Asia Mid-Session Market Update: Uncertainty remains on US healthcare legislation as White House Calls the vote for Friday; Japan PMI expands for 7th month; New Zealand trade stays in deficit
***US Session Highlights***
- (US) INITIAL JOBLESS CLAIMS: 258K V 240KE; CONTINUING CLAIMS: 2.00M V 2.04ME
- BHP.AU Escondida Union spokesperson: no wage agreement reached last night; likely to revert to old contract; no more wage talks are scheduled - press
- F Guides Q1 $0.30-0.35 v $0.45e - filing ahead of analyst event
- (US) Rep Brady (R-TX): There is 95% agreement on healthcare bill as of this morning; there is still work to do to get the necessary votes
- (US) Mar Kansas City Fed Manufacturing Activity: 20 v 14e
***US markets on close: Dow flat, S&P500 -0.1%, Nasdaq -0.1%***
- Best Sector in S&P500: Real Estate
- Worst Sector in S&P500: Healthcare
- Biggest gainers: PVH +8.5%, TRIP +2.7%, CBT +2.7%, NKE +2.7%, AAL +2.6%
- Biggest losers: FTR -8.1%, ACN -4.5%, CNC -4.0%, FDX -3.4%, HRB -2.5%
- At the close: VIX 13.1 (+0.3 pts); Treasuries: 2-yr 1.28% (+2bps), 10-yr 2.42% (+2bps), 30-yr 3.03% (+2bps)
***US movers afterhours***
- MU: Reports Q2 $0.90 v $0.81e, R$4.65B v $4.65Be; Guides Q3 $1.43-1.57 v $0.88e, R$5.2-5.6B v $4.65Be; +10.3% afterhours
- SPWH: Reports Q4 $0.25 v $0.27e, R$221.4M v $229Me;Guides Q1 -$0.08 to -$0.06 v -$0.03e, R$150-155M v $160Me, SSS -11% to -9%; -6.6% afterhours
- OXM: Reports Q4 $0.63 (adj) v $0.91e, R$261M v $267Me; -8.7% afterhours
- GME: Reports Q4 $2.38 v $2.29e, R$3.05B v $3.12Be; Guides initial FY17 $3.10-3.40 v $3.72e, SSS -2% to +2%; -11.3% afterhours
***Politics***
- (US) CNBC's Harwood: Freedom Caucus source sees "no way" the healthcare bill passes tomorrow morning
- (US) CBO releases new scoring on amended GOP healthcare bill; shows less savings over next 10 years than March 13th estimate but will maintain same coverage losses
- (US) White House chief strategist Bannon: Feel good about progress made in Congress negotiations - CNN
- (US) Congressman Chris Collins (R-NY): Message from White House is that if healthcare legislation does not pass, it will move on to tax reform and keep Obamacare in place; Freedom Caucus attaching amendment that will keep 0.9% Medicare surcharge tax on high earners and repeal "essential benefits" requirements.
- (US) House Speaker Ryan: We intend on passing the bill tomorrow (does not respond to whether he thinks GOP has the votes).
- (US) House Minority leader Pelosi: Time to pull the plug on healthcare bill; Latest CBO score shows it is crueler to Medicaid recipients
***Asia Key economic data:***
- (JP) JAPAN MAR PRELIMINARY PMI MANUFACTURING: 52.6 V 53.3 PRIOR (7th month of expansion)
- (JP) Japan Jan Final Leading Index: 104.9 v 105.5 prelim; Coincident Index: 115.1 v 114.9 prelim
- (NZ) NEW ZEALAND FEB TRADE BALANCE (NZ$): -18M V +180ME (8th month of deficit)
- (KR) South Korea Mar Consumer Confidence: 96.7 v 94.4 prior
- (SG) Singapore Feb Industrial Production M/M: -3.7% v +1.2%e; Y/Y: 12.6% v 10.0%e
***Asia Session Notable Observations, Speakers and Press***
- Asian indices are mixed, tracking late-day caution in US markets as GOP leadership pulled the vote on US healthcare reform to hold more meetings with holdout Freedom Caucus. Late in the evening, White House announced it was ending the negotiations and scheduled the vote for Friday afternoon. There is still lack of clarity on whether Speaker Ryan and Pres Trump were able to appease the hard-right opponents with an amendment that does away with "essential benefits" clause while preserving the support of the moderates. White House has also reportedly threatened Congressional lawmakers that they would have to live with Obamacare if the bill does not pass, as it plans to shift its focus to tax reform.
