Generali vows to achieve cost savings target in 2018
Italian insurer Generali has promised faster delivery of its planned €200m of cost savings.
The company saw off bid interest from Intesa Sanpaolo, one of Italy’s biggest banks, last month. If Intesa’s interested had persisted, Generali was gearing up for a big increase in its savings target as part of its defence.
There was no increase announced alongside Generali’s full year results on Thursday but the company said that it would reach its target in 2018 rather than 2019. It added that €70m of the savings had already been delivered.
Generali said that its operating profits, which rose 1 per cent to €4.83bn, were at the highest level ever although its return on equity fell slightly.
The company also announced an 11 per cent increase in the dividend to €0.8 per share.
Philippe Donnet, chief executive, said:
I am encouraged by Generali’s progress in the last year. We are already seeing the early results of our “Simpler, Smarter. Faster” Plan, announced in November 2016. We will build further on these achievements and we have the best possible team to accelerate the execution of our current strategy.
E-commerce Faces Wave of Consolidation
The buzzy digital companies that took backing at high valuations are now looking for their next step.
The boomlet of niche-y e-commerce companies that once struck fear in the heart of traditional retail is going bust, deflating into a category that is also subject to the laws of economics.
Already the go-go start-ups that got big-time funding from Silicon Valley types, but could never really make their businesses work, have started to run into the wall. Nasty Gal was just the beginning, having spent heavily and taken money from former Apple Retail and J.C. Penney Co. Inc. chief Ron Johnson only to find its intellectual property sold off to Boohoo for $20 million in a bankruptcy auction last month.
Now others are expected to see the same fate. The stronger concepts, meanwhile, maybe finding themselves better off but are stuck making a tricky shift, looking for additional funding in a world that suddenly wants not just growth, but also profits.
The brands said to be navigating this landscape and in the market for capital include Bonobos, which is working with Citi, and Birchbox.
And some companies could do more than just bring in a new investor.
Fabletics owner TechStyle Fashion Group is said to be working with J.P. Morgan as it looks to raise additional money or even find a buyer. The company already toyed with the idea of an IPO last year as it tried to solve the typical tech company problem of how to satiate its investors.
“It’s always a possibility at a company our size and with the money that we have invested into it,” said Kimberly Tobman, vice president of global communications, of a potential IPO in May. “Of course, the investors want some kind of strategic exit. That’s what the end goal is when you’re putting that kind of money into a business.”
Others are finding themselves swept up into more traditional retail businesses.
So far, Wal-Mart’s been the most active, having bought up Jet.com for $3 billion last year, adding Shoebuy.com in January and outdoor apparel site Moosejaw for $51 million last month.
Wal-Mart Stores Inc. might well be hungry for more and experts see potential for the company to continue buying e-commerce companies as it squares off for a battle royale with Amazon, the undisputed U.S. e-commerce king.
Observers said more companies, from LVMH Moët Hennessy Louis Vuitton to Kering to Fast Retailing, could ultimately jump into the game and look to grow online via acquisition as the shakeout continues.
“It’s a natural economic cycle,” said apparel veteran Ari Bloom, chief executive officer of tech firm Avametric, which builds virtual fitting room software that’s being put to use by Gap Inc.
Bloom said business school graduates from the 2009 and 2010 period found themselves starting their own companies as jobs were hard to find, ultimately building e-commerce businesses that found a favorable funding environment in the years that followed.
“It was a time when people were a little bit more forgiving because they were looking for places to put their capital,” he said. “If [start-ups] were seeing growth, even if they weren’t seeing profit, it was encouraging enough for them to keep receiving funding.”
But times have changed as more players struggle just to keep their heads above water.
“We’re going to see a lot of M&A in the next year or two and I think we’re going to see a lot of companies go out of business or fold and sell their [intellectual property] like a Nasty Gal or a One Kings Lane,” Bloom predicted. “It’s destined to happen and it doesn’t mean that good businesses aren’t going to fail, that’s a tough thing to happen and that’s a good lesson.”
