Asia Mid-Session Market Update: Hawkish Fed rate hike reverberates in Asia as dollar adds to gains; Aussie employment shines with a 1-year high in new jobs; BOK on hold with an eye on other central banks
***US Session Highlights***
- (US) FOMC RAISES FED FUNDS TARGET RANGE 25BPS TO 0.50-0.75% (AS EXPECTED); Average Fed official looking for three hikes in 2017 vs two prior forecast; USD spikes higher across the board; Treasuries on the short end of the curve move lower; Gold falls nearly $20 below $1,150
- (US) Fed statement adds that measures of inflation compensation have moved up considerably; Economic activity expanding moderately; Fed's Yellen also denies suggesting she favors a "high pressure economy", puncturing her dovish credentials.
- (US) NOV ADVANCE RETAIL SALES M/M: 0.1% V 0.3%E; RETAIL SALES EX AUTO M/M: 0.2% V 0.4%E
- (US) NOV PPI FINAL DEMAND M/M: 0.4% V 0.1%E; Y/Y: 1.3% V 0.9%E
- (US) NOV INDUSTRIAL PRODUCTION M/M: -0.4% V -0.3%E; CAPACITY UTILIZATION: 75.0% V 75.1%E
- (US) OCT BUSINESS INVENTORIES: -0.2% V -0.1%E (biggest drop this year)
- (US) DOE CRUDE: -2.6M V -1.5ME; GASOLINE: +0.5M V +2ME; DISTILLATE: +0.8M V +1ME: US production rises 99K barrels on the week
- (US) Atlanta Fed cuts Q4 GDP forecast to 2.4% from 2.6% on Dec 9th
- (IT) Italy PM Gentiloni wins vote of confidence in Senate, approving his caretaker govt - press
***US markets on close: Dow -0.6%, S&P500 -0.8%, Nasdaq -0.5%***
- Best Sector in S&P500: Healthcare
- Worst Sector in S&P500: Basic Materials / Utilities
- Biggest gainers: NVDA +5.8%, FOXA +3.6%, ALXN +3.2%, AKAM +2.8%, NLSN +2.6%
- Biggest losers: UHS -6.8%, NEM -6.5%, RIG -5.0%, DO -4.8%, HCP -4.5%
- At the close: VIX 13.2 (+0.5pts); Treasuries: 2-yr 1.27% (+11bp), 10-yr 2.53% (+5bps), 30-yr 3.15% (flat)
***US movers afterhours***
- PIR: Reports Q3 $0.22 v $0.12e, R$475.9M v $468Me; names Terry London as interim CEO, effective Jan 1st; +21.9% afterhours
- ATHN: Guides initial FY17 non-Gaap op income $170-190M, R$1.29-1.33B v $1.29Be; Affirms FY16 - ahead of investor day tomorrow; +20.8% afterhours
- MDLZ: Kraft Heinz said to consider acquiring Mondelez; Berkshire, Lemann may join acquisition - Swiss press; Speculation then denied by company +6.5% afterhours
- APOG: Reports Q3 $0.78 v $0.79e, R$274.1M v $278Me (1 est); +3.2% afterhours
- YHOO Identifies data security issues concerning certain Yahoo user accounts; believes 3rd party stole data from 1B user accounts in Aug 2013; -2.3% afterhours
- GPOR: Acquires ~85K net effective acres in the SCOOP play for $1.85B in cash and stock; -4.1% afterhours
- ORIG: Reports Q3 $0.47 v $0.53e, R$335M v $342Me; Review of alternatives may include a bankruptcy; -20.4% afterhours
***Politics***
- (US) President-elect Trump at meeting with major tech company leaders: I'm here to help you; I want you to succeed
- (JP) Japan PM Abe reportedly does not plan to call snap elections in Jan - Japan press
***Asia Key economic data:***
- (KR) BANK OF KOREA (BOK) LEAVES INTEREST RATE UNCHANGED AT 1.25%; AS EXPECTED (6th consecutive month of holding rates)
- (HK) Hong Kong Monetary Authority (HKMA) raises base rate by 25bps to 1.00%, following increase by FOMC
- (AU) AUSTRALIA NOV EMPLOYMENT CHANGE: +39.1K (1-year high) V +17.5KE; UNEMPLOYMENT RATE: 5.7% V 5.6%E
- (AU) AUSTRALIA DEC CONSUMER INFLATION EXPECTATION: 3.4% V 3.2% PRIOR
- (JP) JAPAN DEC PRELIMINARY PMI MANUFACTURING: 51.9 V 51.3 PRIOR; implies 4th consecutive expansion and 11-month high
- (JP) BOJ Q4 TANKAN Inflation Survey: Japan companies see inflation 0.7% y/y in 1-yr v 0.6% prior; 1.0% in 3-yrs v 1.0% prior, and 1.1% in 5-yrs v 1.0% prior
- (NZ) NEW ZEALAND Q3 VALUE OF ALL BUILDINGS Q/Q: 1.4% V 2.1%E
- (NZ) NEW ZEALAND NOV BUSINESS MANUFACTURING PMI: 54.4 V 55.1 PRIOR; 13-month low
***Asia Session Notable Observations, Speakers and Press***
- Fed's 25bp rate increase along with forecasts of 3 more rate hikes in 2017 (market consensus was 2), the accompanying rosier economic projections, as well as subsequent Q/A from Fed Chair Yellen were decidedly more hawkish than expected. US stock indices saw their biggest losses in 2 months, USD spiked by over 200pips against JPY and about 150pips against EUR to 1.05, while Gold fell over $20/oz below $1,450. US treasury yields rose most notably on the short end - 2-year added 11bps and the 5-year was saw a 10bp increase. USD added to gains in Asia, with EUR/USD coming within 10pips of its 14-year low below 1.0460 and USD/JPY approaching 118 handle. Aussie gold miners are bearing the brunt of the precious metal decline. Hong Kong was also hard hit - Insurers, financials, property developers, and gaming stocks were the biggest decliners.