- Political risk continues to weigh on overall sentiment as investors second-guess market conviction of pro-business policies coming down the pike amid the apparent GOP infighting. Vix spiked up to close above 13 for the first time since early January after the healthcare vote was pulled, even though Treasuries were slightly lower across the curve. In FX, USD strengthened throughout the Asia session with risk-on USD/JPY lifting some 50pips off the lows above 111.40 once the talks on healthcare broke for the night. GBP/USD was also a notable mover to the downside, as BOE's Vlieghe suggested rates may not necessarily rise after the latest CPI data saw inflation hit above BOE target for the first time since Dec 2013, stating evidence of wage growth would be needed while attributing the CPI boost to GBP devaluation.
- Also of note, BOJ Gov Kuroda deflected expectations of adjustment to long-term yield target, noting inflation recovery is still lacking strength and risks to economy and prices are still skewed to downside. Recall the latest BOJ policy statement was somewhat more optimistic on inflation achieving 2% objective in the medium term, and Kuroda said he would be prepared to discuss long-term rate target adjustment if inflation picks up. In Japan's economic data, March preliminary PMI remained in expansion for the 7th straight month at 52.6, down from 53.3 in Feb. New Export orders and Backlog both increased but at a slower pace, while Output Prices declined in a change of trend. Local economist said "latest PMI data again point to a Japanese manufacturing economy expanding at a decent clip and new order books remain in solid growth territory."
- New Zealand trade numbers were a miss with 8th month of deficit against expected return to surplus. Exports missed consensus at 4.01B v 4.20Be, while Imports were in line around 4.0B. Shipments to China were strong, rising 6.3% y/y as exports to US declined again.
China
- (CN) China Vice Premier Zhang: China long-term positive economic fundamentals unchanged
- (CN) PBoC Beijing branch announces measures to control home risks; To tighten mortgage rules on some divorced couples
- (CN) US financial press warns about risks to China banking liquidity on expected maturity of CNY1.53T in negotiable certificate of deposits (NCDs)
Japan
- (JP) BOJ Gov Kuroda: Easing program has been working smoothly; Will discuss LT rate target if inflation picks up
Australia/New Zealand
- (NZ) RBNZ: Feb new residential mortgage lending fell 14% to NZ$4.38B - press
Korea
- (KR) South Korea Fin Min Yoo: North Korea appears all set for nuclear test - Korean press
***Asian Equity Indices/Futures (01:00ET)***
- Nikkei +0.9%, Hang Seng -0.2%, Shanghai Composite -0.1%, ASX200 +0.8%, Kospi -0.2%
- Equity Futures: S&P500 +0.3%; Nasdaq +0.3%; Dax +0.4%; FTSE100 +0.2%
***FX ranges/Commodities/Fixed Income (01:00ET)***
- EUR 1.0760-1.0785; JPY 110.85-111.40; AUD 0.7610-0.7640; NZD 0.7000-0.7035
- Apr Gold -0.3% at $1,244/oz; May Crude Oil +0.4% at $47.89/brl; May Copper -0.7% at $2.63/lb
- (CN) PBoC skips open market operations for today's session v injecting CNY30B yesterday; PBoC drains net CNY30B this week v drained CNY120B prior
- (CN) PBOC SETS YUAN MID POINT AT 6.8845 V 6.8856 PRIOR; 3rd straight stronger setting
- (JP) Japan investors bought net ¥149B in foreign bonds v sold ¥696B in prior week; Foreign investors sold net ¥580B in Japan stocks v sold ¥723B in prior week
- (AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 2.0563%; bid-to-cover: 6.25x
***Asia equities / Notables / movers by sector***
- Consumer discretionary: 1958.HK BAIC Motor Corp +1.7% (FY16 result); CKF.AU Collins Foods -8.8% (Deutsche Bank cuts rating); 3865.JP Hokuetsu Kishu Paper Co +3.9% (annual result speculation)
- Financials: 2628.HK China Life Insurance -1.7% (annual result); NAB.AU National Australia Bank +1.3%, ANZ.AU ANZ Bank +2.0% (raises mortgage rate); 8354.JP Fukuoka Financial +4.5% (SMBC raises rating)
