Asian Market Update: Equities retreat as China resumes weakening Yuan
***Economic Data***
- (JP) JAPAN DEC MACHINE ORDERS M/M: 4.2% V 4.4%E; Y/Y: -3.6% (first decline in 3 months, biggest decline in 13 months) V -2.8%E; Sees Q1 Machinery Orders +8.6%
- (AU) AUSTRALIA JAN WESTPAC LEADING INDEX M/M: 0.0% V -0.3% PRIOR
- (KR) SOUTH KOREA JAN UNEMPLOYMENT RATE: 3.5% V 3.4%E
- (SG) SINGAPORE JAN ELECTRONIC EXPORTS Y/Y: -0.6% V -1.7%E; NON-OIL DOMESTIC EXPORTS Y/Y: 0.7% V 2.9%E
- (US) DEC TOTAL NET TIC FLOWS: -$29.4B V $31.4B PRIOR; TOTAL NET TIC FLOWS: -$114.0B V -$3.2B PRIOR; China Total holding of US Treasuries: $1.246T (10-month low) v $1.264T prior
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -1.5%, S&P/ASX -0.6%, Kospi -0.2%, Shanghai Composite -0.2%, Hang Seng -0.5%, Mar S&P500 -0.5% at 1,883
***Commodities/Fixed Income***
- Apr gold +0.1% at $1,209/oz, Mar crude oil flat at $29.07/brl, Mar copper -0.5% at $2.04/lb
- (CN) China MoF sells 1-yr bonds at 2.22% v 2.28%e; 5-yr bonds at 2.6246% v 2.67%e
- (CN) PBOC to inject CNY10B in 7-day reverse repos
- (CN) PBOC SETS YUAN MID POINT AT 6.5237 V 6.5130 PRIOR; 2nd straight weaker setting relative to close
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr, ¥260B in 10-25yr JGBs and ¥180B in JGBs with maturity over 25-yr
- (AU) Australia MoF (AOFM) sells A$900M in 4.75% 2020 bonds; avg yield: 2.590%; bid-to-cover: 2.21x
***Market Focal Points/FX***
- After two up days, the sellers are back in control once again, boosting safe-haven Japanese Yen, Gold, and Treasuries at the expense of stocks, crude oil, and commodity FX. The rally was already tenuous after the underwhelming deal between top oil producers to merely keep output flat relative to January level and Iran refusing to reduce its ramp-up, sending WTI contract below $29/brl in the US hours. In the Asia session, selling resurfaced after the PBoC cuts its Yuan fix for the 2nd straight day in what was also the biggest decline in the fix since Jan 7th. AUD/USD was down 30pips as low as 0.7085, NZD/USD down 30pips near 0.6550, and USD/JPY down some 80pips from session highs below 113.70, while Apr Gold rallied over $10 to $1,210.
- Among notable China speakers, NDRC spokesperson Zhao said China can keep Yuan exchange rate and employment stable despite downward economic pressure. Zhao added China economic fundamentals have not changed, even as the govt looks to find jobs for those lost in steel and coal industries. Ahead of tomorrow's inflation data, NDRC official said the figures may be impacted by the rising vegetable prices. China MOFCOM spokesperson Shen noted China was not experiencing capital flight and that there was no basis for continued Yuan devaluation, just as state economist Li warned that more reports of Yuan depreciation would likely accelerate outflows in 2016.
- Over in Japan, LDP party official Yamamoto reiterated his call for more policy measures in response to market volatility, calling for coordination with US and China officials in a trilateral summit to be held as soon as possible. PM Abe's advisor Honda noted that while it was possible for the BOJ to deepen its policy easing, he would also recommend a fiscal stimulus package of around ¥5T and also the postponement of the 2nd round of sales tax increase until April 2019.
- Boston Fed President Rosengren - a voter on the FOMC this year - echoed sentiment from Fed Chair Yellen last week with suggestion that policy tightening could be restrained "given problems overseas and financial market volatility." He added that a "more gradual approach is an appropriate response to headwinds from abroad" to prevent the risk of global weakness to be transmitted to the US.
***Equities***
US equities / ADRs:
- FLXN: Reports Primary Endpoint Met in Pivotal Phase 3 Trial of Zilretta in Knee Osteoarthritis; +28.4% afterhours
- FOSL: Reports Q4 $1.46 v $1.29e, R$992M v $919Me; +15.9% afterhours
- PBPB: Reports Q4 $0.08 v $0.06e, R$95.1M v $94.3Me; +11.1% afterhours
- CPB: Reports prelim Q2 $0.87 v $0.72e, Rev $2.20B v $2.21Be; +3.9% afterhours
- CXO: To be added to S&P500 after the close on Fri, Feb 19; +3.8% afterhours
- ESRX: Reports Q4 $1.56 v $1.55e, R$26.2B v $26.6Be -0.2% afterhours
- TEX: Reports Q4 $0.50 adj v $0.52e, R$1.58B v $1.44Be; -0.7% afterhours
- CAKE: Reports Q4 $0.54 v $0.52e, R$526.8M v $529Me; -3.2% afterhours
- ACHC: Reports Q4 $0.59 v $0.60e, R$495.3M v $490Me; -5.4% afterhours
- RAX: Reports Q4 $0.31 v $0.23e, R$522.8M v $522Me; -6.6% afterhours
- DVN: Reports Q4 -$11.12 (incl asset impairments) v $0.74e, R$2.89B v $3.82Be; cuts dividend 75% to $0.06 (1.1% yield); -6.6% afterhours
- CERN: Reports Q4 $0.61 v $0.57e, R$1.18B v $1.18Be; Guides Q1 $0.52-0.54 v $0.55e, R$1.15-1.20B v $1.19Be; -14.1% afterhours
Notable movers by sector:
- Consumer discretionary: Yuzhou Properties Co 1628.HK +0.6% (Jan result); China Eastern Airlines 670.HK -1.1% (signs agreement); Coca-Cola Amatil CCL.AU +3.4% (prelim FY15 result); Domino's Pizza Enterprises DMP.AU +4.8% (H1 result)
- Financials: Insurance Australia IAG.AU -1.5% (H1 result); ANZ Bank ANZ.AU -0.1% (Q1 result)
- Industrials: Tangshan Port 601000.CN -2.9% (asset restructuring); Zoomlion Heavy Industry Science and Technology Co 1157.HK -2.9% (details on Terex deal); Shenji Group Kunming Machine Tool Co 300.HK -8.7% (terminates share transfer); Kubota Corp 6326.JP +3.1% (FY15 result)
- Technology: Tencent 700.HK +0.4% (Wechat to charge transactoin fee)
- Materials: Drillsearch Energy DLS.AU -0.8% (guidance); Arrium ARI.AU -22% (H1 result)
- Energy: Woodside Petroleum WPL.AU -6.8% (FY15 result)
- Healthcare: Sonic Healthcare SHL.AU +3.8% (H1 result)