Asian Market Update: Market meltdown in higher gear amid uncertainty over PBoC intent to ease; Nikkei225 enters bear market
***Economic Data***
- (CN) CHINA DEC FOREIGN DIRECT INVESTMENT (FDI) Y/Y: -5.8% V +3.1%E
- (AU) AUSTRALIA JAN WESTPAC CONSUMER CONFIDENCE INDEX: 97.3 (4-month low) V 100.8 PRIOR, M/M: -3.5% (2nd consecutive decline) V -0.8% PRIOR
- (NZ) NEW ZEALAND Q4 CPI Q/Q: -0.5% (biggest decline in 7 years) V -0.2%E; Y/Y: 0.1% (15-year low) V 0.3%E
- (NZ) New Zealand REINZ Dec National median home price +3.3% v +0.8% prior
***Index Snapshot (as of 05:00 GMT)***
- Nikkei225 -2.9%, S&P/ASX -1.3%, Kospi -3.1%, Shanghai Composite -1.4%, Hang Seng -3.8%, Mar S&P500 -1.5% at 1,845
***Commodities/Fixed Income***
- Feb gold +0.3% at $1,092/oz, Mar crude oil -2.4% at $28.86/brl, Mar copper flat at $1.97/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 9,754 tonnes from 9,795 tonnes (lowest level since Dec 2012)
- (CN) PBOC SETS YUAN MID POINT AT 6.5578 V 6.5596 PRIOR; strongest Yuan fix since Jan 6th; 9th straight firmer setting relative to Close
- (CN) China MoF sells 7-yr bonds; yield 2.83% v 2.98% prior
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥450B in 5-10yr JGBs
- (AU) Australia sells A$4.6B in Nov 2027 bonds; yield 2.865%
***Market Focal Points/FX***
- Risk assets were under steady, heavy pressure in Asian hours as optimism over expectation of more PBoC easing in the wake of soft China GDP data overnight proved to be a sugar high. S&P500 futures are down over 1.5% at multi-month lows below 1,845, US 10-year note yield is down 5bps below 2%, crude oil is down another 2.4%, while gold is up over $5 above 1,092. Among regional indices, Nikkei and Kospi were down some 3%, Shanghai down by nearly 1.5%, and Hang Seng is down nearly 4% amid heavy selling in HKD. In FX majors, high-beta/commodity currencies AUD, NZD, CAD, and MXN are down sharply to the benefit of USD, JPY, and EUR. USD/JPY is off by 80pips from the highs below 117, AUD/USD down over 60pips at 0.6860, and NZD/USD down over 100pips below 0.6370, with added pressure on the kiwi coming from soft New Zealand CPI figures.
- Comments from PBoC economist Ma Jun, who said the MLF facility implemented yesterday could be a substitute for a RRR cut, seemed to confound investors looking for hints of more aggressive easing. Recall overnight gains were attributed to expectation of more response from the PBOC after yesterday's economic data, and the comments out of Ma produced a burst of risk selling. Separately, a China Securities Journal report called for the central bank to cut RRR due to market fluctuations and raise fiscal deficit target to 3% of GDP to allow for more fiscal stimulus. MOFCOM spokesperson Shen also remarked that China trade conditions remain challenging and January exports would likely come in rather weak, especially in the contect of December strength supported by year-end front loading. PBoC's Yuan fix was set as strongest since the mini-devaluation but produced little reaction.
- In Japan, Nikkei225 officially entered "bear market", falling 20% from the high mark set in June. Earlier press reports saw speculation that BOJ is considering to once again delay the timeframe to achieve the 2% inflation target beyond H2 of FY16, comments from business federation (Keidanren) about softer wage growth, and increasing uncertainty over the govt's goal of balancing budget by FY20. Yet again however, PM Abe reiterated that he sees Japan economic fundamentals as solid.
- BHP Q2 iron ore production report missed expectations at 57M tons v 59Me. H1 output of iron ore was up 4%, but copper and petroleum were down 6% and 5% respectively. BHP also cut its forecast for FY16 iron ore output to 237Mt from 247Mt due to Brazil Samarco disaster and also cut US production of petroleum. Copper and Metallurgical coal production forecasts were unchanged.
- In economic data, New Zealand quarterly CPI hit multi-year lows, prompting speculation of RBNZ resuming policy easing. Economist with TD Securities said it would be a surprise if the central bank did not show a "genuine easing bias" in its decision next week. Soft CPI added to the pressure on NZD currency earlier coming after a 2nd straight decline in dairy auction prices. Australia's Westpac consumer confidence index hit 4-month lows, falling for the 2nd straight month. Westpac economist noted the decline in commodity prices has impacted business sentiment.
***Equities***
US equities / ADRs:
- SYN: Reports Positive Topline Data from Second Phase 2 Clinical Trial of SYN-010 in Patients with Irritable Bowel Syndrome with Constipation (IBS-C); +34.9% afterhours
- NFLX: Reports Q4 $0.10 v $0.03e, R$1.82B v $1.83Be; +6.9% afterhours
- CREE: Reports Q2 $0.30 v $0.24e, R$435.8M v $434Me; +6.6% afterhours
- IBM: Reports Q4 $4.84 (adj) v $4.76e, R$22.1B v $22.2Be; Guides initial FY16 'at least $13.50' v $15.02e - earnings call; -3.8% afterhours
- IBKR: Reports Q4 $0.25 v $0.25e, R$289M v $313Me; -4.5% afterhours
- AMD: Reports Q4 -$0.10 v -$0.10e, R$958M v $955Me; -6.2% afterhours
Notable movers by sector:
- Consumer discretionary: Sydney Airports SYD.AU +2.1% (Dec result)
- Financials: Eclipx Group ECX.AU -0.3% (divestment); PAX Global Technology 327.HK +3.7% (profit alert); Everbright Securities Co 601788.CN +2.0% (guidance); Hopson Development Holdings 754.HK -2.3% (2015 result)
- Industrials: Harbin Electric Co 1133.HK -4.4% (profit warning); Nippon Express 9062.JP +0.6% (9-month result speculation)
- Materials: Mount Gibson Iron MGX.AU -2.7% (Q2 result); BHP BHP.AU -3.7% (Q2 result); Baoshan Iron & Steel Co 600019.CN -6.8% (FY15 result)
- Energy: CNOOC 883.HK -6.0% (2016 target)
- Telecom: ZTE Corp 000063.CN +1.3% (prelim FY15 result); China Mobile 941.HK -3.0% (Dec result)
- Utilities: Huadian Power International Corp 1071.HK -4.3% (2015 result)