- Industrials: DOW.AU Downer EDI -25.1% (trading resumes); 6324.JP Harmonic Drive Systems -1.3% (Okasan cuts rating)\
- Technology: 6502.JP Toshiba Corporation +7.8% (govt plans full review of chip unit sale)
- Materials: 2600.HK Aluminum Corporation of China -2.1%, 914.HK Anhui Conch Cement -3.0% (annual result); 2168.HK Yingde Gases -3.8% (profit warning); SYR.AU Syrah Resources +5.8% (maintains budget); FMG.AU Fortescue Metals -0.6% (to repay debt); EVN.AU Evolution Mining -4.0% (block trade)
- Energy: 1165.HK Shunfeng Photovoltaic International -4.9% (FY16 guidance); 883.HK CNOOC +4.2% (annual result)
- Utilities: 2380.HK China Power International -3.9% (annual result)
Closing Market Summary: Stocks Settle Lower Following Health Care Vote DelayThe stock market had a decent rebound try going for much of Thursday's session, but it fell to the wayside in the afternoon after reports that the House vote on the American Health Care Act, which was scheduled for tonight, will be delayed. The S&P 500 and the Nasdaq settled lower by 0.1% while the Dow closed flat.
The financial sector (+0.2%) led the stock market to modest gains when it appeared that GOP leadership and the House Freedom Caucus might reach a deal to push the AHCA through the House. However, the major averages retreated back to their flat lines after the House Freedom Caucus failed to reach an agreement on the proposed legislation. Equities then pushed into negative territory on news that the vote would be delayed.
The pick up in selling interest was due in large part to the angst the delayed vote created about the fate of tax reform. Administration officials and Congressional leaders have said health care reform needs to get tackled first before moving on to tax reform.
With investors in wait-and-see mode, almost all sectors settled within 0.4% of their respective flat lines. The lightly-weighted real estate sector (+0.7%) finished at the top of the leaderboard while several sectors--energy (-0.4%), technology (-0.3%), and health care (-0.4%)--contended for the bottom spot.
The technology sector struggled throughout the session with Alphabet (GOOGL 839.65, -10.15) suffering as brands continued to freeze their marketing campaigns with the company after The Times reported that ads were appearing next to extremist videos on YouTube.
On the earnings front, retailers cheered PVH's (PVH 98.55, +7.70) latest earnings report. The company, which owns brands like Van Heusen, Tommy Hilfiger, and Calvin Klein, jumped 8.5% after reporting better than expected earnings and issuing upbeat guidance. The SPDR S&P Retail ETF (XRT 41.21, +0.31) also settled higher, climbing 0.8%.
In the Treasury market, U.S. sovereign debt finished flat with the benchmark 10-yr yield closing unchanged at 2.41%.
On the data front, investors received February New Home Sales and the weekly Initial Claims report:
- New Home Sales in February hit an annualized rate of 592,000, which was above the revised January rate of 558,000 (from 555,000), and more than the 560,000 that was expected by the consensus.
- The key takeaway from the report is that new home sales activity was robust, driven by increased demand for lower-priced homes as high prices and rising mortgage rates have created affordability constraints at higher price points for prospective homebuyers.
- The latest weekly initial jobless claims count totaled 258,000 while the consensus expected a reading of 239,000. Today's tally was above the revised prior week count of 243,000 (from 241,000). As for continuing claims, they declined to 2.000 million from the revised count of 2.039 million (from 2.030 million).
- The key takeaway from the report is that it could soften March nonfarm payroll growth expectations a bit since it covered the week in which the survey for the Employment Situation Report was conducted.
Friday's lone economic report, February Durable Orders (consensus +1.3%), will cross the wires at 8:30 ET.
