Asian Market Update: RBNZ holds OCR, sending NZD lower; China HSBC final manufacturing PMI deteriorates further
***Economic Data*** - (CN) CHINA JAN FINAL HSBC/MARKIT MANUFACTURING PMI: 49.5 V 49.6E (1st contraction in 6 months) - (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE UNCHANGED AT 2.50%, AS EXPECTED - (NZ) NEW ZEALAND DEC BUILDING PERMITS M/M: +7.6% (fifth consecutive increase) V -5.0%E - (NZ) NEW ZEALAND DEC NET MIGRATION: 2,820 V 2,770 PRIOR - (AU) AUSTRALIA Q4 EXPORT PRICE INDEX Q/Q: -0.5% V -0.2%E; IMPORT PRICE INDEX Q/Q: -0.6% (largest decline in 5 quarters) V +2.0%E - (AU) AUSTRALIA DEC HIA NEW HOME SALES M/M: -0.4% V +7.5% PRIOR; 2013 sales: +14.3%, first year of growth in 5 years - (JP) JAPAN DEC RETAIL TRADE M/M: 0.8% V 0.3%E; Y/Y: 2.6% V 3.9%E; LARGE RETAILERS' SALES: 0.1% V 0.7%E - (JP) Japan investors sold net ¥357.0B in foreign bonds last week (3rd consecutive week of net sales) vs sold net ¥226.0B in prior week; Foreign Investors sold net ¥154.6B in Japan stocks v bought net ¥71.2B in prior week - (JP) JAPAN DEC LOANS & DISCOUNTS CORP Y/Y: 2.2% V 2.6% PRIOR - (PH) PHILIPPINES Q4 GDP Q/Q: 1.5% V 0.8%E; Y/Y: 6.5% V 6.0%E; GDP ANNUAL Y/Y: 7.2% V 6.6%E, V 6.0-7.0% GOVT TARGET
***Observations/Insights*** - Facebook the most notable mover in US extended session, rising over 10% on earnings above $60/shr - a new record high. - Lenovo announced a high-profile deal to acquire Google's Motorola Mobility for $2.9B. Lenovo is down over 8%, while Google rose about 2% in the aftermarket. - RBNZ held rates on hold as expected by majority of analysts. However, with swaps markets at an even-split in expectation of a hike today, NZD was sharply lower on the decision. RBNZ did acknowledge "considerable momentum" for the economy and forecasted growth to be in line with 3.5% GDP in Sept quarter. At the same time, it added that the current high level of FX rate is "unsustainable" in the long run, weighing further on the kiwi dollar. - China final manufacturing PMI print from HSBC declined to 49.5 from 49.6 flash figure, confirming the first contraction in the manufacturing space in 6 months. Even more notable, HSBC report said China's employment sector saw the "quickest rate of job shedding since March 2009." Hong Kong's Hang Seng and Shanghai Composite saw modest losses in the final trading session before the start of the Lunar New Year holiday break. - Nikkei225 hit 11-week lows below 14,900, dragged down by firmer yen.
***Fixed Income/Commodities/Currencies*** - JGB: (JP) Japan MoF sells ¥2.66T in 0.1% 2-yr notes, Avg Yield: 0.083% v 0.086% prior; bid to cover: 7.17x v 6.53x prior - (CN) PBoC won't conduct open market operations (OMO) in today's session, as expected (1st halt in 4 sessions); Injects CNY75B this week v injected CNY375B in prior week - (CN) Daily Shibor fixings; O/N: 4.4350% v 4.8000% prior (2nd consecutive decline); 1-week: 4.9830% v 5.1080% prior - (CN) China Qinhuangdao coal price falls to CNY580-590/t (4th consecutive decline) - GLD: SPDR Gold Trust ETF daily holdings rise 2.1 tonnes to 792.6 tonnes (first rise since Jan 18th)
- Risk-off sentiment stemming from the losses on Wall St, as well as a less hawkish than expected RBNZ statement and soft China PMI, are weighing on AUD and NZD currencies. NZD/USD hit 4-week lows of $0.8170, falling nearly 100pips in the aftermath of the RBNZ overnight cash rate decision. AUD/USD saw its lows right after the China Manufacturing PMI data, trading as low as $0.8710, down 40pips from the highs. AUD/NZD cross is higher on relative NZD weakness, rising to a 1-week high of NZD1.0680. In-line FOMC statement and $10B taper decision gave traders little to latch on to for the most liquid USD majors - USD/JPY traded in a 20pip range above ¥102.10 in the morning session while EUR/USD is down just 15pips from pre-FOMC levels around $1.3650.
