports Q3 $0.42 v $0.39e, R$913.3M v $954Me
- MSFT +1.1%; Raises dividend 8% to $0.39 from $0.36 (indicated yield 2.74%); authorizes up to $40B in share repurchases (9% of market cap)
- MIRN -27.1%; Halts Phase 1 Clinical Study of MRX34
- MSTX -83.4%; Reports top-line results from Phase 3 study in sickle cell disease; study did not meet primary endpoint
***Equity Futures (01:0ET): S&P e-mini +0.4%, Dax +0.4% FTSE100 +0.5%***
***FX / Commodities (01:0ET): ***
- EUR falls 30pips to 1.1125; USD/JPY rises about 100pips to 102.70; AUD 0.7540-0.7570, NZD 0.7285-0.7315
- Gold -0.3% at 1315; Oil +1.8% at $44.82/brl; Copper -0.4% at $2.18/lb
**** Asian Equity Markets (01:0ET) ****
- Nikkei +1.3%, Hang Seng +0.6%, ASX +0.7%, Shanghai flat, Kospi +0.2%
***Key economic data: ***
- (JP) JAPAN AUG TRADE BALANCE: -¥18.7B (3-month low) V +¥191BE; ADJ TRADE BALANCE: ¥340B (4-month high) V ¥494BE; Exports Y/Y: -9.6% v -4.7%e; 11th consecutive decline; Imports Y/Y: -17.3% v -16.6%e; 20th consecutive decline
- (AU) AUSTRALIA AUG SKILLED VACANCIES M/M: -0.4% V -0.3% PRIOR
- (AU) AUSTRALIA AUG WESTPAC LEADING INDEX M/M: 0.0% V +0.1% PRIOR
***Fixed Income / Speakers / Press / Key Themes***
China:
- (CN) China Banking Regulatory Commission (CBRC) President Fulin: Needs to stress test real estate loans - Chinese press
- (CN) PBOC to inject CNY120B in 7-day reverse repos and CNY80B in 28-day reverse repos
- (CN) China Premier Li: World trade is still sluggish 8-yrs after crisis; China is keeping stable growth amid weak global recovery; To restructure economy to sustain growth; To raise service portion in GDP by 4-5ppts per year.
Japan:
- (JP) Prices of Japan's commercial land has risen for the first time in 9 years; Avg increase was 0.005% as of July 1st; Residential prices were down 0.8% - Nikkei citing Ministry of Land, Infrastructure, Transport and Tourism
- JGB: (JP) Japan's top 3 megabanks traded about ¥1.7T in JGBs in August - record low and first time below ¥2T - as BOJ's QE program weighs on liquidity in the market - Nikkei
Australia / New Zealand:
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2027 bonds; avg yield 2.1936%; bid-to-cover 3.11x
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +1.7% v +7.7% prior; 4th straight increase (**Below market forecast of +5-10%)
- (NZ) Fonterra: Raises FY16/17 milk price payout to NZ$5.25/kg from NZ$4.75/kg
***Asia movers***
- Consumer discretionary: Esprit Holdings 330.HK +3.3% (annual result); Kathmandu Holdings KMD.AU +0.4% (FY16 result)
- Consumer staples: Chaoda Modern Agriculture Holdings 682.HK -4.4% (profit warning)
- Industrials: Takata Corp 7312.JP -6.7% (receives 5 bids); Hanjin Shipping Co 117930.KR -17.9% (Korean Air considers aid options); Aurizon Holdings AZJ.AU +2.4% (Goldman Sachs raised to Neutral); Great Wall Motor 2333.HK -4.8% (Credit Suisse cuts to Neutral); Boral BLD.AU +1.7% (Macquarie raised to Outperform); Nufarm NUF.AU +5.4% (FY16 result)
- Technology: Sharp Corp 6753.JP +5.6% (said to raise TV sales target)
- Materials: Kobelco Eco-Solutions Co.6299.JP +1.8% (raises guidance); Adelaide Brighton ABC.AU +1.3% (Macquarie raised to Outperform)
- Energy: Infigen Energy IFN.AU +3.4% (added to ASX 200)
- Healthcare: Sumitomo Dainippon Pharma 4506.JP +2.7% (dasotraline meets endpoint); Bionomics BNO.AU +45.3% (Phase 2 trial meets primary endpoints)
- Telecom: TPG Telecom TPM.AU -6.4% (Morgans cuts to Reduce)