- Nasdaq Composite +8.1% YTD
- S&P 500 +4.8% YTD
- Dow Jones Industrial Average +4.5% YTD
- Russell 2000 -0.3% YTD
*MINDICH FOUNDED ETON PARK HEDGE FUND IN 2004
*MINDICH FOUNDED ETON PARK HEDGE FUND IN 2004
*MINDICH FOUNDED ETON PARK HEDGE FUND IN 2004
Schumer Urges Filibuster to Block Gorsuch Confirmation
To save nomination, GOP likely needs to find Democratic votes or change Senate rulesWASHINGTON—The Senate’s top Democrat will oppose Judge Neil Gorsuch’s confirmation to the Supreme Court and urged his Democratic colleagues to block the nomination.
On the Senate floor, Sen. Chuck Schumer of New York said that he couldn’t support President Donald Trump’s nominee, saying he feared he was insufficiently independent of the Trump administration and concerned about his testimony this week before the Senate Judiciary Committee and his history of decisions on the 10th Circuit Court of Appeals.
“I’ve thought long and hard about this nomination and what it means for the future of the Supreme Court and the future of our country,” said Mr. Schumer, the Democratic minority leader. “What is at stake is considerable.”
Mr. Schumer urged his Democratic colleagues to block the confirmation by using a procedural maneuver known as a filibuster, which takes 60 votes to overcome.
Mr. Schumer’s decision sets up a quandary for Republicans in the Senate. Democrats will insist Judge Gorsuch meet the 60-vote threshold to end the filibuster, in a body where Republicans control only 52 seats.
The party will need either to win eight Democratic votes or change the rules to eliminate the 60-vote threshold. The Democrats, when they were in the majority in 2013, eliminated the 60-vote requirement on lower court judges and cabinet nominations but preserved it on Supreme Court nominees.
Republicans have enough votes to change the Senate rules, but such an action is considered drastic. It has drawn concerns from institutionalists in both parties concerned about the comity and working order of the Senate.
“The answer isn’t to change the rules. It’s to change the nominee,” Mr. Schumer said.
The incredibly narcissistic reason most people actually use Tinder
There’s a new theory as to why people match on Tinder — yet never contact each other.
LendEdu, a consumer finance comparison site, asked more than 3,800 millennials if they used Tinder and a staggering 72% of them said they did. When the researchers asked them why, 22% of those Tinder users answered that they are “looking for a hookup” and 29% percent said they use the location-based app for other reasons, which likely include friendship and curiosity. And only 4% said they were “looking for a relationship.” Meanwhile, more than 44% — by far the largest percentage — said they were swiping for “confidence-boosting procrastination.”
“If people are seeking a serious relationship, then they are most likely not going to use Tinder,” the study concluded. Online sites like Match.com or OkCupid, which are both owned by InterActiveCorp are more conducive to finding a long-term relationship, the researchers said. Match.com is subscription-only and OKCupid has free and premium accounts, but both have space to answer questions and will match people based on their values and preferences. Match.com charges $42 for one month or $21 a month with a one-year commitment. (IAC was not immediately available for comment.)
Ghosting (never replying to messages) has been a problem on dating apps for quite some time now. The endless supply of fresh faces and people’s lack of leisure time make it difficult for people to ever actually go out on a date, says Jeffrey Hall, associate professor of communications at the University of Kansas. Spending a lot of time to meet Mr. or Ms. Right “decreases your chance of ever doing so,” he says. Swiping endless photos and fantasizing about each one, he adds, “is not conducive to forming a good match, and it’s not exactly a productive use of your time.”
All of this voyeurism can be expensive if you don’t follow through. The matchmaking industry is now worth about $2.4 billion, and rises around 5% per year, with revenue split between advertising and subscription services, according to a report by research firm IBISWorld. Of that, around $1.1 billion is from online dating, $576 million is from mobile apps such as Tinder, and the rest is made up mainly of matchmakers and singles events. A decade ago, many sites were free or had minimal fees of around $20 a month. (Match.com charged $9.95 per month when it launched in 1995.)
