Asian Market Update: Moody's warns on China sovereign rating; Australia GDP tops estimates
***Economic Data***
- (AU) AUSTRALIA Q4 GDP Q/Q: 0.6% V 0.4%E; Y/Y: 3.0% (6-quarter high) V 2.5%E
- (AU) AUSTRALIA JAN HIA NEW HOME SALES M/M: +3.1% V +6.0% PRIOR
- (NZ) NEW ZEALAND FEB QV HOUSE PRICES Y/Y: 11.6% V 12.6% PRIOR
- (JP) JAPAN FEB MONETARY BASE Y/Y: 29.0% v 28.9% PRIOR; MONETARY BASE END OF PERIOD: ¥358.8T v ¥358.8T PRIOR
- (KR) SOUTH KOREA FEB PMI MANUFACTURING: 48.7 V 49.5 PRIOR; 2nd straight month of contraction
- (KR) SOUTH KOREA JAN INDUSTRIAL PRODUCTION M/M: -1.8% V -1.0%E; Y/Y: -1.9% V -0.6%E
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +4.3%, S&P/ASX +2.2%, Kospi +1.6%, Shanghai Composite +2.3%, Hang Seng +2.6%, Mar S&P500 +0.2% at 1,982
***Commodities/Fixed Income***
- Apr gold -0.2% at $1,228/oz, Apr crude oil -1.3% at $33.97/brl, May copper +0.5% at $2.16/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 8.9 tonnes to 786.2 tonnes; Highest since Sept 2014
- (US) Weekly API Oil Inventories: Crude: +9.9M v +7.1M prior; largest build since Jan 26
- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: +1.4% v -2.8% prior; first rise in 5 auctions
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5490 V 6.5385 PRIOR; weakest Yuan setting since Feb 3rd
- (CN) PBoC won't conduct open market operations (OMO) in today's session
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr, and ¥450B in 5-10yr JGBs
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2027 Bonds; avg yield: 2.583%; bid-to-cover: 2.04x
- USD/KRW: RBA has reportedly recently invested 5% of its net reserves in KRW - financial press
***Market Focal Points/FX***
- Asian equity markets are up sharply across the board, as bullish momentum from Wall St is reverberating overseas. The case for an impending recession has been punctured by the strong US ISM report, while investors also cheered dovish rhetoric from Fed's Dudley and ECB's Draghi. Upside momentum appears to be self-sustaining, as "the usual suspects" headwinds - namely lower oil prices, China growth worries, and weaker Yuan - are being discounted. While WTI fell nearly 2% afterhours on large build in API inventories, Yuan fixed at a new 1-month low, and Moody's warned on growing China risks, commodities are sharply higher and Yen is lower. In FX majors, USD/JPY is still around 2-week highs around 114, AUD/USD is up over 70pips from the lows at 0.7240 on strong GDP, and Gold has come off the highs below $1,230/oz - down over $10.
- Moody's warned on China, lowering its outlook to Negative from Stable, while affirming AA3 rating. Among the key risks, Moody's noted ongoing weakening of fiscal metrics as evidenced by rising debt, continued falls in reserves due to capital outflows, and also uncertainty over govt's ability to address the growing imbalances. Separately, Fitch noted that the latest RRR cut in China could lead to bank risks through exacerbated extension of questionable credit. Also of note in China, CASS researcher remarked that economic conditions are not ripe to restart IPO registration.
- Australia's GDP topped expectations, particularly on annualized basis. Components revealed most pronounced strength in consumption at +0.7% q/q, while capital formation was not as soft as expected. Subsequent comments from NAB forecast RBA that is firmly on hold, even though RBC economists said the more recent data calls for more moderation in growth going forward, keeping the central bank in play this year.
- In Japan, BOJ Gov Kuroda reiterated that monetary easing has had intended effect and underlying inflation trends are improving, affirming H12017 as the target for 2% inflation. Other reports showed more urgency on policy response, with one press source indicating the govt is considering emergency economic measures that could be announced as soon as this month and another stating that the MOF, BOJ, and FSA would hold talks about developments in international markets.
- Stateside, Super Tuesday produced few surprises in the US political landscape. Donald Trump momentum gave him victories in all but 3 of the 11 states holding Republican primaries - Texas/Oklahoma (Cruz) and Minnesota (Rubio). On the Democratic side, Clinton secured victories in 7 states to 4 for Sanders, with most high-profile wins in Texas, Virginia, and Massachusetts.
***Equities***
US equities / ADRs:
- GWRE: Reports Q2 $0.24 adj v $0.15e, R$102.1M v $96.6Me; +8.9% afterhours
- AWK: Added to S&P500 index, replacing CNX, after close on Mar 3rd; +5.2% afterhours
- ROST: Reports Q4 $0.66 v $0.64e, R$3.25B v $3.21Be; +1.3% afterhours
- VEEV: Reports Q4 $0.15 adj v $0.11e, R$114.3M v $110Me; -1.1% afterhours
- ASNA: Reports Q2 $0.01 adj v -$0.00e, R$1.84B v $1.88Be; -4.5% afterhours
- BGFV: Reports Q4 $0.20 v $0.19e, R$275M v $273Me; raises dividend by 25% to $0.125 from $0.10; -15.4% afterhours
Notable movers by sector:
- Consumer discretionary: China Resources Beer 291.HK +21.9% (acquisition)
- Industrials: Kawasaki Heavy Industries 7012.JP +8.0% (guidance); Nissan Motor Co 7201.JP +4.1% (plans to release autonomous vehicles)
- Materials: Yanzhou Coal Mining Co. 1171.HK +5.4% (possible transaction); Anhui Conch Cement 914.HK +9.8%, China National Building Material Co 3323.HK +6.3% (China plans to cut capacity in cement)