Asia Market Update: Asian indices mostly decline as US stocks drop by 10%, uncertainty continues to linger regarding coronavirus impact and US stimulus measures; Global central banks move to increase liquidity; China press comments on RRR cuts; US equity FUTs later reverse losses in Asia
General Trend:
- Nikkei declined over 10% at one point during session; Softbank drops over 6% despite buyback announcement
- Circuit breaker was triggered for Japan’s TOPIX Banking Index FUTs
- Japanese equities later pare loss amid special operations by the BOJ
- Australian equities pare losses; PM Morrison said advice to gov’t is not to ban travel from Europe
- Chinese markets pare losses as officials announce measures
- China announces measures to support consumption and the funding situations of key companies
- Japan Fin Min Aso: Yen has been stable around ¥105, no need to fret over its moves
- USD/JPY rises despite declines on Nikkei; JGB Futures decline
- Commodity currencies (AUD/USD and NZD/USD) rise in early Asian session despite equity declines, NZ and AU government bond yields rise
- Bank of Korea (BOK) said it is discussing whether to hold an emergency meeting; South Korea 10-year yield rises over 15bps
- BoJ conducts another unscheduled JGB repo operation
- BoJ also offered to buy 5-10 yr JGBs in unscheduled operation
- RBA adds liquidity through daily repo operations
***Headlines/Economic Data***
Australia/New Zealand
-ASX 200 opened -2.5% at 5,171
- (AU) Australia PM Morrison: Notes greater community transmission of coronavirus throughout Australia; parliament will resume as 'normal'; advice to govt is not to ban travel from Europe
- (NZ) New Zealand Feb Manufacturing PMI: 53.2 v 49.8 prior (back into expansion)
- VAH.AU Suspends guidance due to coronavirus; cancels all non-essential CAPEX; To further reduce capacity
Japan
-Nikkei 225 opened -2.1%
- *(JP) BANK OF JAPAN (BOJ) TO BUY ¥500B IN JGB REPURCHASES FUTURE DELIVERY (3rd unscheduled JGB repo operation in March)
- 9984.JP To buyback up to ¥500B in stock (7% of shares)
- 0001.JP Plans to halt certain foreign-currency insurance sales - Japanese press
- (JP) Japan Olympics Min Hashimoto: IOC and 2020 organizers are not considering cancellation or postponement of the 2020 games
- (JP) Japan Chief Cabinet Sec Suga: confirms PM Abe and President Trump spoke on phone today at the request of the US; discussed coronavirus, Olympics and the economy
- (JP) Japan Fin Min Aso: Volatility is high in markets, see uncertainty increasing, decline in stocks does not change corporate fundamentals; will finish budget by the end of March
- (JP) Japan Top Currency Official Takeuchi: No comment on market intervention; confirms G7 held phone conference last night, need to limit spread of virus as much as possible; will closely cooperate with G7, watch markets closely and act as needed
- (JP) Japan Securities Clearing Corp (JSCC): Issues margin call for JGBs, TOPIX and Nikkei FUTs
Korea
-Kospi opened -6.1%
- (KR) BANK OF KOREA (BOK) DISCUSSING NEED TO HOLD EMERGENCY RATE REVIEW MEETING; will give further notice if decision is made
- (KR) Bank of Korea (BOK): Closely monitoring local bond yields spiking; Will use OMO to intervene into money markets if needed; Will take steps to stabilize financial markets
- USD/KRW South Korea currency authorities suspected to have intervened to support the Korean Won (KRW)
- (KR) South Korea FX Authorities: Reiterates will act to stem any 'herd-like' behaviors or excessive moves in FX market
- (KR) South Korea FSC Chairman: Reviewing steps to stabilize markets - Yonhap
- (KR) South Korea Feb Export Price Index M/M: 1.2% v -0.7% prior; Y/Y: -1.8% v -2.5% prior; Import Price Index M/M: -1.3% v -0.8% prior; Y/Y: -0.9% v +2.7% prior
- (KR) General O'Shaughnessy: North Korea's recent engine testing suggests the regime may be ready to test a more advanced intercontinental ballistic missile that could pose a greater threat to the United States - Yonhap
China/Hong Kong
-Hang Seng opened -7.4%; Shanghai Composite opened -4.1%
- (CN) China National Development and Reform Commission (NDRC): China will take measures to boost consumption, will reduce import tariffs on consumer goods, to encourage regions that have car plate quota restrictions to increase quotas; to stabilize and increase property income