An executive at a prominent private equity firm that plays in the fashion space said investors are scrutinizing valuations much more closely than they were and that the key question today is: “What’s your path to profitability?”
“So many of these businesses start raising capital and it’s in this very West Coast model,” said the executive, noting that fresh funds went toward customer acquisition to drive growth with no profits in sight.
While some e-commerce companies that have taken venture money and built up complementary store businesses are said to be driving profits, most seem to find themselves in some version of this bind of having to pay back investors who bought in at a lofty valuation.
Negative Underwear went a different route and has never taken outside funding, which cofounder Lauren Schwab said has helped the business learn how to be careful with its money.
“Certainly lots of our peers are continuing to take money and generally the idea is that this is to fuel additional growth and I think it has to do with, customer acquisition is expensive and getting a brand out into the ether is expensive,” Schwab said. “Up until this point, we have not invested at all in paid advertising and in order for us to do that in a meaningful way, we would likely have to take on some funding. We have managed our customer very smartly and have been able to thoughtfully experiment and really focus on ROI, so we weren’t able to frivolously invest large amounts of money in potential big mistakes.”
Negative is profitable and reinvests those profits in its business.
It’s a form of corporate modesty the high-flyers of the digital age are increasingly looking to adopt.
Valentino Growth on Track, but IPO on Hold
An IPO is not on the table in 2017 due to market conditions, revealed ceo Stefano Sassi.
MILAN — Valentino’s profits and sales may continue to be on a roll, but it isn’t rushing to an initial public offering this year.
“An IPO in 2017 is not on the table and we’ll see what happens in 2018,” said chief executive officer Stefano Sassi. “We’ve shelved it because of market conditions. If things change, we’ll review [the project]. We are not talking about it internally at the moment.”
To be sure, no firm date had ever been forecast, and Sassi last year said there was “no IPO before 2017.”
Valentino doesn’t have to be in a hurry. The company is controlled by the Qatar-based Mayhoola Group, which is not eyeing an exit from its investment, first made in 2012. On the contrary, Mayhoola “has [Valentino] and wants to keep it, with ambitious plans to do even more,” said Sassi, alluding to the expansion of the fund’s fashion and luxury stable with the acquisition of the Balmain brand last year.
In his 11th year helming Valentino, Sassi underscored the still-untapped potential for the brand, which, he said, has “been growing in a healthy way.”
In 2016, earnings before interest, taxes, depreciation and amortization rose 14.3 percent to 206 million euros, or $226.6 million, from 180.2 million euros, or $200 million, in 2015.
Operating income climbed 16.6 percent to 133 million euros, or $146.3 million, from 114 million euros, or $126.5 million, in the previous year.
Revenues in 2016 were up 13 percent to 1.10 billion euros, or $1.21 billion, compared with 987 million euros, or $1.09 billion, in 2015. Dollar figures were converted from the euro at average exchange rates for the periods in question.
Last year marked the appointment of Pierpaolo Piccioli as sole creative director of Valentino, following the exit of Maria Grazia Chiuri, who joined Dior. Sassi underscored the “significant effort” of the recent five shows in five months, expressing “great satisfaction, proving Pierpaolo’s very strong creative leadership and the correct stylistic statement — that of an evolving Valentino.”
As reported, the company will once again show its pre-collection in New York. The event will be held on May 23. Pre-collections account for 70 percent of Valentino’s business, said Sassi. The shows are a strong element of communication that allow Piccioli to express his point of view and, for that reason, Sassi waved away the option of combining the men’s and women’s collections in one show per season. “Last year emphasized how there are no longer any dogmas, each brand has its own strategy.”
Sassi emphasized the “ongoing evolution” of the brand under Piccioli. “The past is behind us, there is a good team in place and there is great positivity. The brand is strongly recognizable and has been carefully distributed. We’ve never aimed at growth at all costs.” Sassi has stayed clear of overexposure of the brand, which “does not pay.”