- Aussie employment data were fairly strong, with net new jobs at a 1-year high of 39K - more than double the estimates. Unemployment rate rose a decimal due to a rise in participation rate, but aggregate hours worked put in their biggest decline in 7 months. AUD/USD hardly budged however amid prevailing greenback momentum. A pair of cautious research notes from DB and CS warned respectively about overestimated by the govt growth trends and high consumer leverage pushing RBA to cut rates deeper next year.
- Japan's Dec prelim manufacturing PMI printed an 11-month high with its 4th straight month of expansion - Employment and Input Price components saw notably faster increases, while New Export Orders growth slowed and inventories decreased. Markit economist noted new work inflows rising at the quickest pace since January, helping the rate of job creation picking up to a 32-month high. BOJ's Q4 Tankan survey of inflation raised its 1-year target and 5-year target by a decimal to 0.7% and 1.1% - still well below the 2% goal.
- Bank of Korea left rates on hold as widely expected, but noted Fed hikes, Brexit, political uncertainty, protectionism, and rising oil trends as risks worth monitoring. BOK was also leery of weak improvement in domestic demand and growing household credit.
China:
- (CN) China National Energy Administration (NEA): China Nov power consumption 507B Kwh, +7.0% y/y v +1.9% prior
- (CN) China govt said to announce 7 new Free Trade Zones (FTZ) soon - Chinese press
Japan:
- (JP) Japan PM Adviser Nishimura: Will not comment on currency levels, but a weak yen generally helps lift corporate profits
- (JP) Japan Chief Cabinet Sec Suga: expects frank talks between Japan and Russia leaders; Important to monitor concrete impact after Fed decision
- (JP) BOJ said to consider upgrading its economic outlook in its policy decision next week; Would mark first upgrade in 19 months - Nikkei
Australia:
- (AU) Credit Suisse economist: RBA may have to cut rates as many as 3 more times to ward off dramatic deleveraging given over-geared conditions of Australian households - AFR
- (AU) Deutsche Bank economist Boyton: Australia Treasury has overestimated its forecasts for nominal GDP - AFR
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.4%, Hang Seng -1.7%, Shanghai Composite -0.4%, ASX200 -0.8%, Kospi flat
- Equity Futures: S&P500 +0.2%; Nasdaq +0.1%, FTSE100 +0.3%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0470-1.0540; JPY 117.00-117.90; AUD 0.7380-0.7430; NZD 0.7075-0.7125
- Feb Gold -1.8% at 1,143/oz; Jan Crude Oil -0.1% at $50.97/brl; Mar Copper +0.7% at $2.62/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 6.9 tonnes (0.8%) to 849.4 tonnes; 19th straight decline; lowest since May 12th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9289 V 6.9028 PRIOR; weakest Yuan setting since 2008; biggest margin of weakness since Aug 29
- JGB: (JP) Japan's MoF sells ¥1.0T in 0.6% (0.5% prior) 20-year JGBs; Avg yield: 0.645% v 0.456% prior; bid-to-cover: 3.35x v 3.17x prior
- (JP) Japan investors bought net ¥267B in foreign bonds v ¥892B sold in prior week; Foreign investors bought net ¥278B in Japan stocks v ¥403B bought in Japan stocks in prior week
- (HK) Hong Kong 1-month HK$ HIBOR 0.66464% (7th consecutive rise) v 0.65929% prior; 3-month 0.93426% (>7-yr high) v 0.91921% prior; Overnight 0.14607% v 0.15429% prior
***Asia equities / Notables / movers by sector***
- Consumer discretionary: DuluxGroup DLX.AU +2.2% (Raised at JPMorgan ); Tatts Group TTS.AU -2.2% (Morgans Financial cuts to hold)
- Consumer staples: Mengniu Dairy 2319.HK -4.0% (profit warning); Yashili International Holdings 1230.HK -1.9% (profit warning)
- Industrials: IHI Corp 7013.JP -3.8% (Credit Suisse cuts to underperform)
- Materials: Resolute Mining RSG.AU -6.7%, Regis Resources RRL.AU -8.2%, Newcrest Mining NCM.AU -5.4%, Saracen Mineral SAR.AU -5.9%; (gold declines after Fed hikes rate)
- Energy: Santos STO.AU -10.2% (capital raising); Caltex Australia CTX.AU +0.8% (guidance); Beach Energy BPT.AU -4.6% (Citi cuts to sell); Mitsubishi Materials 5711.JP -1.3% (Morgan Stanley cuts to underweight)
- Healthcare: Askul Corp 2678.JP +5.2% (H1 result)