- (CN) China Vice Industry Min Xin Guobin: Coronavirus epidemic globally brings uncertainty to work resumption in China
- (CN) China Banking Regulator (CBIRC): Banking institutions have issued CNY1.4T in loans related to virus control and prevention; To encourage banks to help key supply chain companies suffering from liquidity crunch with credit lines
- (CN) China National Health Commission Coronavirus Update for March 12th: 8 additional cases v 15 prior; Additional deaths: 7 v 11 prior; Hubei: 5 additional cases v 8 prior; additional deaths: 6 v 10 prior
- (CN) 'Coming' RRR cuts may 'swell' liquidity and lower financing costs for small and medium-sized companies - China Daily
- (CN) China PBoC Open Market Operation (OMO): Skips reverse repo operations for the 18th consecutive session, Net CNY0B v CNY0B prior
- (CN) China PBOC sets Yuan reference rate: 7.0033 v 6.6941 prior (weakest setting since Feb 28th)
- (CN) USTR: Grants additional tariff exclusions on medical products from China
- (CN) China auto makers said to be requesting Govt assistance after Feb sales fell 79% - press
- 486.HK Reports Q4 Adj Net -$138M v -$17M y/y, Rev $2.49B v $2.37B y/y
- (HK) Hong Kong said to consider stepping up its border control due to Europe and US outbreak - Local media
-(CN) China MoF sells 30-year Bond, avg yield 3.39%; bid to cover 1.46x
North America
- (US) New York Fed announces new $1.5T in Treasury reserve management purchases and repurchase operations to address "highly unusual disruptions" in Treasury financing markets associated with the coronavirus outbreak; to offer $500B in 3-mo repo today, and two $500B repos tomorrow; will continue $1T in repos each week for the rest of the monthly schedule; expands repo purchases beyond bills to a 'range of maturities'
- (US) TTN March 12th Avg Traffic Intensity Index in Select US cities y/y: -39.8% v -34.6% prior (3rd consecutive decline)
- (US) US House Speaker Pelosi (D): Lawmakers and White House have 'neared agreement' on coronavirus legislative package, hopes to make an announcement on Friday (March 13th)
- (CA) Canada Fin Min Morneau: Reiterates Canada is in a strong fiscal position to respond, expect some market volatility; still planning on presenting budget on March 30th
- AAPL Says all 42 of its stores in China have reopened
- CBOE To Suspend Open Outcry Trading on Chicago Trading Floor as Precautionary Measure; trading on options exchange will continue to be available in an electronic-only trading mode until further notice
- (CA) Canada PM Trudeau wife has tested positive for coronavirus, he will remain in quarantine for 14-days, currently in good health, will not be tested as he has no symptoms
Europe
- (BE) Belgium PM Wilmers: To close all bars and restaurants due to coronavirus
- (IT) Italy Market Regulator: To introduce temporary short-selling ban on 85 stocks on Friday
- (EU) ECB ANNOUNCES EXPANSIONARY MEASURES; Increase bond buying from €20B to €120B/month until end of 2020
- (EU) ECB UPDATES STAFF PROJECTIONS: CUTS 2020 GDP FROM 1.1% TO 0.8%
- (BE) Belgium PM Wilmers: To close all bars and restaurants, sports events, schools due to coronavirus until April 3rd
- (EU) Eurogroup Chief Centeno: EU to make budget rules more flexible to deal with coronavirus impact – FT
***Levels as of 1:20 ET***
- Nikkei 225, -3.6%, ASX 200 +4.4%, Hang Seng -2%; Shanghai Composite -1.3%; Kospi -2.3%
- Equity Futures: S&P500 +3.2%; Nasdaq100 +3%, Dax 4.2%; FTSE100 -5.9%
- EUR 1.1209-1.1152 ; JPY 106.01-104.50 ; AUD 0.6326-0.6231 ;NZD 0.6160-0.6084
- Gold -1.7% at $1,563/oz; Crude Oil -0.6% at $31.31/brl; Copper -0.7% at $2.426/lb
After Hours Summary: CAL +9.1%, ORCL +4.7%, DOCU +3.4% up on earnings; WORK -15.9%, AVGO -8.6% lead on the downside
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: TLYS +11.7%, FLNT +10.3%, CAL +9.1%, ORCL +4.7%, DOCU +3.4%, PH +1.2%, ADBE +0.9%
Companies trading higher in after hours in reaction to news: NBL +10.7% (cuts 2020 expenditure guidance by $550 mln), PQG +2.1% (authorizes $50 mln share repurchase program), JBGS +0.6% (announces authorization of $500 mln in share repurchases)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: INO -21.2%, ZUO -18.1%, WORK -15.9%, AVGO -8.6%, MRAM -2.7%, STAY -1.7%, CBPO -0.5%, MDLA -0.4%