While it reached the $1 billion milestone last year, Sassi said Valentino’s goal is to focus on its core business and a “very high, strong and clear positioning. This is not a snobbish attitude, but an emphasis on quality.”
He said it was difficult to provide estimates for 2017, although the year has started on a positive note. Revenue of 1.2 billion euros, or $1.32 billion, is “a reasonable target” for 2017, he added. “There are all the elements in place to support further growth this year,” said Sassi.
The company last year started investing in Japan and will continue to do so in 2017. “We had been making fewer investments in the region compared to our competitors,” he said. Following the opening last summer of a store in Tokyo’s Omotesando district, a 10,800-square-foot unit will open in a month in the new Ginza Six shopping landmark.
“With these two important locations we make a strong statement in Japan,” observed Sassi, who lamented how challenging it was to find the right space in the Ginza area. He also admitted the company was “thinking” about holding a show in Japan later in the year.
The store concept of the Ginza venue will be an evolution of the blueprint conceived by David Chipperfield with Piccioli and Chiuri. “We adapt and experiment in each location, there is no definite model, but that concept is working very well,” explained Sassi.
The American market remains the main business area for the company, accounting for between 20 and 22 percent of sales.
There are 175 stores globally and Sassi characterized the expansion of the brand’s retail network as “cautious.” The company has earmarked between 7 and 8 percent of sales for investments in 2017 and plans to open 20 stores this year, including some men’s units.
Sassi underscored the growing relevance of its men’s wear division, which now accounts for 15 percent of total sales.
Retail sales in 2016 represented 55 percent of total revenues, unchanged from 2015. Sassi has been focused on upgrading Valentino’s wholesale channel with dedicated spaces and increasing concession agreements.
Aware of the “obsession” with all things digital, Valentino has been actively working to improve customer service and has renewed its partnership with the Yoox Net-a-porter Group to develop omnichannel tools “as much as possible.”
“The digital phenomenon has accelerated changes, and there is more attention to spending, customers look for opportunities on the web and compare prices,” said Sassi, noting that Valentino has also seen important online business with partners including Neiman Marcus and Mytheresa.com, for example. In every case, substantial efforts have been made to control the product and the quality of the service, he said. He also pointed to applications in Valentino stores that allow for interaction with customers.
A main effort last year was to realign prices globally. Sassi admitted the company had seen the effects of the Brexit vote in the U.K., which showed strong growth compared to France, for example.
Last year “was very much influenced by the flow of tourists, and the exchange rates, so the Chinese traveled less, and the dollar appreciation versus the euro impacted the U.S.”
He said Macao and Hong Kong were “complicated,” and Japan was lifted by domestic sales. “We did not see a growth of the Chinese in Japan.” He was upbeat, saying that the flows adjust each year.
Asked whether the issue of a potential increase in U.S. custom taxes has been discussed, Sassi was practical. “We’ll tackle that if and when that will happen.”
Accessories at Valentino continue to account for 50 percent of sales. Asked if there could be synergies with Balmain, for example, Sassi admitted that brand does not have a big accessories business, and that Valentino “has skills and tools to help grow the smaller companies” in the Mayhoola Group.
Valentino employs around 3,300 people.
Dow +0.54% S&P +0.84% Nasdaq +0.74% Russell +1,50%
US Market closed higher after FOMC decision. As expected, the Federal Open Market Committee voted to raise the fed funds target range by 25 basis points to 0.75%-1.00%, the Fed still believes that three rate hikes are appropriate for 2017, relieving investors' fears that the central bank could begin setting the groundwork for a fourth hike. Crude oil set today's bullish tone in pre-market action after the API reported encouraging inventory data on Tuesday evening. The EIA validated those positive numbers this morning, showing a draw of 200,000 barrels (+3.7 million barrels consensus). The reading prompted WTI crude to finish the day 2.1% higher at $48.71/bbl. energy sector (+2.1%), rate-sensitive utilities (+1.6%) and real estate (+1.9%). US After Hours GPRO +12%, ORCL+3%, rise on upbeat guidance; Guess (GES) -12% on light Q4 and underwhelming guidance. In Asia, New Zealand Q4 GDP missed expectations, as consumption and capital formation growth slowed markedly from Q3, Australia's employment figures fared poorly, with the first negative print in 5-months. PBOC also eased off the monetary accommodation in the wake of the Fed decision, raising rates on its reverse repo operations by 10bps. China central bank said the steps do not represent a shift in policy, but rather reflect changes in markets, firmer domestic economy, and strong credit expansion. PBoC also strengthened Yuan in its daily fix by the biggest margin since mid-January.
