Asian Market Update: RBA quarterly statement raises projections for CPI and GDP as analysts begin to price in 2014 rate hikes
***Economic Data*** - (AU) RESERVE BANK OF AUSTRALIA (RBA) QUARTERLY STATEMENT ON MONETARY POLICY; raises inflation, growth forecast on lower fx rate; inflation to breach 2-3% target band by mid-2014 - (AU) AUSTRALIA JAN AIG PERFORMANCE OF CONSTRUCTION INDEX: 48.2 V 50.8 PRIOR (first contraction in 4 months) - (CN) CHINA JAN HSBC/MARKIT SERVICES PMI: 50.7 V 50.9 PRIOR - (CN) CHINA Q4 PRELIMINARY CURRENT ACCOUNT BALANCE: $49.8B V $40.4B PRIOR - FX REGULATOR SAFE - (JP) JAPAN JAN OFFICIAL RESERVE ASSETS: $1.28T V $1.27T PRIOR (1st increase in 3 months) - (MY) MALAYSIA DEC TRADE BALANCE (MYR): 9.5B V 9.6BE
***Observations/Insights*** - LinkedIn down over 8% on soft Q1 and 2014 guidance despite beating on the top and bottom lines in Q4. - RBA quarterly policy statement raises all of its projections for CPI and GDP through 2015 and also warns inflation may breach 2-3% target band in mid-2014. Statement, following the RBA dropping its easing bias in a meeting this week, sees H1 and FY14 GDP at 2.75% (+0.25pts from prior forecasts), FY15 GDP at 3.0% v 2.75% prior, 2014 core CPI at 2.75% vs 2.5% prior and 2015 core CPI at 2.5% v 2.25% prior. RBA also reiterates a period of stable interest rates is likely, however analysts with Commonwealth Bank have now gone as far as anticipating the first rate hike some time this year. - China HSBC services PMI falls again to a near 2 1/2 year low, however employment component in services is not as weak as manufacturing. HSBC chief economist expects services growth to bounce back a little in the coming months. - Shanghai Composite returns from week-long Lunar New Year break with a modest catch-up selloff. Despite the aggressive PBoC injections going into the holiday, money market rates have tightened again with overnight repo rates rising about 150bps.
***Fixed Income/Commodities/Currencies*** - (US) Weekly Fed Balance Sheet Total Assets Week ending Feb 5th: $4.11T v $4.10T prior; Reserve Bank Credit: $4.07T v $4.06T prior; M1 y/y change: 8.3% v 8.4% w/w; M2 y/y change: 5.6% v 5.8% w/w - (JP) BOJ offers to buy ¥110B in JGB with maturity under 1-yr, ¥200B in JGB with maturity over 10-yr as well as ¥2.0T in T-bills - (AU) Australia MoF (AOFM) sells A$800M in 6.0% 2017 Bonds; avg yield: 2.9785%; bid-to-cover: 4.79x - SLV: iShares Silver Trust ETF daily holdings fall to 10,045.8 (1-week low) tonnes from 10,090.7 tonnes
- USD majors were rangebound ahead of the Friday non-farm payrolls report. Traders are particularly cautious, with another weak figure dismissing the claim that the soft December print was a weather-related one-off, while a strong number would suggest the US recovery story is still intact. EUR/USD consolidated its post-ECB rally on Thursday just below $1.36 and USD/JPY traded within 10pips of the ¥102 handle. AUD/USD remained volatile, spiking about 30pips on the release of RBA quarterly statement above $0.8970 before selling down toward $0.8920. China Services PMI had little impact on the aussie.