***Speakers/Political/In the Papers*** - (CN) Credit Suisse cuts China Q1 GDP target to 7.3% from 7.7% prior - (CN) China PBoC may control M2 growth approx 13% for 2014 - Chinese press - (CN) China local govt to increase state-owned asset securitization amid pressure from unsustainable land financing - Chinese press - (CN) China property companies may be facing financing challenges - Chinese press - (JP) Japan 2014 new vehicle sales expected at 4.85M units -9.8% y/y (1st time below 5M in 3 years) - financial press citing industry body JAMA - (JP) Japan New Komeito party leader Yamaguchi: Excessive yen strength corrected; country is moving away from deflation - address to parliament - (JP) Japan Econ Min Amari: Fall in global equity market indicates difficulty to smoothly end QE in US - (KR) Korea National Oil Corporation (KNOC): 2013 oil consumption fell 0.1% y/y to 826.8M barrels equivalent; First decline in 5 years - Korean press - (KR) South Korea Financial Services Commission (FSC): Fed's decision on tapering is helpful to ease global market uncertainties - (US) Survey finds all 17 US primary dealers expect Fed to cut QE program by additional $10B at Mar meeting - financial press
***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 -2.5%, S&P/ASX -0.8%, Kospi closed, Shanghai Composite -0.5%, Hang Seng -0.5%, Mar S&P500 +0.2% at 1,774, Apr gold -0.1% at $1,261, Mar crude oil +0.2% at $97.54/brl
US markets: - FLEX: Reports Q3 $0.26 adj v $0.23e, R$7.18B v $6.69Be; +12.3% afterhours - FB: Reports Q4 $0.31 v $0.27e, R$2.59B v $2.36Be; +12.1% afterhours - PRXL: Reports Q2 $0.49 v $0.49e, R$574.2M v $475Me; +3.3% afterhours - QCOM: Reports Q1 $1.26 v $1.20e, R$6.62B v $6.71Be; +3.1% afterhours - QLGC: Reports Q3 $0.29 v $0.24e, R$119.4M v $118Me; +2.3% afterhours - GOOG: Lenovo confirms to acquire Motorola Mobility assets for $2.91B; +2.2% afterhours - LVS: Reports Q4 $0.72 v $0.85e, R$3.66B v $3.72Be; Raises quarterly dividend by 43% to $0.50/shr from $0.35/shr; -2.0% afterhours - SYMC: Reports Q3 $0.51 v $0.43e, R$1.71B v $1.65Be; -2.1% afterhours - CTXS: Reports Q4 $1.04 v $0.98e, R$802.4M v $808Me; -5.0% afterhours - ELY: Reports Q4 -$0.34 v -$0.32e, R$127.2M v $123Me; -6.0% afterhours
Notable movers by sector: - Consumer discretionary: Billabong BBG.AU -3.6% (CEO comments) - Financials: Sumitomo Mitsui Financial Group 8316.JP -5.4% (9M results); Shinsei Bank 8303.JP -7.2% (9M results) - Materials: Luoyang Glass 1108.HK -2.3% (FY13 guidance); Fortescue Metals Group FMG.AU -2.1% (Q2 production results) - Energy: Beach Energy Ltd BPT.AU -2.4% (FY14 production guidance) - Technology: Lenovo Group 992.HK -8.8% (acquires Motorola unit); Canon 7751.JP -1.7% (FY13 results); Nintendo 7974.JP -3.4% (9M results; repurchase plan) - Industrials: Hitachi Metals 5486.JP +5.0% (9M results); Zhangjiagang Furui Special Equipment 300228.CN -6.4% (FY13 results); Toyota Motor 7203.JP -2.2% (speculation on FY13/14 results); Misumi 9962.JP -6.8% (9M results) - Healthcare: Taisho Pharmaceutical 4581.JP +2.5% (9M results) - Utilities: Chugoku Electric Power 9504,JP -4.3% (FY13/14 guidance)
After Hours Summary: INFN +13.3%, FB +12.2%, FLEX +10.4%, QCOM +2.5%, NSR -23.0%, CTXS -4.6% following earnings/guidance
* After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: INFN +13.3%, FB +12.2%, ININ +10.6%, FLEX +10.4%, CNQR +7%, NOW +5.4%, CSII +5.4%, MKSI +4.8%, FTNT +4.4%, QCOM +2.5%, LRCX +2.4%, QLGC +2.3%, TCBK +1.2%, PRXL +0.8%, CMO +0.8%, IVAC +0.5%
Companies trading higher in after hours in reaction to news:
- IO +9.8% (announced that it has increased its ownership interest in OceanGeo, a geophysical company specializing in multicomponent ocean bottom seismic acquisition; ION now owns 70% of OceanGeo), - TWTR +6.0% (trading higher following strong quarterly results from Facebook), - NLST +5.6% (announced that it has filed motions to add two additional patents to the lawsuits against the recently announced ULLtraDIMM memory module from Diablo Technologies and Smart Storage Systems), - GERN +5.1% (announced public offering of common stock, size not disclosed), - GOOG +2.6% (confirmed Lenovo (LNVGY) is acquiring Motorola Mobility), - NOG +2.5% (announced 4Q2013 production is expected to average ~ 13,900 barrels of oil equivalent (Boe) per day, up 28% y/y), - GPOR +2.1% (announced retirement of CEO James Palm), - MPO +2.0% (provided operation update and preliminary 2014 production and capital guidance; sees Q4 adjusted EBITDA of $115-120 mln), - ARP +1.2% (increased quarterly distribution ~4% to $0.58 from $0.56 per unit)
