Asian Market Update: Recovery in crude prices supports bullish sentiment to start the new week
***Economic Data***
- (JP) JAPAN DEC TOTAL TRADE BALANCE: ¥140.2B V ¥117BE; ADJUSTED TRADE BALANCE: ¥36.6B V ¥84.2BE
- (JP) JAPAN NOV FINAL LEADING INDEX CI: 103.5 V 103.9 PRELIM; COINCIDENT INDEX: 111.9 V 111.6 PRELIM
- (AU) AUSTRALIA DEC NAB BUSINESS CONFIDENCE: 3 V 5 PRIOR; CONDITIONS: 7 V 10 PRIOR
- (SG) SINGAPORE DEC CPI M/M: 0.0% V -0.1%E; Y/Y: -0.7% V -0.7%E; CPI CORE Y/Y: 0.3% V 0.2%E
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.5%, S&P/ASX +1.5%, Kospi +0.9%, Shanghai Composite +1.0%, Hang Seng +1.8%, Mar S&P500 +0.1% at 1,
***Commodities/Fixed Income***
- Feb gold +0.5% at $1,102/oz, Mar crude oil +0.4% at $32.32/brl, Mar copper -0.3% at $2.00/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.1 tonnes to 664.2 tonnes; highest since Nov 9th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5557 V 6.5572 PRIOR; strongest Yuan setting since Jan 6th, 11th straight firmer setting relative to Close
- (KR) South Korea sells 20-yr government bonds; Avg yield 2.110%
- (JP) BOJ offers to buy ¥450B in 5-10 yr JGBs and ¥40B in inflation-indexed bonds
- USD/MXN: (MX) Mexico Central Bank Gov Carstens: Expects a "major correction" in Peso; Currency is severely undervalued after EM currency selloff - financial press
***Market Focal Points/FX***
- The Friday rally on Wall St has carried over to Asia amid the themes of recovery in oi prices and more dovish central banks expectations. Record snowfalls in the US northeast and multi-decade temperature lows in Hong Kong over the weekend helped sustain the gains of the near-10% rally in oil on Friday. Likewise, investors are anticipating an acknowledgement of a hiccup in global growth from the Fed, a hint toward more easing from RBNZ, and potentially expanded QE by the BOJ all to take place this week. S&P/ASX is at the help of the regional indices' rally thanks to the energy names. China steel names are also strong amid further reports of industry overcapacity reduction. In FX, USD/JPY is rangebound at ¥118.45-85, EUR/USD rallied 30pips toward $1.0820, and AUD/USD reversed initial 20pip dip to 0.6980 to test 0.7030. Chinese Yuan has been set firmer yet again, but the ripple in the currency market from the fix has been greatly diminished.
- In economic data, Japan adjusted Dec trade balance hit a surplus after 8 months of deficit but mostly because of worse than expected exports decline. Shipments fell 8% y/y - the biggest drop since 2012 - with exports to Asia y/y at -10.3% v -8.7% prior. US exports fell 3.4% - the first decline in 16 months. Australia's Dec NAB business confidence surveys also softened. Resident economist noted deterioration in construction will be monitored closely, but also added the broad-based recovery in the non-mining sector is underway.
- Among notable press reports out of China, the survey from national banking association saw vast majority of lenders expressing concern over credit risks in industries with excess capacity. To that end, China State Council was reportedly looking at steel production cuts of 100-150M tonnes as well as lower coal industry size. PBoC was also in the headlines with speculation that Chinese central bank would prioritize a stronger CNY in managing liquidity. This was in response to earlier reports citing PBoC official suggesting the bank prefers liquidity injections over RRR cuts for fear of weakening currency sparking more investment outflows.
***Equities***
US equities / ADRs:
- JCI: Thought to be in advanced merger talks with Tyco; deal could be announced early this week - Financial press
- YHOO: Verizon said to have offered about $8B for core Yahoo! assets - NY Post
- FRT: To be added to S&P500 index, replacing Broadcom after the close on Jan 29th
- SUNE: Greenlight Capital (Einhorn) said to be granted a board seat - financial press
Notable movers by sector:
- Consumer discretionary: Goodbaby International Holdings 1086.HK +8.6% (guidance)
- Financials: Guosen Securities 002736.CN +2.0% (FY15 result); Agricultural Bank of China (ABC) 1288.HK -1.1% (material risk incident); Poly Real Estate Group Co 600048.CN +1.6% (prelim FY15 result)
- Industrials: Takata Corp 7312.JP -11.0% (no decision on seeking financial support, another 5M vehicle recall)
- Technology: Senetas Corp SEN.AU -25.3% (guidance); NEXTDC NXT.AU +2.4% (new contract)
- Materials: Angang Steel 000898.CN +8.2%, Baoshan Iron and Steel 600019.CN +2.6% (China to cut steel production); Tokyo Steel Mfg Co 5423.JP +12.4% (share buyback); Toshiba Corporation 6502.JP -5.3% (not source of chip business sale)
- Energy: China Coal Energy 1898.HK +2.3% (profit warning); China Shenhua Energy Co 1088.HK +0.7% (Dec result)