Asian Market Update: Nikkei leads the rebound on softer Yen, Lew calls for more progress on CNY reform at G20
***Economic Data*** - (JP) BANK OF JAPAN (BOJ) RELEASES MINUTES FROM JAN 21-22 MEETING: Sees moderate economic recovery to continue. - (KR) South Korea Q4 Household Income +1.7% y/y - (US) NORTH AMERICA JAN SEMI BOOK/BILL RATIO: 1.04 V 1.02 PRIOR (4th consecutive month above parity)
***Highlights/Observations/Insights*** - HP and Priceline rise just over 1% in extended session after beating estimates on top and bottom lines; Gains capped by below-consensus forecasts for next quarter. - In Australia, NAB's growth in domestic lending overshadowed by prospects of higher "redress costs" in its UK business; Santos FY profits fall amid rising offshore exploration costs without positive results. - US Treasury Sec Lew opens G20 conference in Sydney with a keynote address; Sees global economic growth remaining below potential and also calls for EM economies to balance their books, for Japan to get on with 3rd arrow of Abenomics, and for China to accelerate FX reform. - BOJ Minutes from Jan meeting show concern CPI may slow once JPY stops weakening; Members generally not worried over the impact of higher sales tax, and many members express the need for transparency on wide scope for policy toward achieving 2% inflation target. - Also in Japan, press survey seeing reluctance among managers to boost base wages with just over a month to go to the start of the new FY; Less than 20% plan to hike base salaries and only about 11% of companies would hike by enough to cover expenditures from higher sales tax.
***Fixed Income/Commodities/Currencies*** - (JP) BOJ offers to buy ¥2.5T in T-bills outright; Exercise on Feb 25th - SLV: iShares Silver Trust ETF daily holdings fall to 10,081 tonnes from 10,150 tonnes prior - USD/CNY: (CN) PBoC sets yuan mid point at 6.1176 v 6.1146 prior setting (weakest setting since Dec 19th) - (US) Weekly Fed Balance Sheet Total Assets Week ending Feb 19th: $4.15T v $4.12T prior; Reserve Bank Credit: $4.11T v $4.08T prior; M1: -$79.6B v +$109.2B prior; M2: +$41.3B v +$14.9B prior
- JPY is modestly weaker across the board - USD/JPY hit session highs in afternoon trade above 102.55 after comments from BOJ's Kuroda that it is too early to discuss exit from QE; EUR/JPY and GBP/JPY also up about 30 pips from the lows above 140.70 and 170.70 respectively. AUD is underperforming, falling back below $0.90 handle despite the overall risk-on session, with a bearish research note from Deutsche passing the trading desks with a forecast for AUD/USD as low as mid-$0.60s in 2015.
***Speakers/Political/In the Papers*** - US Treasury Sec Lew: Global economy remains well below potential; US pushing for TPP agreement; Sees progress on fx rate with respect to China; yet to move at speeds US wants - (CN) Beijing to officially implement of second-child policy on Feb 21st - Chinese press - (CN) China Finance Ministry researcher Jia Kang: Property tax should target the high-end segment - Chinese press - (CN) Commercial property project in China's City of Xiangyang, Hubei Province halted construction due to capital chain rupture; Sales permit revoked - Chinese press - (CN) China Ministry of Environmental Protection: China records 19.3 days in Jan with polluted air quality; Only 11.7 days in Jan have "above minimum standard" air quality; Sampled in 74 cities in China - (CN) China to continue US bond market investment; Normal for the nation to cut holdings of treasuries, as it is to increase them - Hong Kong press cites People's Daily - (JP) BoJ Gov Kuroda: Reiterates on track to hit 2% target; too early to discuss specific QE exit plans - addressing parliament - (JP) Bank of Japan (BoJ) Exec Dir Amamiya: Central bank to make policy adjustments if there are changes in outlook for inflation - addressing parliament - (JP) According to one survey, less than 20% of Japanese firms agree with PM Abe's stimulus policy to hike base wages in 2014 - financial press - (JP) Japan Fin Min Aso: To explain Japan's plan to spur growth at the G20 - financial press - (JP) Nomura Securities strategist: Expectations for additional easing from the BOJ are gaining traction - Nikkei - (AU) Australia Treasurer Hockey: Cautions country will run out of funds to pay for Medicare services - Australian press (update) - (NZ) New Zealand Fin Min English: New Zealand on track for FY14/15 budget surplus - comments on govt financial statement - (NZ) ANZ chief economist: Latest decline in consumer confidence is "merely noise" - NZ press - (KR) South Korea Customs Service: Feb 1-20 Exports +3.6% y/y, Imports +1.0% y/y - (KR) South Korea Fin Min Hyun: Fed tapering