>>> Asian Update

Asia Market Update: Equities remain mixed, China records Jan trade surplus, encourages US to deal prudently with trade contentions

***Headlines/EconomicData***
General Trend: Asian equities trade mixed
- Chinese equities decline amid weaker than expected trade surplus
- China Jan imports jump as crude oil imports hit record high
- Yuan (CNY) declines over 1% versus USD, despite stronger PBoC fix
- Kiwi (NZD) under performs as RBNZ official commented on probability of rate cut
- Aussie traders look ahead to Friday's release of the RBA quarterly policy statement and forecasts
- RBA Gov Lowe expected to speak later today during the European morning
- BoJ’s Suzuki comments on recent declines in markets and possibility of ‘tweak’ in policy easing

Japan
-Nikkei 225 opened +0.4%; closed +1.1%
- Nissan [7201.JP] gains ahead of earnings report
- (JP) Japan Dec BoP AdjCurrent Account: ¥1.48T v ¥1.65Te; Current Account Balance: ¥797.2T v ¥1.06Te;Trade Balance BoP: ¥538.9B v ¥520.4Be; 2017 current account surplus¥21.874T, +7.5% y/y; largest since 2007
- (JP) BoJ Suzuki: Reiterates important to 'patiently' maintain 'powerful' monetary easing; does not rule out a chance of 'tweak' under powerful easing; BoJ may fine-tine YCC in future but that won't be big turnaround in its monetary policy or exit from easy policy; Impact of 'market rout' on policy may be limited
- (JP) Japan Chief Cabinet Sec Suga: No decision made on meeting between Abe and North Korea
-(JP) Japan MoF sells ¥800B v ¥800B indicated in 0.8% (0.8% prior) 30-yr bonds; Avg yield: 0.820% v 0.832% prior; Bid to cover: 4.27x v 3.77x prior

Korea
-Kospi opened +0.2%
- Chip makers Samsung Electronics and Hynix gain over 1%
- Daewoo Engineering & Construction [047040.KR]: Declines over 6%: Hoban said to be considering dropping its bid due to extra losses - Korean press
- (KR) North Korea: Will not use Winter Olympics aspolitical venue – KCNA
-(KR) South Korea Industry Ministry launchedproject to boost the country's semiconductor and display sectors through newtechnology development and localized production - Korean press
- (KR) Bank of Korea (BoK): Reiterates monetary policy to remain accommodative; Sees strong exports of memory chips and oil products
-(US) Vice President Pence: Will meet any use of nuclear weapons with rapidresponse; all options are on the table for North Korea - Speaking to troops inJapan


China/Hong Kong
-Hang Seng opened +0.8%, Shanghai Composite -0.9%
- Hang Seng Info Tech Index +1.6%, Services +1.5%, Financials +0.6%, Property/Construction+0.2%; Materials -1.8%, Energy -1.1%
-(CN) CHINA JAN FOREIGN RESERVES: $3.162T V $3.170TE (released after Shanghai closeyesterday)
- (CN) CHINA JAN TRADE BALANCE (CNY): 135.8B V 330.0BE; Exports YoY: 6.0% v 2.6%e, Imports YoY: 30.2% v 5.3%e
- (CN) CHINA JAN TRADE BALANCE (USD): $20.3B V $54.7BE; Exports YoY: 11.1% v 10.7%e, Imports YoY: 36.9% (fastest growth since Feb 2017) v 10.6%e
- ZTE Corp [763.HK] Senator's Tom Cotton and Marco Rubio introduce Defending US Govt Communications Act; legislation that would prohibit the United States government from purchasing or leasing telecommunications equipment and/or services from Huawei, ZTE, or any subsidiaries or affiliates
- (CN) China Economic Daily Commentary: One-waymove of yuan is unlikely in 2018
-(CN) China Jan excavator sales said to more than double - Chinese Press
-(CN) China Central Depository & Clearing annual report: Interbank holdingsof wealth management products CNY3.25T v CNY6.65T y/y
-(CN) Standard Chartered Economist Ding: Yuan could appreciate to 6.18/dollar bythe end of the year
-USD/CNY (CN) PBOC SETS YUAN REFERENCERATE AT 6.2822 V 6.2882 PRIOR (strongest CNY fix since Aug 11, 2015)
-(CN)PBOC Statement: To improve the framework of regulation underpinned by monetarypolicy and macro-prudential policy in 2018
-(CN) China FX Regulator SAFE: Will support "capable and qualified"businesses to invest overseas this year to advance cross-border investment
-(CN) China probe on US Sorghum imports is normal case; urges US to prudentlydeal with 301 probe
-USD/CNY Onshore yuan falls 0.7% to 6.3268/dollar, biggest decline in 13-months
-(CN) China has resumed an outbound investment scheme, under the Qualified Domestic Limited Partnership (QDLP) plan after a 2-yr break, granting licenses to ~12 global money managers - financial press
Looking Ahead: China Jan CPI and PPI expected to be released on Friday