Nikkei +0.07% Hang Seng +1.48% CSI +0.31% Shanghai +0.70%
Eur$ 1.0734 CNH 6.8644 CNY 6.8905 JPY 113.28 GBP 1.2276 CHF 0.9990 RUB 58.4810 WTI$ 49.13 +0.55%
S&P +0.21% EuroStoxx +0.70% Dax +0.60% SMI +0.32% FTSE +0.58%
Macro :
- Yellen: There’s Some Scope for Wages to Increase Further
- VIX Three-Way Spread Trade Is Bullish on Volatility
- Banks Drop As Fed Maintains Hike Forecasts for 2017, 2018
- Fed Fund Futures Pricing Only One More Rate Hike, Sept. 2017
- Trump to Propose Spinning Off U.S. Air-Traffic Control from FAA
Keep an eye on :
- AIR FP : Boeing Gets $3.28b Modification to Saudi Arabia Contract
- AZA IM : Alitalia Plans to Return to Profit by End 2019 in New Plan
- ATC NA : Altice Refinances $4.3b of Debt to Extend Maturity, Cut Costs
- BOI FP : Boiron FY Net Climbs 5.1%; Co. Cautious About 2017 Sales Outlook
- BMPS IM : Monte Dei Paschi Says It Issued State-Guaranteed Bond for EU4b
- GOOS CN : Canada Goose IPO Prices 20m Shares at C$17: IPO Boutique
- COH US : Coach Call Volume Highest Since January
- CDA FP : Cie Des Alpes CEO Marcel Sees Real Rebound in Tourist Business
- DBK GY : Deutsche Bank Said to Weigh Sale of Indian Retail Business
- DEZ GY : Deutz FY Rev. Matches Est.
- EDF FP : EDF Tries New Fixes to Restart 4 Nuclear Reactors: Reuters
- FCA IM : Fiat Chrysler CEO Says ‘Zero Interest’ in Volkswagen Deal: Rtrs
- FUR NA : Kiltearn Partners Reports Higher Fugro Stake of 10.25%: Filing
- G IM : Generali 2016 Net +2.5%, COR 92.5%; Accelerates on Cost Cuts
- GWI1 GY : Gerry Weber 1Q Rev. EU209.2m
- HEI GY : HeidelbergCement Sees Growth in FY17 on U.S, Canada, Europe
- ISN SW : Intershop Looking for a Buyer, CEO Wiechen Tells Boersen-Zeitung
- ISP IM :Intesa Raised EU100m in Sale of PIR Products Since Feb 27
- SDF GY : K+S FY EBIT I EU229m, Rev. EU3.5b Cuts Dividend to EU0.30
- KORI FP : Korian FY Ebitda Jumps 24%; Co. Sees 2017 Ebitda Margin Stable
- LDO IM : Leonardo CEO Says He Should Be Reappointed Based on Co. Results, Leonardo offers first dividend for 6 years
- LHA GY : Lufthansa 2016 Adj. Ebit Falls 3.6% to EU1.75b on Strike Costs
- M US : Starboard Value Said to Sell Its Stake in Macy’s: Reuters
- EGL PL : Mota-Engil Says Full-Year 2016 Sales Fall 9% Y/y to EU2.2b
- RNO FP : Renault Reiterates Earlier Comments on Emission Probe
- RNO FP : Nissan Falls Most in Four Months After Renault Emission Report --> Nissan (7201) -1.73%
- SHP LN : Shire Gets European Approval for Label Extension of Cinryze
- UHR VX : Swatch Says First Months of 2017 are Encouraging, Cuts CEO Pay, Sees ‘Healthy Growth’ in U.S., European Markets in 2017
- TSLA US : Tesla to Offer $250m Shares, $750m Convertible Notes --> Raised to $1.15bil pricing on the 16th
- VOD LN : Vodafone, Liberty Global Said Not in Active Talks, FT Says
>>> Up
*Air France-KLM Raised to Buy at AlphaValue
*Cape Raised to Outperform at Macquarie, PT 240p
*DBV Tech Raised to Buy at SocGen, PT EU82
*Intertek Raised to Buy at Deutsche Bank, PT 4150p
*KAZ Minerals Raised to Overweight at JPMorgan, PT 580p
*Maire Tecnimont Raised to Overweight at Barclays
