Asian Market Update: Commodities and high-beta FX soar after dovish Fed statement tempered tightening expectations
***Economic Data***
- (CN) China banks Feb net forex sales CNY228.5B for clients v sold CNY454.8B m/m - SAFE
- (CN) China National Energy Administration (NEA): China Feb power consumption at 381B kWh, +4% y/y
- (AU) AUSTRALIA FEB EMPLOYMENT CHANGE: 0.3K V 13.5KE; UNEMPLOYMENT RATE: 5.8% V 6.0%E
- (NZ) NEW ZEALAND Q4 GDP Q/Q: 0.9% V 0.7%E; Y/Y: 2.3% V 2.1%E
- (JP) JAPAN FEB TOTAL MERCHANDISE TRADE BALANCE: ¥242.8B V ¥400BE; ADJUSTED TRADE BALANCE: ¥166.1B V ¥235BE
- (JP) Japan investors bought net ¥897B in foreign bonds v bought net ¥1.5T in prior week; Foreign investors sold net ¥1.6T (record) in Japan stocks v sold net ¥139B in Japan stocks in prior week
- (SG) SINGAPORE FEB ELECTRONIC EXPORTS Y/Y: 0.7% V 5.7%E; NON-OIL DOMESTIC EXPORTS M/M: +2.1% V -0.8%E; Y/Y: -4.1% V -1.1%E
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +1.4%, S&P/ASX +1.4%, Kospi +1.0%, Shanghai Composite +0.5%, Hang Seng +1.4%, Jun S&P500 +0.4% at 2,025
***Commodities/Fixed Income***
- Apr gold +2.2% at $1,256/oz, Apr crude oil +1.7% at $39.11/brl, May copper +1.4% at $2.26/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 3.0 tonnes to 795.2 tonnes; 2nd straight increase
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4961 V 6.5172 PRIOR; first stronger setting in 4 sessions
- (CN) PBOC to inject CNY40B in 7-day reverse repos
- JGB: (JP) Japan's MoF sells ¥1.09T in 0.4% (1.0% prior) 20-year JGBs; Avg yield: 0.427% (record low) v 0.786% prior; bid-to-cover: 3.08x v 3.50x prior
- (NZ) New Zealand sells NZ$100M in 3% 2020 bonds at 2.26%
***Market Focal Points/FX***
- Asian equity markets are higher, tracking the strong close on Wall St that followed a more dovish than anticipated FOMC statement. While the Fed held off on another rate hike as widely expected, staff projections for rates this year were reduced by 50bps at the median to 0.875% - implying just 2 more hikes in 2016 against prior expectations of 4 moves. 2017-end median est also came in 50bps to 1.875% and the long-run rate was reduced to 3.25% from 3.50%. FOMC forecasts also lowered 2016 GDP ests to 2.1-2.3% from 2.3-2.5% and PCE inflation to 1.0-1.6% from 1.2-1.7% in justifying new rate expectations. In her statement, Fed Chair Yellen reflected on inflation persisting below 2% long-run objective and noted economic conditions will evolve so as to warrant only gradual increases. In the Q/A, Yellen maintained that April remains a live meeting for another tightening, but Fed watcher Hilsenrath remarked that the new staff projections pose a "high hurdle" to moving off the 0.25% rate. Note the statement also had 1 dissenter - Esther George - who voted for a 25bp hike. USD crashed across the board in the wake of the decision and consolidated in Asia. USD/JPY was down as much as 120pips around 112.40, EUR/USD got up to 1.1240 or 160pips, AUD/USD was up some 180pips above 0.76 - 8-month high - with added gains from Aussie jobs numbers, and NZD/USD hit a high of 0.6780 - up 200 ticks from pre-FOMC levels with added strength from better Q4 GDP. Gold rose $35 to as high as $1,265, oil is close to its 2016-highs above $39, and copper was up over 1% at $2.27.
