Asian Mid-session Update: Energy sector under pressure as Oil retreats from last week's gains
***Economic Data***
- (KR) South Korea Nov Department Store Sales y/y: 1.0% v +11.4% prior; Discount store sales y/y: -3.7% v -0.5% prior
- (PH) Philippines Oct Trade Balance: -$1.9B v -$1.4Be; Imports $6.5B v $6.3B prior
- (VN) Vietnam 2015 YTD Retail Sales: 9.5% (biggest increase since 2011)
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 flat, S&P/ASX +0.9%, Kospi flat, Shanghai Composite +0.2%, Hang Seng +0.3%, Feb S&P500 +0.1% at 2,050
***Commodities/Fixed Income***
- Feb gold +0.3% at $1,072/oz, Feb crude oil +0.1% at $36.84/brl, Mar copper +0.7% at $2.10/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 643.6 tonnes
- (SA) Saudi Aramco chairman: Oil glut to ease in 2016; Supply from N America, including US shale, continues to decline - financial press
- (KR) South Korea Energy Ministry: To lower city gas prices by 9%, effecitve Jan 1st - Korean press
- (CN) 9 of the largest copper smelters in China to reduce sales of spot metal by 200K in Q1 2016 in order to counter lower prices - financial press
- (CN) PBoC to inject CNY10B in 7-day reverse repos (51st consecutive injection); Offer yield at 2.25%, unchanged from prior
- USD/CNY: (CN) PBoC sets yuan mid point at 6.4864 v 6.4750 prior; weakest Yuan setting since June 2011
***Market Focal Points/FX***
- Asian equity indices are marginally higher, however the prevailing theme of pressure from the energy space has carried over from the US session. PetroChina and CNOOC were among the laggards in Hong Kong, as WTI crude has pulled back below the $37/brl mark. After Saudi Arabia announced lower expected revenue from oil sales, traders anticipate the kingdom to defend its market share and not succumb to pressure of reducing output. Late in US hours, Saudi Aramco chairman noted that oil glut is still expected to ease in 2016, with supply in North America having plateaued.
- China central bank's Q4 Monetary Policy Committee Meeting draft unveiled overnight reiterated the view of prudent monetary policy approach and flexibility in using various tools. Today's open market operations by the PBoC were uneventful, with another CNY10B offered at the same 2.25% 7-day reverse repo tool. The central bank did however resume its notable weakening of CNY midpoint, announcing a fresh 4 1/2 year low fix. Separately, Shanghai Academy of Social Sciences forecast 2015 GDP of 6.9%, and slowing in 2016 to 6.8% and 2017 to 6.5%. Resident researcher said sector performance will vary based on external conditions like global commodity prices, geographical politics and Chinas relations with its core trading partners.
- In Japan, the Japan Center for Economic Research (JCER) estimated Nov GDP at +0.1% m/m v +0.4% in Oct - the 2nd straight month of increase. Exports growth slowed to +0.1% v +1.1% prior, while CapEx turned negative at -1.0% v +1.3% prior. The lack of consistency in these key sectors of the economy help explain growing dissatisfaction with the progress of Abenomics - according to the latest Nikkei survey, 44% give a rating of disapproval to Abenomics vs 38% approval.
- In FX, USD majors remained contained to narrow ranges. USD/JPY traded in 20pip range above 120.20, EUR/USD was also in a 20pip window above 1.0960, while AUD/USD was up nearly 30pips from the lows as high as 0.7270. NZD/USD was a notable outperformer with a 30pip rally to 0.6870 - a 2-month high.
***Equities***
US equities / ADRs:
- ZN: Granted Approval of Their Exploratory Drilling Request (Hafkada) From Israels Northern District Committee; +8.4% afterhours
- PBY: Icahn sends letter; raises offer to $18.50/shr (vs $17/shr from Bridgestone) - filing; +6.3% afterhours
- WSH (+2.5% afterhours): To be added to S&P500, replacing FOSL, which will move to the S&P400; ADPT (+3.8% afterhours) added to S&P600
- LOCK: Enters into credit agreement with Equifax - filing; +0.6% afterhours
Asia by sector:
- Consumer discretionary: Oriental Land 4661.JP +0.4% (raising prices at theme park)
- Industrials: Hyundai Motors -1.0% (workers approve wage agreement)
- Energy: Beach Energy BPT.AU -7.6% (Norges Bank sells stake)
- Financials: Evergrande Real Estate 3333.HK (halted ahead of major transaction)
- Technology: Toshiba 6502.JP +1.2% (seeking ¥300B bank funding)