Asia Market Update: Equities across the region lower tracking US Friday session; Broadcom may raise bid for Qualcomm
***Headlines/Economic Data***
General Trend: Energy, Real Estate and Materials companies underperform
- (US) US 10-year Treasury yield higher by 2bps, after rising over 5bps on Friday’s session; yield at 2.86% vs 2.88% for Australia 10-year yield
- Australia 10 year yield rises over 9bps amid gain in Treasury yields and weaker bid to cover at bond auction
- Taiwan sells 10-year bonds at lower bid to cover, despite rise in yield
- Broad dollar strength, rising 1% against the KRW
Japan
-Nikkei 225 opened -1.5%; closed -2.6%
- TOPIX Real Estate Index -3%, Electric Appliances -2.2%, Iron & Steel -2%, Securities -2%
- Mitsubishi UFJ [8306.JP] Declines over 3%: Reported flat 9-month pretax profits
- Softbank [9984.JP]: -2%: Expected to report earnings on Wed, Feb 7th
- Toyota [7203.JP] -1.5%: Expected to report earnings on Tuesday Feb 6th
- Fast Retailing [9983]: Declines over 3%: Jan domestic SSS -2.4% y/y
- Honda [7267.JP] Gains over 1.5% after raising FY outlook
- (JP) PM Abe backed candidate Taketoyo Toguchi said to defeat incumbent Susumi Inamine in the Nago mayoral elections – Japanese Press
- (JP) Japan PM Abe expected to ask the US and South Korea o conduct a planned joint military drill after the Pyeongchang Winter Olympics without scaling it down so as to keep pressuring North Korea to give up its nuclear and missile development – Nikkei
- (JP) Japan cryptocurrency exchange Coincheck, has not been successful tracking stolen funds, were transferred to anonymous e-wallets; not sure when they will resume withdrawals – Nikkei
- (JP) Japan Jan PMI Composite: 52.8 v 52.2 prior; PMI Services: 51.9 v 51.1 prior
-(JP) Japan PM Abe: 2% inflation is a global standard, market environment has greatly changed due to 2% target - Parliament
-(JP) BoJ Iwata: Companies raising prices has not progressed 'far'
-(JP) Bank of Japan (BOJ) Gov Kuroda: No change in approach to QE; maintaining 2% inflation target is very important - Parliament
Korea
-Kospi opened -1.5%
- Continued weakness in chip sector: Samsung Electronics and Hynix drop further after Friday’s over 2% declines
- Samsung: 005930.KR South Korea Appeals Court: Samsung's support of equestrian sport constitutes bribery in the Jay Lee case
- (KR) South Korea Dec Current Account Balance: $4.1B v $7.4B prior; Balance of Goods (BOP): $8.2B v $11.5B prior
- (KR) North Korea military parade on Thursday is not targeted at the Olympics
- (KR) Bank of Korea (BOK) sells KRW720B in 6-month bonds at 1.62%
- (KR) According to Statistics Korea, 2017 online shopping in South Korea reached KRW78T, +19.2% y/y - Korean press
-(KR) North Korea official: North Korea's nuclear capabilities will deter Trump from 'showing off on the Korean peninsula' - UK press
- (KR) South Korea sells KRW1.65T in 3-yr Govt bonds: avg yield 2.275%
China/Hong Kong
-Hang Seng opened -2.7%, Shanghai Composite -1.5%
- Hang Seng Energy Index -3%, Information Tech -2.7%, Materials -2.1%, Consumer Goods -2%, Financials -2%
- (CN) Yuan (CNY) ‘internationalization’ may accelerate in 2018 – China Economic Info Daily
- (CN) Chinese Academy of Social Sciences (CASS): China is likely to leave its benchmark interest rate unchanged in the near future amid reasonable inflation rises and a stable yuan, even with the higher likelihood of US Fed interest rate rise next month - China Daily
- (CN) China Ministry of Commerce (MOFCOM): to launch anti-dumping investigation into US sorghum imports
- (CN) China urges the US to drop its "Cold War mentality" earnestly assume its special disarmament responsibilities, correctly understand China's strategic intentions and objectively view China's national defense and military build-up
- (CN) China PBoC: Skips OMO (8th straight session) v skipped prior; Net drain CNY40B v CNY90B prior
- USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.3019 v 6.2885 PRIOR
- (CN) CHINA JAN PMI SERVICES: 54.7 V 53.5E (highest since May 2012); PMI COMPOSITE: 53.7 V 53.0 PRIOR
-(CN) China securities regulator CSRC said to ask brokerage firms to help 'avert sharp stock crashes' - US financial press