Australia/New Zealand
-ASX 200 opened -0.2%; closed %
- ASX 200 Resources Index -1.2%, Energy -1.5%, Utilities -1.3%; Telecom +1.5%, Financial +0.8%
- (NZ) NEW ZEALAND CENTRALBANK (RBNZ) LEAVES OFFICIAL CASH RATE (OCR) UNCHANGED AT 1.75%; AS EXPECTED
-(NZ) RBNZ Gov Spencer: not concerned about the NZD, comfortable with where the currency is - post rate decision comments
-(NZ) RBNZ Assistant Gov McDermott: Drop in inflation expectations could trigger rate cut; currently RBNZ has neutral stance on rates
-(NZ) New Zealand Central Bank (RBNZ) Gov Spencer: Did not cut rates because inflation will come back – parliament
- (AU) Australia Q4 NAB Business Confidence: 6 v 8 prior
-Blackham Resources (+32%) BLK.AU Reports Jan gold production6.5K oz v 5.5K m/m
- AGL Energy[AGL.AU]: Declines over 1% as H1 underlying EBIT missed expectations
Looking Ahead: RBA Gov Lowe expected to speak during European morning
- RBA Quarterly Monetary Policy Statement due for release on Friday

Other Asia
- (PH) Philippines Central Bank (BSP) due to hold policy meeting later today
- Singapore bank DBS [DBS.SG] gains over 2% after reporting Q3 earnings


North America
- US equity markets closed mostly lower: Dow -0.1%, S&P500 -0.5%, Nasdaq -0.9%, Russell 2000 +0.1%
- S&P500 Energy Sector -1.7%, Technology -1.3%
- Costco [COST] Reports Jan SSS (ex-gas) 2.9%;US SSS (ex-gas) 3.6% v 2.1%e
- Victory Capital [VCTR ] Prices 11.7M share IPO at$13.00/shr v $17-19/shr range indicated
- SPDR Gold Trust ETF daily holdings -0.3% at 826.9 metric tonnes
- (US) White House aide: we have come to agreement on 2-year budget deal (agreement includes $300B boosts to defense and non-defense spending); Deal would extend reaching the debt ceiling until March 2019
- (US) Fed's Williams(moderate, voter): No strong view between 3 or 4 Fed hikes in 2018
- (US) Fed's Dudley (dove, FOMC voter): A sustained drop in stock market would impact my outlook; recent activity has no consequence for economic outlook
- (US) Fed’s Evans (non-voter, dove): there's a hint inflation pressures may be in train today; his dissent on Dec rate hike was a close call; Under an alternate scenario where inflation picked up more assuredly, would support 3 or even 4 rate hikes in 2018 - comments in Iowa-
- (US) TREASURY'S $24B 10-YEAR NOTE AUCTION DRAWS:2.811%; BID-TO-COVER RATIO: 2.34 V 2.48 PRIOR AND 2.33 OVER THE LAST 10 AUCTIONS (bid to cover lowest since Sept 2017)
- (US) DOE CRUDE: +1.9M V +2.5ME
- (CA) Canada Prime Min Trudeau: NAFTA needs to be updated and improved