There’s another downside to all that choice. Americans are increasingly picky when it comes to dating, particularly those who have Apple iPhones, according to a separate survey of 5,500 singletons aged 18 and over by Match.com, which was released last month. iPhone owners are 21 times more likely to judge others negatively for having an Android, while those who have an Android are 15 times more likely to judge others negatively for having an iPhone. And those who have older models of either smartphone are 56% less likely to get a date.
On a happier note, dating sites are encouraging people to be truthful to facilitate happier dates and, ideally, relationships. Apps like The Grade and Tinder are forcing their members to connect through Facebook to create more transparency about age and real first names. On Facebook, there’s a limit to how many times users can change their birth date. The Grade uses algorithms and members to rank other users on a scale from A+ to F based on quality of messages, photos and description. Those who get a permanent F grade are expelled from the app.
Goldman Sachs Says Tax Cuts Are Coming, Even If Health Care Fails
Goldman Sachs analysts have a prediction that might help nervous investors sleep easier: tax reform is still likelier than not to happen, regardless of what happens with health care reform.
Goldman Sachs (GS) analysts have a prediction that may help nervous investors sleep easier: tax reform is still likelier than not to happen, regardless of what happens with health care reform.
Wall Street has become increasingly shaky in recent days on anxieties over the outcome of the House Republicans' plan to repeal and replace Obamacare. Stocks were mixed on Thursday in anticipation of a vote on the American Health Care Act, a bill put forth by the GOP. But Goldman analyst Alec Phillips in a note late Wednesday held investors need not worry -- tax cuts will probably still happen anyway.
"Passage of the health bill is not what is important for tax reform," Phillips wrote. "Instead, the most important issue for financial markets is for Congress to be finished with this bill one way or another so that it can move forward with tax reform, which is likely to have a greater effect on corporate earnings and the real economy."
Some on Wall Street see the health care vote as a referendum on Congress' ability to enact its broader policy agenda, but Goldman notes that is to overlook some important nuances.
If the AHCA gets through the House, it faces an uphill battle in the Senate, as Republicans there have expressed serious concerns about the bill. Thursday's vote is just the start of what could be a weeks or even months-long process on health care.
Moreover, the divisions among Republicans in the tax debate are different from those involved in health care. The border adjustment tax, a measure that taxes imports and exempts exports and is part of the House GOP's tax blueprint, has become a matter of hot contention on the Hill. So has interest deductibility. But Goldman says they are obstacles that can be overcome.
The trouble that congressional Republicans face in achieving majority support for the health bill is a reminder of how difficult it might be to reach near-unanimous Republican support for major tax reforms, like border adjustment," Phillips wrote. "However, there is likely to be much broader support for tax cuts than there is for the health legislation."
The Goldman analysts give the AHCA about a 50% chance of passing the House on Thursday. As for tax reform, they say the odds of passing tax legislation by early 2018 as around 80%, even suggesting it could be enacted in the fourth quarter of 2017.
Goldman isn't the only party to pick up on this idea that health care reform might not matter for taxes, even if it fails.
Politico's Ben White in his Morning Money newsletter on Wednesday suggested that a failure on the health care vote could actually incentivize the GOP to accelerate the rest of President Trump's agenda, including tax cuts, in order to get back on offense and deliver a win.
"This depends on Republicans simply pulling the plug on ACA repeal in the face of failure. If they instead attempt to go back into the lab and cook up something else that can appeal to both hardline conservatives and nervous moderates then the whole timetable could get pushed back more and Wall Street could tank even harder," White wrote.
Investor's Business Daily's Jed Graham also picked up the notion that a quick health care rejection could spur a move on taxes. "A quick failure of Obamacare repeal might make tax cuts a 2017 story," he wrote in a column this week.
Trump himself appears eager to get through health care in order to move onto other items, including taxes.
"We want a very big tax cut," he said at a rally in Louisville, Kentucky this week. "But we cannot do that until we keep our promise to repeal and replace the disaster known as Obamacare."
Politico's Shane Goldmacher observed the president treats talking about health care like "the vegetables of his agenda." And he's ready for dessert, as is Wall Street.