Australia/New Zealand
-ASX 200 opened -1.4%; closed -1.6%
- ASX 200 Resources Index -2.5%, Energy -2.2%, Telecom -1.6%, Financials -1.4%, REIT -1.3%
- (AU) Australia Jan CBA PMI Composite: 54.2 v 55.5 prior; PMI Services: 53.8 v 55.1 prior
- AWE.AU Board recommends bid from Mitsui at A$0.95/share
- WES.AU Guides H1 non-cash impairment for UK and Ireland Bunnings unit of A$795M resulting in underlying pretax loss A$165M; targeting H1 EBITDA of A$33M
- (AU) Australia AOFM buy backs A$400M in bonds due March and Oct 2019; combined bid to cover 2.95x
- (AU) Australia Jan Melbourne Institute Inflation M/M: 0.3% v 0.1% prior; Y/Y: 2.0% v 2.3% prior
- (AU) Australia sells A$400M v A$400M indicated in April 2033 bonds, avg yield 3.0717%, bid to cover 1.87x
- (AU) Australia Jan ANZ Job Advertisements M/M: +6.2% v -2.3% prior
- (NZ) New Zealand Treasury: Sees annual inflation at ~1.0% in Q1; inflation to gradually pick up in 2018 and 2019
Other Asia
- (ID) Indonesia Q4 GDP Q/Q: -1.7% v -1.7%e; Y/Y: 5.2% v 5.1%e; 2017 GDP Y/Y: 5.1% v 5.1%e
- (MY) Malaysia Central Bank (BNM) Gov: Not on a tightening trend, monetary policy is still accommodative
- (TW) Taiwan Central Bank sells NT$25B in 10-yr bonds at 1.069% v 0.981% prior (1.02-1.05%e); bid to cover 1.73x v 2.20x prior
North America
- On Monday’s session, S&P500 Futures trade lower by more than 0.7% in Asia
- (US) Outgoing Fed Chair Yellen: Asset valuations are generally elevated, but don't want to call what we are seeing a bubble - PBS interview (from Feb 3rd)
- (US) Fed's Williams (moderate, voter): need to continue raising interest rates; hikes will keep the economy on track and avoid overheating (from Feb 2nd)
- (US) Fed's Kaplan (moderate, non-voter): Has more conviction in three rate hikes than six months ago; - There's a chance I'm wrong and we may consider more than three hikes; Jobs report today [Friday] was consistent with his thinking (from Feb 2nd)
- (US) Larry Lindsey said to withdraw from being considered for the Fed Vice Chairman position – US financial media
- (US) White House econ adviser Cohn: White House would like to make individual side of tax reform permanent; We have had a mild backup in Treasury yields ; Stocks are seeing a few days of consolidation after a long rally; Expects strong Q1 GDP in the US; Strong dollar is always in the best interest of the US - Fox Business interview (From Feb 2nd)
-QCOM Broadcom said to raise bid for Qualcomm to $80-82/shr (vs $70/share currently), ~$120B; will also include higher breakup fees - financial press
Looking Ahead: US Jan ISM Non-Manufacturing PMI due for release on Monday
Europe
- (DE) Germany suspends coalition talks, will resume Monday 09:00GMT, failing to meet self imposed Sunday deadline; disputes over healthcare and labor policy remain
- (FR) ECB's Villeroy (France): whether we end QE program in Sept or taper somewhat more gradually is not a deep existential question; We will keep an eye on impact of exchange rate evolution and be prepared to reassess if necessary (from Feb 2nd)
- (UK) UK Official: PM May has ruled out staying in customs union - press [Note: PM May advisers were said to consider a customs union deal covering trade in goods with the EU after Brexit, said a press report from Feb 1st. The possible plan would take effect after the 2-year Brexit transition period.]
- Fiat Chrysler: US regulators reportedly to seek major fines and recall as part of Fiat diesel motor settlement - press
- GKN [GKN.UK]: Onex in talks with GKN on aerospace unit - Uk press
- Carillion [CLLN.UK]: Greybull Capital will be among bidders interested in acquiring parts of Carillion that might be ringfenced following its liquidation - FT
Looking Ahead: UK Jan Services PMI due for release
***Levels as of 01:00ET***
- Nikkei225 -2.6%, Hang Seng -1.3%; Shanghai Composite +0.5%; ASX200 -1.6%, Kospi -1.1%
- Equity Futures: S&P500 -0.2%; Nasdaq100 -0.1%, Dax -0.4%; FTSE100 -0.4%
- EUR 1.2466-1.2424; JPY 110.29-109.79; AUD 0.7939-0.7890;NZD 0.7309-0.7278
- Apr Gold -0.2% at $1,334/oz; Mar Crude Oil -0.8% at $64.91/brl; Mar Copper +0.4% at $3.19/lb