needs to be orderly and carefully calibrated; Emerging markets need to review macroeconomic policies
***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 +2.3%, S&P/ASX +0.3%, Kospi +1.1%, Shanghai Composite -0.1%, Hang Seng +0.4%, Mar S&P500 +0.2% at 1,841, Apr gold +0.1% at $1,318, Mar crude oil -0.1% at $103.21/brl
US markets: - ESC: To merge with Brookdale Senior Living in transaction valued at $2.8B in stock (32% premium); +30.5% afterhours - JNPR: Releases integrated operating plan; returning $3B (21.7% of market cap) in capital to shareholders over coming 3 years; initiatves $0.10 quarterly dividend (implied yield 1.5%); +2.8% afterhours - INTU: Reports Q2 $0.02 v $0.15e, R$782M v $826Me; +1.9% afterhours - PCLN: Reports Q4 $8.85 v $8.22e, R$1.54B v $1.52Be; +1.5% afterhours - HPQ: Reports Q1 $0.90 v $0.85e, R$28.15B v $27.1Be; +1.1% afterhours - AGU: Reports Q4 $0.74 v $0.90e, R$2.87B v $3.04Be; +0.5% afterhours - WBMD: Reports Q4 $0.25 v $0.23e, R$146.3M v $145Me; -0.4% afterhours - JWN: Reports Q4 $1.37 v $1.33e, R$3.61B v $3.70Be; -0.7% afterhours - NEM: Reports Q4 $0.33 (inc items) v $0.42e, R$2.17B v $2.10Be; -0.9% afterhours - MRVL: Reports Q4 $0.29 v $0.26e, R$932M v $893Me; -2.6% afterhours - ESRX: Reports Q4 $1.12 (adj) v $1.12e, R$25.8B v $25.3Be; -2.7% afterhours - GRPN: Reports Q4 $0.04 v $0.02e, R$768.4M v $719Me; -11.7% afterhours
Notable movers by sector: - Consumer Discretionary: Billabong BBG.AU +1.4% (H1 results); Fantastic Holdings FAN.AU -3.8% (H1 results) - Financials: National Australia Bank NAB.AU -2.2% (Q1 trading update); Amalgamated Holdings AHD.AU +2.4% (H1 results); AIA Group 1299.HK -1.7% (FY13 results) - Materials: Jinchuan Group International Resources 2362.HK +9.1% (Trafigura acquires stake); Iluka Resources ILU.AU +1.6% (FY13 results); Teranga Gold Corp TGZ.AU +3.2% (FY13 results) - Energy: Santos Ltd STO.AU -4.0% (FY13 results) - Technology: Acer Inc 2353.TW +1.4% (unveils new Android smartphones); Renesas Electronics Corp 6723.JP +4.4% (restructuring plans) - Telecom: KDII 9433.JP +2.4% (press speculation on FY14/15 results)
Hewlett-Packard beats by $0.06, beats on revs; guides Q2 EPS in-line (midpoint below); raises low end of FY14 EPS, in-line (30.19 +0.74)
Reports Q1 (Jan) adj. earnings of $0.90 per share, excluding non-recurring items, $0.06 better than the Capital IQ Consensus of $0.84; revenues fell 0.7% year/year to $28.15 bln vs the $27.17 bln consensus. Personal Systems revenue was up 4% YoY with a 3.3% operating margin. Commercial revenue increased 8% and Consumer revenue declined 3%. Total units were up 6% with Desktops units down 3% and Notebooks units up 5%. Printing revenue was down 2% YoY with a 16.8% operating margin. Total hardware units were up 5% with Commercial hardware units up 6% and Consumer hardware units up 4%. Supplies revenue was down 3%. Enterprise Group revenue was up 1% YoY with a 14.4% operating margin. Industry Standard Servers revenue was up 6%, Storage revenue was flat, Business Critical Systems revenue was down 25%, Networking revenue was up 4% and Technology Services revenue was down 4%. Enterprise Services revenue was down 7% YoY with a 1% operating margin. Application and Business Services revenue was down 4%, and Infrastructure Technology Outsourcing revenue declined 9%. Software revenue was down 4% YoY with a 15.8% operating margin. Support revenue was down 2%, license revenue was down 6%, professional services revenue was down 12% and software-as-a-service (SaaS) revenue was up 6%. HP Financial Services revenue was down 9% YoY with a 6% decrease in net portfolio assets and an 18% increase in financing volume. The business delivered an operating margin of 11.6%. Corporate Investments revenue increased due to the sale of a portfolio of mobile computing intellectual property. Asset management HP generated $3.0 billion in cash flow from operations in the first quarter, up 17% from the prior-year period. Inventory ended the quarter at $6.0 billion, down 1 day YoY to 25 days. Accounts receivable ended the quarter at $13.5 billion, down 2 days YoY at 43 days. Accounts payable ended the quarter at $12.6 billion, up 4 days YoY to 52 days. HP's dividend payment of $0.1452 per share in the first quarter resulted in cash usage of $278 million. HP also utilized $565 million of cash during the quarter to repurchase ~20.4 million shares of common stock in the open market. HP exited the quarter with $16.4 billion in gross cash. Co issues in-line guidance for Q2, sees adj. EPS of $0.85-0.89 vs. $0.89 Capital IQ Consensus Estimate.
Co issues in-line guidance for FY14, raises adj. EPS to $3.60-3.75 (from $3.55-3.75) vs. $3.64 Capital IQ Consensus Estimate.