Asian Mid-session Update: Australia posts another month of stellar job growth; RBNZ cuts with a neutral outlook
***Economic Data***
- (AU) AUSTRALIA NOV EMPLOYMENT CHANGE: +71.4K (highest since Aug 2000) V -10.0KE; UNEMPLOYMENT RATE: 5.8% (lowest since Apr 2014) V 6.0%E
- (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) CUTS OFFICIAL CASH RATE BY 25BPS TO 2.50%; AS EXPECTED
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50%; AS EXPECTED
- (JP) JAPAN Q4 BUSINESS SURVEY INDEX (BSI) LARGE ALL INDUSTRY Q/Q: +4.6 V +9.6 PRIOR; BSI LARGE MANUFACTURING Q/Q: +3.8 V +11.0 PRIOR
- (JP) JAPAN NOV PPI M/M: -0.1% V -0.3%E; Y/Y: -3.6% (3-month high) V -3.8%E
- (JP) Japan Nov Tokyo Avg Office Vacancies 4.2% v 4.5% prior
- (NZ) NEW ZEALAND NOV RETAIL CREDIT CARD SPENDING M/M: 0.3% V 0.4%E; TOTAL M/M: 0.2% V 0.0% PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -1.1%, S&P/ASX -1.2%, Kospi -0.2%, Shanghai Composite +0.2%, Hang Seng -0.1%, Dec S&P500 +0.3% at 2,049
***Commodities/Fixed Income***
- Feb gold -0.2% at $1,074/oz, Jan crude oil +0.8% at $37.44/brl, Mar copper +0.1% at $2.07/lb
- (CN) PBoC to inject CNY20B in 7-day reverse repos (46th consecutive injection); Drains net CNY50B this week v injected CNY50B prior (biggest weekly drain in 2 months)
- USD/CNY: (CN) PBoC sets yuan mid point at 6.4236 v 6.4140 prior; Lowest Yuan setting since 6.4335 in Aug 2011
- (CN) China aluminum smelters said to meet for discussion of cutting production - financial press
- (AU) Yield on Australia 3-year bond rises 8bps to 2.22% after jobs data; 7-month high
- (JP) Japan investors buy net ¥73.1B in foreign bonds v sell net ¥156.6B in prior week; Foreign investors buy net ¥104.6B in Japan stocks v selling ¥54.6B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian equity markets are trading mixed again in the wake of 3rd consecutive losing session on Wall St. Nikkei225 and S&P/ASX are underperforming - the former weighed down by stronger JPY amid some extreme USD selling following earlier hawkish comments from ECB's Nowotny while the latter is reacting to strong Aussie jobs numbers further deflating expectations of RBA rate cuts.
- Australia employment growth hit its highest monthly increase in 15 years while unemployment rate sank to match the lowest since Apr 2014. Participation rate of 65.3% - well above 65.0% expected - was also the highest in over 3 years, though the aggregate hours worked saw the biggest decline in 16 months. The contradictions in the data did not go unnoticed by analysts, and some of the bigger sceptics also pointed to the "matched sample" of survey respondents - those who were in both data sets of the past two months - being underrepresented. UBS estimated that accounting for those factors, the growth of the past two months would be 6K and 24K vs 71K and 56K reported. More hawkish economists with BoA/ML said RBA should consider a rate hike if growth and employment continue to recover. AUD/USD spiked up some 90pips on the jobs release above 0.7330, while the yield on Australia's 3-yr bond rose 8bps to 2.22%, a 7-month high.
- As expected, RBNZ cut rates by 25bps to match record lows of 2.50%, but also signaled that level should be sufficient to achieve the central bank's inflation objective. The implied pause in the easing cycle against some analysts' calls of further cuts sent NZD/USD up about 100pips above 0.6750. RBNZ forecast recovery in growth as a result from improved export prices, the recent lift in confidence, and increasing domestic demand from the rising population, though it also pushed for further depreciation in NZD as "appropriate in order to support sustainable growth." In the subsequent press conference, Gov Wheeler clarified that RBNZ will cut rates further if needed, but warned that aggressive rate cuts would increase housing risks, even as the latest data suggests slowing in the overheated Auckland property market. Despite the neutral outlook, economists with ASB and Westpac still expect RBNZ to ease further but at a later date in 2016 than previously anticipated.
- Bank of Korea left rates at record low levels of 1.5% in a unanimous decision, offering mixed commentary. BOK said inflation would remain low for the time being and economy would continue its recovery, but also warned over elevated household borrowing along with risks associated with Fed rate hike and China slowdown. BOK Gov Lee said the FOMC tightening would likely have limited impact, but low oil prices would likely keep 2016 inflation subdued. ANZ economists said the more mixed economic assessment by the BOK relative to last month implied another rate cut is likely in Q1 of 2016.
***Equities***
US equities / ADRs:
- AMSC: Guides Q3 higher -$0.54, R$22-24M (-$0.62, R$19-22M prior guidance); +14.3% afterhours
- OLLI: Reports Q3 $0.11 v $0.08e, R$174.6M v $169Me; +6.0% afterhours
- FTI: TEC.FR reportedly exploring potential merger options, held discussions with FMC Technologies - press; +5.0% afterhours
- ATHN: Guides initial FY16 $1.65-1.85 v $1.58e, R$1.085-1.115B v $1.13Be (ahead of investor day tomorrow); +0.6% afterhours
- CVX: Announces $26.6B Capital and Exploratory Budget for 2016, down 24% from 2015; +0.1% afterhours
- ITCI: Presents additional efficacy and safety data from the positive Phase 3 Clinical Trial of ITI-007 for the Treatment of Schizophrenia and From the Positron Emission Tomography Study; -3.6% afterhours
- PE: Announces Midland Basin acquisition for $148.5M in cash; -3.8% afterhours
- FSLR: Guides initial FY16 $4.00-4.50 (including gain from expected sale of equity method investment and the share of 8point3 earnings) v $4.08e; R$3.9-4.1B v $4.0Be; -9.4% afterhours
- MW: Reports Q3 $0.50 v $0.50e, R$865M v $869Me; -19.1% afterhours
Notable movers by sector:
- Financials: Collection House CLH.AU -2.1% (affirms guidance); CITIC Securities 6030.HK +0.5%, Haitong Securities 600837.CN +2.0% (China to launch IPO registration next year)
- Industrials: Austal Ltd ASB.AU -24.8% (guidance)
- Technology: United Microlectronics Corp UMC -1.3% (Nov result); InnoLux Corp 3481.TW -5.9% (Nov result); Yahoo! Japan Corp 4689.JP -1.7% (launches taxi hailing app); Toshiba Corporation 6502.JP +1.9% (speculation to cease TV manufacture); Canon Electronics Inc 7739.JP -3.7% (cuts guidance)
- Materials: Yunnan Copper Co 000878.CN +3.6% (cancels debt sale); Whitehaven Coal P:WHC.AU -9.2% (guidance); Independence Group IGO.AU +4.1% (affirms capex); Aluminum Corporation of China 601601.CN +1.2% (speculation to discuss cutbacks)
- Energy: China Oilfield Services 2883.HK -2.7% (guidance)