***Speakers/Political/In the Papers*** - (CN) China Ministry of Commence (MOFCOM): China 2014 Lunar New Year "golden week" retail sales CNY610.7B, +13.3% y/y - financial press - (CN) China state researcher: China may set up deposit insurance system in 2014 - Chinese press - (CN) China Jan CPI growth may be at 2.3% y/y at the most (v 2.5% in Dec) - Chinese press - (CN) Goldman Sachs: 2014 China growth supported by developed markets recovery - (JP) Japan Econ Min Amari: Currently talking with US about Trans-Pacific Partnership (TPP) - (JP) Japan Fin Min Aso: PM Abe wants to see clear effect from extra budget in H1 of FY14/15 - financial press - (JP) Japan Finance Ministry posts Jan 1-20 Trade Balance of -¥2T, record amount - financial press - (JP) US Navy said to be upgrading its naval presence in Japan by swapping three of its currently-stationed ships with more modern vessels - Nikkei - (JP) Goldman Sachs economist: BOJ may announce further easing at the June meeting; Japan CPI may begin to stagnate in Mar-Apr - financial press - (AU) Commonwealth Bank senior economist: RBA likely to start raising rates in late 2014 - financial press - (AU) Minerals Council of Australia: Billions of dollars of investment are at risk unless Abbott govt cuts business regulation - AFR - (KR) South Korea Vice Fin Min Choo: South Korea should monitor markets as uncertainty increased - financial press - (KR) According to a survey by South Korea Hyundai Research Institute (HRI) think tank, over 60% view govt forecasts for $40K GNI per capita within a decade to be infeasible - Korean press
- (EU) ECB's Noyer: No new evidence to suggest change in monetary policy - French press interview - (US) Fed's Rosengren (dovish dissenter in 2013, FOMC non-voter in 2014): unemployment remains too high; must be patient in reducing stimulus - (US) Goldman Sachs chief economist Hatzius: Sees first rate hike by the Fed in early 2016 (in line with prior comments) - financial press
**Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 +1.8%, S&P/ASX +0.7%, Kospi +0.5%, Shanghai Composite -0.3%, Hang Seng +0.8%, Mar S&P500 +0.1% at 1,767, Apr gold +0.3% at $1,261, Mar crude oil -0.2% at $97.62/brl
US markets: - SMT: Reports Q3 $0.07(adj) v -$0.02e, R$158.0M v $108Me; To exit optical touch sensor business; +38.7% afterhours - UEPS: Reports Q2 $0.40 v $0.31e, R$137.3M v $120Me; +20.9% afterhours - ATHN: Reports Q4 $0.57 v $0.44e, R$171.6M v $169Me; +13.6% afterhours - EXPE: Reports Q4 $0.92 v $0.85e, R$1.15B v $1.14Be; +13.1% afterhours - OUTR: Reports Q4 $1.55 (cont ops) v $1.23e, R$593M v $597Me; authorizes $500M additional share buyback (28% of market cap); +10.0% afterhours - ATVI: Reports Q4 $0.79 v $0.73e, R$2.27B v $2.22Be; +7.8% afterhours - NWSA: Reports Q2 $0.31 v $0.21e, R$2.24B v $2.23Be; +3.8% afterhours - ITW: To Sell its Industrial Packaging Segment to The Carlyle Group for $3.2B, slightly above rumored $3B figure; +1.5% afterhours - BTE: Acquires Aurora Oil & Gas for $2.6B, $1.3B Bought Deal Financing and 9% Dividend Increase Upon Completion of Acquisition; +1.2% afterhours - VRSN: Reports Q4 $0.65 v $0.60e, R$246M v $245Me; Warns Q4 results could be restated; Guides initial FY14 R$1.0-1.02B v $1.03Be - conf call; -0.8% afterhours - NCR: Reports Q4 $0.83 v $0.80e, R$1.67B v $1.78Be; -6.4% afterhours - LNKD: Reports Q4 $0.39 v $0.37e, R$447.2M v $439Me; To Acquire data insights and matching technology co BrightBright's for $120M; -8.5% afterhours - FWM: Reports Q3 -$0.74 v -$0.04e, R$205.7M v $206Me; -17.8% afterhours - IBM: Said to consider selling its semiconductor unit; Value of business not determined - FT - AAPL: CEO Cook: Company repurchased $14B (approx 3.1% of market cap) in shares in two-weeks time, $40B in past 12 months - financial press
Notable movers by sector: - Consumer Discretionary: Yamada Denki 9831.JP +3.2% (9M results); SJM Holdings 880.HK +4.8% (enters JV) - Materials: Kingray New Materials Science & Technology 600390.CN +10.0%, Shenzhen Capchem Technology 300037.CN +7.4% (suppliers of Panasonic trade higher on strong Panasonic financial results); Tonghua Shuanglong Chemical 300108.CN +9.9% (acquisitions) - Energy: Woodside Petroleum WPL.AU -0.2% (enters Leviathan JV) - Industrials: DIC Corp 4631.JP +5.1% (9M results) - Technology: Lenovo Group 992.HK -0.7% (Google reportedly acquired stakes); Kingsoft Corp 3888.HK +2.3% (rumors company to spinoff security software unit); Sony Corp 6758.JP +2.3% (9M results; confirms to sell PC unit); Nikon Corp 7731.JP +6.8% (9M results); Catcher Tech 2474.TW +6.3% (Q1 guidance)