* After Hours Losers:
Companies trading lower in after hours in reaction to earnings: NSR -23%, INVN -7.3%, TSCO -5.9%, CAVM -4.8%, ELY -4.7%, CTXS -4.6%, BVSN -4%, MLNX -3.3%, TTEK -2.8%, KEX -2.3%, SYMC -2.1%, BRKL -1.6%, QTM -1.6%, FBHS -1.4%, LVS -1.3%, QGEN -0.2%
Companies trading lower in after hours in reaction to news:
- KBIO -35.5% (reported top-line data for Phase 2 study of KB003 in severe asthma; while the study showed that KB003 was generally safe and well tolerated, it did not meet its primary clinical endpoint of improvement in FEV1 (a measurement of pulmonary function) compared to placebo in the overall study population), - NSR -23.0% (provided update on local number portability administrator selection process; co was notified that its October 2013 proposal would not be considered), - IDIX -5.1% (confirmed negative decision by the USPTO Trial and Appeal Board in the first patent interference case with Gilead), - PBYI -0.6% (filed for $115 mln common stock offering)
Asian Shares Slump After Fed Action
Pedestrians walk in front of a quotation board displaying the Nikkei index in Tokyo on Thursday. Photo: Agence France-Presse/Getty Images By BRAD FRISCHKORN And DANIEL INMAN Market turmoil returned to Asia on Thursday, led by a more than 3% slump in Japanese stocks after the U.S. Federal Reserve said it would scale back further on its stimulus measures. Although the move to scale back on its monthly buying program was widely expected, it is the latest blow for investors already dealing with a global selloff. Recent attempts by central banks in Turkey and South Africa to stop the slides in their currencies have failed to have a significant impact, heightening jitters for money managers. The Nikkei dived 3.3%, spurred by a stronger yen as investors flocked to the safe-haven currency. In other markets, Singapore's Straits Times Index lost 1.1%, Australia's S&P ASX 200 fell 1% and Indonesia's JSX was 1.3% lower. A further knock to global confidence came too with more evidence that manufacturing in China is slowing, pushing Hong Kong's Hang Seng Index down 1.5% and the Shanghai Composite down 0.7%. HSBC's final China purchasing managers index for January came out at 49.5, compared with 50.5 in December, and a touch lower than a preliminary reading of 49.6 from earlier in the month. A score above the 50 mark indicates an expansion in manufacturing activity, while a reading lower than 50 points toward a contraction. The preliminary reading last week showed a move from expansionary territory to contraction and was the spark that set off the emerging-market rout, which started in developing economies and soon spread to their developed peers. Emerging market "concerns have not left us," said Sean Callow, senior currency strategist at Westpac Institutional Bank in Sydney, adding that sharp moves in emerging economies can lead to "unexpected collateral damage in the rest of the world." The declines on Thursday mark a sharp turnaround from the gains that Asia saw in the previous session—the Nikkei jumped 2.7%, its biggest daily move since early September. On Wednesday, the region moved higher because of initial optimism after a move by the Turkish central bank to restore confidence in the local currency by yanking interest rates much higher. "The Wednesday market rise was overdone given prevailing global market conditions," said Yoshihiro Okumura, general manager at Chibagin Asset Management. "The turmoil in emerging markets does not look like it is close to dying down." The positive impact of the central bank's action was short-lived however, with the effects diminishing as the global day progressed. By the time the U.S. market had closed on Wednesday, sentiment had soured again and the Dow Jones Industrial Average ended the day 1.2% lower. The market turmoil resulted in a stronger yen overnight. The dollar lost 0.7% against the Japanese currency on Wednesday and weakened on Thursday. It was last at ¥102.14, compared with ¥102.26 late Wednesday in New York. In corporate news, shares in Lenovo Group sank 6.9% after the Chinese electronics firm said on Thursday that it agreed to buy Motorola's handset business from Google for $2.9 billion. The acquisition came just one week after Lenovo bought International Business Machine Corp.'s low-end server business for $2.3 billion. While the first deal gave Lenovo's stock a boost, the latest acquisition weighed on the company as analysts questioned the profitability of the target.