Europe
- (EU) ECB's Nowotny (Austria): US Treasury is deliberately putting pressure on the dollar and wants to keep it low - press interview
- (DE) Germany SPD Leader Schulz: optimistic we can get SPD party members to agree to SPD-CDU coalition
- (DE) Germany's SPD leader Schulz to step down asp arty leader; says party leader should not be part of the govt cabinet (Schulz will become Foreign Minister under the coalition deal)
- (DE) Germany's SPD party to announce results of members ballot on supporting govt coalition deal on March 4th - press
- (UK) Citing UK Govt economic analysis: a no-deal Brexit would cost £80B in public finances, with the leave-voting heartlands of north-east England and West Midlands worst affected - Guardian
- Swiss Re [SREN.CH]: Softbank said to be in advanced talks to take as much as a 33% stake in Swiss Re - press
Looking Ahead: BoE rate decision and inflation report due later today


***Levels as of 01:00ET***
- Nikkei225 +1.1%, Hang Seng +0.6%; Shanghai Composite -1.5%; ASX200 +0.2%, Kospi +0.8%
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.3%,Dax +0.3%; FTSE100 -0.2%
- EUR 1.2286-1.2252; JPY109.68-109.12; AUD 0.7832-0.7803;NZD 0.7238-0.7181
- Apr Gold -0.1% at $1,313/oz; Mar Crude Oil -0.4%at $61.55/brl; Mar Copper +0.5% at $3.11/lb

>>> US After Hours Summary: INFN +17% higher and IRBT -20%, IPHI -12%,


After Hours Summary: INFN +17% higher and IRBT -20%, IPHI -12%, YELP -7%, TTWO / YUMC -5% lower following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: RSYS +22.2%, INFN +17.4%, ECHO +12.8% (light volume), IO +12.5%, APPS +11.4%, CFMS +9.5% (ticking higher), PSEC +6.1%, EVHC +6% (also amended its bylaws to extend the deadline for stockholders to nominate candidates for election to the Board), SYNA +4.9%, LLNW +3.7% (light volume), CSRA +3.7%

Companies trading higher in after hours in reaction to news: CRC +7.8% (enters into a midstream joint venture with a portfolio company of Ares Management), GCAP +6% (reports January Retail OTC avg. daily volume +19% y/y and +38% q/q to $11.3 bln), TNH +5% (ticking higher - CF Industries subsidiary to exercise right to purchase all publicly traded units of Terra Nitrogen for $84.033 per unit in cash), MNOV +3.8% (prices 4,419,890 share common stock offering at $9.05 per share), FOLD +2.7% (announces additional positive data in Pompe Disease Phase1/2 Study), CNX +2.5% (CNX Resources will sell its 95% interest in the Shirley-Pennsboro gathering system to CNXM for total cash consideration of $265 million (CNMX) entered into a definitive agreement), CIEN +2.1% (following INFN results), TEGP +2% (evaluating potential reorganization transactions that could among other things streamline and simplify TEP  / TEGP structure, improve debt cost of capital and facilitate financing)

Companies trading lower in after hours in reaction to earnings/guidance/SSS: IRBT -20.4%, MRAM -12.4% (also to offer shares of common stock in a public offering), IPHI -12.2%, TTMI -9.6%, LCI -8.3%, COHR -7.1%, YELP -6.8%, TTWO -5%, YUMC -4.9%, ZUMZ -2.2% (Zumiez reports January comps of +6.3vs +9.4% year ago and +7.9% last month; sees Q4 EPS toward high end of $0.88-0.90 prior guidance and $0.89 consensus), ORLY -0.8% (also appoints Greg Johnson as CEO and Jeff Shaw as COO, announces additional $1 bln share repurchase)

Companies trading lower in after hours in reaction to news: GEMP -14.3% (commences common stock offering), VIVE -8.6% (commenced an underwritten public offering of shares of its common stock), APO -2.9% (light volume; CFO disclosed the sale of 15k shares), CADE -2.6% (commences offering of 7 mln shares of Class A common stock), OAK -2.5% (commences offering of 5 mln Class A units), XL -1.4% (after spiking higher in late trade on reports of acquisition interest), DRYS -1.1% (DryShips files for proposed spin-off of 49% of Gas Ships Limited) SAGE -0.8% (commences $575 mln common stock offering and provides corporate update)

>>> US Close Dow -0.08% S&P -0.50% Nasdaq -0.89% Russell +0.05%


Closing Market Summary: Wall Street Lower Following Another Choppy Session

Stocks endured another choppy trading session on Wednesday, settling in negative territory at their worst marks of the day.

