Asian Market Update: Decline in commodities back in focus
***Economic Data***
- (NZ) NEW ZEALAND FEB TRADE BALANCE (NZD): 339M V 90ME; 2nd month of surplus
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.1%, S&P/ASX -1.1%, Kospi -0.3%, Shanghai Composite -0.9%, Hang Seng -1.1%, Jun S&P500 -0.2% at 2,024
***Commodities/Fixed Income***
- Apr gold -0.5% at $1,218/oz, May crude oil -0.2% at $39.73/brl, May copper +0.1% at $2.24/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 10,230 tonnes from 10,274 tonnes; first decline since Feb 12th
- WTI crude trades below $40 heading into NYMEX close, down 4%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5150 V 6.4936 PRIOR; weakest setting since Mar 16th
- (CN) PBOC to inject CNY60B in 7-day reverse repos
- (CN) SWIFT: CNY use in international transactions 1.76% of total in Feb v 2.45% prior
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs,¥240B in 10-25yr JGBs and ¥160B in JGBs with maturity over 25-yr
- (NZ) New Zealand sells NZ$100M Apr 2033 bond
***Market Focal Points/FX***
- Asian equity markets are largely in the red, tracking more pronounced declines in US indices even as volatility of the pre-holiday week remains depressed. Commodity markets returned to the forefront of investors concerns as oil fell back below $40/brl after large builds in DOE and API weekly inventory data, though the general spillover from falling commodity prices is part of a broader narrative in Asia. Specifically, Japan's Mitsui is lower after formally cutting FY profit guidance on the close overnight due to impairment related to energy market price falls. Mitsubishi Corp was also on the hot seat with Nikkei report speculating commodity decline related impairments could send it to its first net loss in years. Company denied those rumors but did concede that it is preparing to formally downgrade its profit projections. Similarly in Australia, ANZ bank was down sharply after announcing it is raising its impairment provision by at least A$100M due to "pockets of weakness due to commodity prices in resources and related industries," highlighting the long-feared risks of a spillover from sour loans in the resources sector into the financial system. Among the FX majors, USD/JPY shrugged risk-off sentiment with a 50pip rise to 112.80, in line with the firmer USD setting vs CNY. AUD/USD was down over 40pips to test below $0.75 level, while NZD/USD initially rallied to 0.6720 on strong trade data before sliding to 0.6690.
- Among notable speakers, China Premier Li delivered the keynote address at the Boao forum with largely boilerplate rhetoric. Li saw latest employment data as steady and also promised to help workers who lost their jobs due to overcapacity in steel/coal find new work. Li acknowledged that China is facing unavoidable challenges in the process of upgrading economy, but also noted there have been positive changes this year. On exchange rate, Li pledged to keep Yuan levels stable and not devalue to boost exports, assuring the audience of his confidence in maintaining the 6.5% GDP target for the next 5 years.
- In Japan, BOJ Gov Kuroda also largely reiterated his prior expectations that negative rates will spread to real economy, adding he expects to face less opposition to negative rates at the next policy meeting. Note that the most recent decision split was already reduced to 7-2 from initial 5-4, and the latest Opinion Summary from that Mar 15th decision published today saw some agreement that wage growth has been weak, trend CPI of 1.0-1.5% is shaky, and negative rates have produced some intended effects with limited portfolio rebalancing. Board members agreed that more exemptions to negative rates could heighten market volatility. Earlier, a Nikkei report also indicated that there is a new focus within the BOJ to keep down interest rates - especially the short end - rather than expand money supply with more JGB purchases.
- New Zealand trade balance was the only economic datapoint in the session, posting its 2nd straight month of surplus on hotter than expected exports. Decline in shipments to US of -3.6% was much lower than -9.5% of the prior month, and the exports of dairy were a more healthy 9% vs 3.7% prior.
***Equities***
US equities / ADRs:
- SPLS and ODP: US judge reproaches FTC for questionable legal tactics in Staples-ODP merger case - press; SPLS +5.5%, ODP +11.7% afterhours
- KBH: Reports Q1 $0.14 v $0.11e, R$678M v $633Me; +7.0% afterhours
- PVH: Reports Q4 $1.52 v $1.45e, R$2.11B v $2.07Be; +5.4% afterhours
- LCI: Cuts FY16 guidance to R$555-565M v $578Me (guided $585-595M prior); -0.8% afterhours
- SPWH: Reports Q4 $0.27 v $0.25e, R$213M v $205Me; -9.4% afterhours
Notable movers by sector:
- Consumer discretionary: Shimamura 8227.JP +7.0% (guidance speculation); Panasonic Corporation 6752.JP -0.2% (to withdraw long term sales target)
- Financials: China Life Insurance 2628.HK -3.0% (FY15 result); Macau Legend Development 1680.HK -3.6% (FY15 result); ANZ Bank ANZ.AU -5.7% (credit update); Mitsui & Co 8031.JP -7.1% (guidance)
- Industrials: Qinhuangdao Port 3369.HK -14.5% (FY15 result); BBMG Corp 601992.CN +5.9% (FY15 result)
- Technology: TCL Communication Technology 2618.HK -5.8% (FY15 result)
- Materials: Anhui Conch Cement 600585.CN -1.0% (FY15 result); Mitsubishi Corp 8058.JP -2.5% (guidance speculation)
- Energy: PetroChina Co 857.HK -4.1% (FY15 result); GCL-Poly Energy Holdings 3800.HK -3.0% (FY15 result); Beach Energy BPT.AU -7.9% (headcount cut following merger)
- Telecom: Coolpad Group 2369.HK -1.5% (FY15 result)