- In notable economic data out of Asia Pacific, Japan February trade balance was slightly lower than expected but components were robust, with exports falling 4% vs 13% prior and imports down 14% vs 16% expected. Shipments to China were especially significant with a 5% rise, though analysts pointed out those numbers were distorted by timing of Lunar New Year. Shipments to Europe were up 9% and US were flat vs -3.6% and -5.3% respectively. In Australia, February jobs numbers came in mixed with lower than expected unemployment and lower net new jobs, as participation rate hit a 5-month low of 64.9% v 65.2%e amid ongoing transition away from mining economy. New Zealand Q4 GDP maintained its level of growth from Q3, beating expectations on the strength of capital formation component rising 1.6% after a decline of 3% in Q3. China Commerce Ministry put out its Feb FDI figures of CNY53.63B, +1.8% y/y amid property market recovery. Note the YTD FDI figures were released last week.
- Among key speakers and press, RBA's Debelle said Australia central bank would welcome slightly lower AUD to help economic rebalancing, leading a to a brief AUD retreat below 0.7540 in early Asia session. ASB and ANZ economists noted that soft dairy sector and cautious global outlook justify expectations for more RBNZ easing this year despite the strong Q4 GDP report. In Japan, a Nikkei piece remarked that average OIS for the next 12 months see rates at just under -0.1% vs slightly below -0.2% average in February, suggesting markets are now very skeptical of further BOJ easing. Separate report also saw a steep reduction in the number of Japan firms that plan to offer increases in base wages for next year. Outside Asia, Brazil ETF and main ADRs (PBR, Vale) were up sharply afterhours as the move to oust deeply unpopular Pres Rousseff shifted into higher gear with appointment of a prosecutor general to launch a formal investigation.
***Equities***
US equities / ADRs:
- VTAE: Achieves proof-of-concept with first-in-class RORyt inhibitor in moderate to severe psoriasis; +58.2% afterhours
- RSTI: Coherent Inc. acquires ROFIN-SINAR for $32.50/shr in cash, valuing it at $942M; +46.2% afterhours
- FDX: Reports Q3 $2.51 v $2.33e, R$12.7B v $12.3Be; +5.1% afterhours
- AMD: Intel said to be in talks to license graphics technology from AMD - financial press; +4.6% afterhours
- APD: Said to be in talks to sell performance-materials unit to Evonik; estimated value as much as over $3.5B - financial press; +0.3% afterhours
- CTRP: Reports Q4 $0.11 v $0.00e, R$468M v $434Me; -4.1% afterhours
- WSM: Reports Q4 $1.52 adj v $1.59e, R$1.59B v $1.62Be; -6.0% afterhours
- JBL: Reports Q2 $0.57 adj v $0.59e, R$4.40B v $4.53Be; -6.0% afterhours
- GES: Reports Q4 $0.57 v $0.58e, R$658M v $655Me; -10.6% afterhours
Notable movers by sector:
- Consumer discretionary: Li Ning Co 2331.HK +5.7% (FY15 result); Wanda Commercial Properties Group Co 169.HK -5.3% (FY15 result); Myer Holdings MYR.AU +13.4% (H1 result)
Samsonite 1910.HK +1.4% (FY15 result)
- Technology: Kingdee International Software Group Co 268.HK -7.8% (FY15 result); Toshiba Corporation 6502.JP +2.8% (FY16 profit speculation)
- Materials: Hyundai Steel Co 004020.KR % (to increase major steel product prices); CGN Mining Co 1164.HK % (guidance); Lingbao Gold Co 3330.HK % (guidance)
- Energy: Sinopec Shanghai Petrochemical 600688.CN +4.7% (FY15 result); China Shenhua Energy Co 1088.HK +3.8% (Feb result)
- Telecom: China Unicom 762.HK +7.1% (FY15 result)
- Utilities: CGN Meiya Power Holdings Co 1811.HK +1.7% (FY15 result)