Companies trading lower in after hours in reaction to news: WPX -4.4% (common stock offering by selling shareholders), DIS -1.9% (to close Disneyland park in California after Friday - CNBC), AMZN -1.7% (tells all employees around the globe to stay home thru March amid COVID-19 outbreak, according to CNBC), WBA -1.5% (waives delivery fees for eligible prescriptions during COVID-19 pandemic), PAYC -0.5% (increases and extends its ongoing stock repurchase plan)
Closing Stock Market Summary
Each of major indices dropped more than 9% on Thursday, as new stimulus measures from central banks failed to stir confidence among investors without a meaningful fiscal response from Washington. The Russell 2000 (-11.2%) led the retreat, followed by the Dow Jones Industrial Average (-10.0%), S&P 500 (-9.5%), and Nasdaq Composite (-9.4%) with each closing down more than 25% from prior highs.
For the second time this week, the S&P 500 triggered a 15-minute trading halt after falling by 7.0% shortly after the open following more economic disruptions caused by the coronavirus. Notable ones included President Trump suspending travel from most European countries for 30 days and the major sporting leagues in the U.S. suspending their 2019-2020 seasons.
Few asset classes were safe today. The S&P 500 sectors lost between 7.4% (health care) and 12.3% (energy). WTI crude fell 4.3%, or $1.43, to $31.57/bbl. Gold futures fell 3.2% to $1589.80/ozt. The 2-yr yield was unchanged at 0.49%, and the 10-yr yield increased three basis points to 0.85% amid selling pressure. The U.S. Dollar Index rose 0.8% to 97.25.
Notably, the benchmark index cut its intraday decline to 2.9% after the New York Fed announced repurchase operations totaling more than $1.5 trillion, while stocks in Europe accelerated losses following a lackluster ECB response. The ECB didn't cut its key policy rates, and instead announced additional net asset purchases through the end of the year with additional longer-term refinancing operations.
While it's encouraging that central banks are committed in ensuring ample liquidity in these disastrous trading conditions, it's unlikely that the measures will boost consumer confidence. Elsewhere, the reported disagreements within the White House regarding a stimulus plan only exacerbated the dire mood on Wall Street.
Progress is reportedly being made, though, with the U.S. Senate to remain in session next week instead of going on recess. President Trump is expected to sign a declaration to unlock more funding to fight the COVID-19, according to Politico.
The market wants strong and immediate action, as well as signs that the coronavirus situation will get better. The CBOE Volatility Index, which is commonly referenced as a fear gauge, surged 40.0% to 75.47-- its highest level since the financial crisis -- as investors rushed for more protection against further equity weakness.
Reviewing Thursday's economic data:
- The Producer Price Index for February declined 0.6% m/m (consensus -0.2%) while core PPI, which excludes food and energy, declined 0.3% (consensus 0.1%). That left the yr/yr readings at 1.3% and 1.4%, respectively.
- The key takeaway from the report is that it was weighed down sharply by the decline in energy prices, which was prominent in final demand goods, processed goods for intermediate demand, and unprocessed goods for intermediate demand.
- Initial jobless claims decreased by 4,000 for the week ending March 7 to 211,000 (consensus 218,000). Continuing claims for the week ending February 29 decreased by 11,000 to 1.722 million.
- The key takeaway from the report is that the good news in it will be overlooked, as subsequent developments suggest there will be a tide of rising initial claims in coming weeks.
Looking ahead, investors will receive the preliminary University of Michigan Index of Consumer Sentiment for March and Export and Import Prices for February on Friday.
- Nasdaq Composite -19.7% YTD
- S&P 500 -23.2% YTD
- Dow Jones Industrial Average -25.7% YTD
- Russell 2000 -32.7% YTD