Asian Market Update: Fed Chair Yellen tempers recent "live meeting" Fed speak with dovish remarks; Japan industrial output plummets; ADB cuts Asia GDP targets
***Economic Data***
- (JP) JAPAN FEB PRELIMINARY INDUSTRIAL PRODUCTION M/M: -6.2% (biggest decline since Mar 2011) V -5.9%E; Y/Y: -1.5% V -1.7%E
- (JP) JAPAN FEB VEHICLE PRODUCTION Y/Y: -6.9% V -5.8% PRIOR; 3rd straight decline
- (CN) China Mar Westpac Consumer Confidence index: 118.1 v 111.3 prior
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.5 v 116.0 prior
- (NZ) NEW ZEALAND FEB BUILDING PERMITS M/M: +10.8% V -7.8% PRIOR; 7-month high
- (KR) South Korea Feb Department Store Sales y/y: -1.9% v 9.0% prior; Discount store sales y/y: -7.0% v 11.0% prior
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.3%, S&P/ASX +0.1%, Kospi +0.4%, Shanghai Composite +1.4%, Hang Seng +1.4%, Jun S&P500 +0.1% at 2,049
***Commodities/Fixed Income***
- Apr gold flat at $1,238/oz, May crude oil +0.8% at $38.57/brl, May copper -0.9% at $2.19/lb
- (US) Weekly API Oil Inventories: Crude: +2.6M v +8.8M prior; 6th straight week of build
- GLD: SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 820.5 tonnes; first decline since Mar 14th
- SLV: iShares Silver Trust ETF daily holdings rise to 10,276 tonnes from 10,257 tonnes; highest since Apr 2015
- (CN) PBOC to inject CNY60B in 7-day reverse repos
- (CN) PBOC SETS YUAN MID POINT AT 6.4841 V 6.5060 PRIOR; Strongest Yuan setting since Mar 18th
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2017 Bonds; avg yield: 2.63%; bid-to-cover: 2.54x
***Market Focal Points/FX***
- Asian equity markets have responded positively to the latest set of dovish remarks from Fed chair Yellen, tracking the gains on Wall St, just as USD index plunged and precious metals rallied. Speaking in New York, Yellen challenged the more upbeat recent rhetoric from regional Fed presidents that rekindled uncertainty of April being a "live" meeting, noting ongoing risks to US economy from global developments while also expressing concern about low inflation expectations with projections of PCE core well below 2% in 2016. She concluded that cautiousness in policy adjustment is the most appropriate course of action, reiterating that the FOMC is not on a preset course for normalizing policy. USD/JPY fell about 100pips below 112.40 from the levels ahead of Yellen's remarks, AUD/USD was up about 90 pips above 0.7640, and NZD/USD up about 80pips to trade above 0.6880, with some added strength coming from hotter building permits data. China markets led the regional advance, while Nikkei lagged on JPY strength against the stumbling greenback.
- Risk aversion in Japan was exacerbated by particularly disappointing February industrial production which fell m/m by the biggest margin since the massive 2011 earthquake. Despite the bigger than anticipated plunge, METI still raised its March forecast to +3.9% m/m v +3.1% prior and also set its Apr forecast at +5.3%. Earlier, a Nikkei feature noted increasingly lower trading volumes on Tokyo Stock Exchange as indication of wilting investor confidence in even short-term trading profits. Later in the day, Japan vehicle output also fell for the 3rd straight month.
- Regionally, Asian Development Bank (ADB)'s "Outlook 2016" report cut developing Asia 2016 GDP target to 5.7% from 6.0% and cut Central Asia 2016 GDP growth to 2.1% from 3.7%. SE Asia forecasts were cut to 4.5% from 4.9% and 2017 set at 4.8%. ADB also cut its China target for this year to 6.5% from 6.7% prior and forecast 2017 at 6.3% - below the official 6.5-7.0% range for the next 5 years.
- In Australia, PM Turnbull confirmed press speculation that the govt will consider giving more flexibility to states to set their own rates of income tax, reducing nationwide levy by 2pts starting from 2020. On the corporate front, shares of Virgin Australia were sharply lower after key holder Air New Zealand announced it is considering selling part or all of its 26% stake in VAH.
***Equities***
US equities / ADRs:
- SONC: Reports Q2 $0.18 adj v $0.16e, R$133.2M v $129Me; +4.3% afterhours
- PLAY: Reports Q4 $0.53 v $0.43e, R$234M v $229Me; -0.6% afterhours
- RH: Reports Q4 $0.98 v $0.99 prelim, R$647M v $647M prelim; -4.5% afterhours
- VRNT: Reports Q4 $0.90 v $1.17e, R$282M v $319Me; Starts $150M share buyback program (6.8% of market cap); -11.9% afterhours
Notable movers by sector:
- Consumer discretionary: Belle International Holdings 1880.HK -7.5% (guidance); Dongfeng Motor 600006.CN +0.2% (FY15 result); FamilyMart Co. 8028.JP +0.8% (FY15/16 result speculation); Daphne International Holdings 210.HK -1.0% (FY15 result); Ajinomoto Co 2802.JP -5.1% (guidance)
- Consumer staples: WH Group 288.HK +7.5% (FY15 result)
- Financials: Evergrande Real Estate Group 3333.HK -1.3% (FY15 result); Bank of Communications 601328.CN +1.8% (FY15 result); China Everbright Bank Co 601818.CN +1.9% (FY15 result)
- Industrials: CRRC Corp 601766.CN +1.2% (FY15 result); Virgin Australian VAH.AU -4.8% (Air New Zealand looks to sell stake)
- Technology: Alibaba Pictures Group 1060.HK +4.1% (FY15 result); Ourgame International Holdings 6899.HK +1.9% (FY15 result); Samsung Electronics 005930.KR +1.4% (Q1 result speculation); Sharp Corp 6753.JP +6.2% (president to resign)
- Energy: Sinopec (China Petroleum & and Chemical Corp) 386.HK +6.1% (FY15 result); Xinjiang Goldwind Science & Technology Co 2208.HK +5.1% (FY15 result); Yanzhou Coal Mining Co. 1171.HK -0.5% (FY15 result); APA Group APA.AU +2.8% (AGL deal)
- Telecom: NTT (Nippon Telegraph & Telephone Corp) 9432.JP +0.5% (acquisition)