Asian Mid-session Update: Kraft targeted by 3G Capital in potential $40B deal; New Zealand trade surplus misses estimates
***Economic Data***
- (JP) JAPAN FEB PPI SERVICES Y/Y: 3.3% V 3.3%E
- (NZ) NEW ZEALAND FEB TRADE BALANCE (NZD): 50M V 350ME (2nd consecutive month of surplus)
- (AU) AUSTRALIA FEB SKILLED VACANCIES M/M: 0.2% V 0.7% PRIOR (2nd consecutive increase)
- (KR) SOUTH KOREA Q4 FINAL GDP Q/Q: 0.3% V 0.4% PRELIM; Y/Y: 2.7% V 2.7% PRELIM; 2014 GDP 3.3% v 2.9% in 2013
- (PH) PHILIPPINES JAN TRADE BALANCE: -$752M V -$910Me
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.1%, S&P/ASX +0.1%, Kospi -0.1%, Shanghai Composite -0.2%, Hang Seng +0.5%, Jun S&P500 flat at 2,085
***Commodities/Fixed Income***
- Apr gold -0.2% at $1,190/oz, May crude oil -0.4% at $47.55/brl, May copper -0.2% at $2.79/lb
- (US) API PETROLEUM INVENTORIES: CRUDE: +4.8M (2nd straight build) v +5.5Me, GASOLINE: -2.6M v -2Me, DISTILLATE: -0.64M v -0.5Me
- (SA) Saudi Arabia observed moving military equipment and heavy artillery to areas near its borders with Yemen - press
- (CN) China MoF sells 3-yr bonds at avg yield of 3.22%
- (JP) BOJ offers to buy ¥300B in 1-3yr JGBs, ¥350B in 3-5yr JGBs, and ¥400B in 5-10yr JGBs
- USD/BRL: (BR) Brazil Central Bank (BCB) to end fx intervention program by end of March
***Market Focal Points/FX***
- After partnering with Berkshire last year to acquire Heinz, Brazilian private equity firm 3G Capital has set reportedly set its sights on Kraft. The mega-deal is rumored to be valued as much as $40B or up to $50B when including debt. Shares of KRFT spiked up 16% in extended session. Recall overnight there was also some speculation that Yum Brands could be a potential target for 3G, though YUM was little changed afterhours.
- Trade data out of New Zealand was the most notable economic event in an otherwise quiet session. February marked the 2nd consecutive surplus, though well below estimates, sending NZD/USD down by about 35pips below 0.7630 in the aftermath. Both exports and imports were at roughly NZ$3.9B - the former missing consensus and the latter beating by NZ$0.2B. Among the notable components, shipments to China plunged by 36% y/y and the overall dairy exports were down 42%, even though US-bound shipments rose by over 25%. Interim report out of Fonterra was also less than inspiring. Net profit fell to NZ$183M v NZ$206M y/y, and even though Fonterra affirmed its FY14/15 payout of NZ$4.70/kg, its forecast for overall cash payout including dividend was reduced by 5c to NZ$4.90-5.00/kg. Fonterra CEO said the results are "below our farmers expectations... a snapshot of tough conditions in dairy with variable production, demand and pricing."
- Also down under, Australia top-3 iron ore producer Fortescue CEO stirred up controversy by calling on giants BHP and Rio Tinto to follow him and cut production to boost prices. The call resulted in a warning from competition regulator ACCC, and Treasurer Hockey also remarked that the govt is not supportive of "cartels". Also of note, RBA Semi-Annual Financial Stability Review pointed to elevated risks in housing and commercial property sector, even though the overall financial system was deemed to be performing strongly. AUD/USD traded in a narrow 30pip range below $0.79.
- In Japan, Dep BOJ Gov Iwata went against the formal position driven by Gov Kuroda, questioning the likelihood of achieving 2% inflation target within the intended 2-year time frame. Iwata did acknowledge that real wages are rising as a trend and the end of deflation was in sight. Earlier, a Nikkei report noted the equity holdings by the BOJ have now topped ¥10T in market value and ¥5.7T in book value, making the central bank the biggest holder of Japan stocks next to GPIF's ¥27T. Report noted that while the BOJ does not publicly disclose the details of its share-buying operations, it frequently steps into the market and buys ¥30-40B in stocks when prices fall in the AM session.
***Equities***
US equities / ADRs:
- KFX: Lexmark to Acquire Kofax for $11/shr in cash or about $1B; +45.3% afterhours
- KRFT: Private equity firm 3G Capital said to be in talks to acquire Kraft Foods - financial press; +16.2% afterhours
- STMP: Intends to Acquire Online Shipping Company Endicia From Newell Rubbermaid for $215M in cash; +9.6% afterhours
- MRK: Announces New $10B Share Repurchase Program (6% of market cap); +1.7% afterhours
- BDX: Said to weigh sale of respiratory devices unit; Valuation could be around $1.5-2.0B - financial press; flat afterhours
- SCS: Reports Q4 $0.22 v $0.21e, R$749.9M v $764Me; Raises quarterly dividend by 7.1% to $0.1125 (implied yield 2.3%); -0.9% afterhours
- NSM: Offering 17.5M shares (19% of shares outstanding); -5.2% afterhours
Notable movers by sector:
- Consumer Discretionary: Myer Holdings Ltd MYR.AU +3.3% (shareholder raises stake); Intime Department Store Group 1833.HK +6.8% (FY14 results); Daphne International Holdings 210.HK +4.3% (FY14 results)
- Financials: China Overseas Land 688.HK +2.3% (FY14 results); Kaisa Group Holdings 1638.HK -3.0% (S&P cuts rating); Agricultural Bank of China 1288.HK -0.3% (FY14 results)
- Materials: Regis Resources RRL.AU -1.9% (shareholder cuts stake); Fortescue Metals Group FMG.AU +2.0% (founder calls for a cap in Australia iron ore production)
- Energy: Kansai Electric Power 9503.JP +2.6% (speculation on decommissioning reactors)
- Industrials: Sinotrans Air Transportation Development 600270.CN +4.2% (FY14 results); China International Marine Containers Group 000039.CN +3.8% (FY14 results)
- Healthcare: Humanwell Healthcare Group 600079.CN -3.9% (FY14 results)