The Dow Jones Industrial Average slipped 0.1%, but settled ahead of the other major indices as the price-weighted average's most influential component--Boeing (BA 348.12, +7.21)--jumped 2.1%.

The aerospace giant was helped by news from Washington, where Senate Majority Leader Mitch McConnell (R-KY) and Senate Minority Leader Chuck Schumer (D-NY) have agreed to a budget deal that would lift spending caps and raise defense and non-defense spending by approximately $160 billion and $130 billion, respectively, over the next two years.

However, it's unclear if the bill has enough support to pass in the House, where the House Freedom Caucus might protest the spending increase, forcing Republicans to lean on Democratic support. House Minority Leader Nancy Pelosi (D-CA) has vowed to oppose a spending deal unless she is guaranteed a vote on immigration.

The S&P 500 lost 0.5% on Wednesday, with just three of its eleven sectors settling in the green--industrials (+0.3%), financials (+0.2%), and telecom services (+0.3%). The consumer discretionary sector (-0.3%) finished in the red, but outpaced the the broader market, with Hasbro (HAS 102.22, +8.29) setting the pace; the toymaker spiked 8.8% to a six-month high after reporting better-than-expected earnings for the fourth quarter.

In other earnings news, Snap (SNAP 20.75, +6.69) surged 47.6%, hitting an eight-month high, after reporting better-than-expected earnings, revenues, and daily active users (DAUs). Conversely, Walt Disney (DIS 104.76, -1.41) dropped 1.3% despite beating profit estimates, and Chipotle Mexican Grill (CMG 272.21, -32.12) tumbled 10.6% after its quarterly results showed a decline in customers--likely due to multiple instances of food poisoning over the last couple of years.

In other corporate news, Wynn Resorts (WYNN 177.32, +14.10) rallied 8.6% after Steve Wynn resigned from his position as CEO following reports of sexual misconduct.

At the opposite end of the sector standings, the top-weighted technology sector (-1.4%) struggled on Wednesday, with heavyweights like Apple (AAPL 159.54, -3.49), Microsoft (MSFT 89.61, -1.72), Facebook (FB 180.18, -5.13), and Alphabet (GOOGL 1055.41, -29.02) losing between 1.9% and 2.8%. Chipmakers also weighed on the tech sector, sending the Philadelphia Semiconductor Index lower by 2.2%.

Unsurprisingly, the tech-heavy Nasdaq was the weakest of the three major indices, settling with a loss of 0.9%.

The only sector to finish behind technology was the energy group, which lost 1.7% as crude oil tumbled for the fourth session in a row; West Texas Intermediate crude futures dropped 2.5% to $61.80 per barrel, hitting a one-month low. The commodity suffered amid a strengthening U.S. dollar--the U.S. Dollar Index increased 0.8% to 90.23--and following the government's weekly crude inventory report, which showed that U.S. crude stockpiles increased 1.9 million barrels last week.

In the bond market, U.S. Treasuries were under heavy pressure, pushing the benchmark 10-yr yield higher by seven basis to 2.84%; the 10-yr yield now trades just one basis point below the three-year high it hit last Friday. Meanwhile, the 2-yr yield also climbed on Wednesday, jumping four basis points to 2.13%.

Trading was volatile once again today, with the S&P 500 fluctuating between 2681.66 (-0.5%) and 2727.67 (+1.2%)--a 46-point range.

Reviewing Wednesday's economic data, which was limited to December Consumer Credit and the weekly MBA Mortgage Applications Index:

  • The Consumer Credit report for December showed an increase of $18.4 billion (consensus $20.0 billion). November credit growth was revised to $31.0 billion from $28.0 billion.
  • The weekly MBA Mortgage Applications Index increased 0.7% to follow last week's 2.6% decline.

On Thursday, investors will receive the weekly Initial Claims report (consensus 234K) at 8:30 AM ET.

  • Nasdaq Composite: +2.2% YTD
  • Dow Jones Industrial Average: +0.7% YTD
  • S&P 500: +0.3% YTD
  • Russell 2000: -1.8% YTD