*Norsk Hydro Raised to Overweight at JPMorgan, PT NOK58
>>> Down
*Boliden Cut to Neutral at JPMorgan, PT SEK285
*BowLeven Cut to Underweight at Barclays
*Geberit Cut to Hold at SocGen, PT CHF473
*GN Cut to Sell at DNB Markets, PT DKK160
*Hikma Cut to Neutral at JPMorgan, PT 2400p
*Merlin Cut to Sell at Berenberg, PT 375p
*Royal Unibrew Cut to Hold at ABG Sundal, PT DKK315
>>> Initiation
*Adler Real Estate Rated New Buy at Bankhaus Lampe, PT EU16.50
*Low & Bonar Rated New Buy at Berenberg, PT 112p
*Management Consulting Group Resumed Hold at Peel Hunt, PT 8p
*Nordic Nanovector Rated New Buy at Jefferies, PT NOK125
*Premier Oil Rated New Buy at Peel Hunt, PT 90p
>>> Call
UK builders' suppliers cautiously upbeat as demand returns
Groups boosted by improved housing activity and mild winter
UK builders' merchants and suppliers are sounding notes of cautious optimism, as they benefit from pent up post-recession demand for housing and a mild winter helping British construction.
Two companies have in the past week reported profit growth, driven by a pick-up in activity towards the end of 2016.
Paving and concrete maker Marshalls said on Wednesday that pre-tax profits rose by 31 per cent to £46m last year.
Sales to UK households were particularly strong, which Martyn Coffey, Marshalls’ chief executive, attributed to property owners investing in their homes with funds they can now access through pension equity release.
Despite the Brexit related uncertainty, Mr Coffey said the company had seen “no change” in the daily rate of orders it received — although he added the second half of 2016 had improved on the first.
The company said sales and orders had been “strong in the first couple of months of 2017”.
Analysts at Panmure Gordon and Canaccord Genuity said they were raising estimates for Marshalls’ 2017 full-year earnings to £49m.
Home improvement also boosted Grafton, a builders’ merchant and DIY purveyor. The £1.5bn market capitalisation group last week reported adjusted profit before tax — before one-off acquisition and other costs — up 14 per cent to £136.2m for 2016.
Grafton said the final months of 2016 were strong, although the second and third quarters were weaker amid “subdued activity in the housing market”.
The group said its Selco brand, which sells to builders, was boosted by residential demand for repair and maintenance services. It opened seven UK Selco branches last year and plans to open 10 more in 2017.
John Newcomb, managing director of the Builders Merchants Federation, said the merchants sector “had a reasonably good year, with growth anywhere between 5 and 6 per cent”. He cited clement weather conditions and pent up demand for housing from previous years.
Members of the federation had positive expectations for the first quarter of 2017, with 41 per cent of general merchants saying they anticipated more than 5 per cent sales growth.
Mr Newcomb added that 2017 had started well — although Brexit is “a bit of a sword of Damocles hanging over us”.
Repair and maintenance revenues are closely linked to house purchases, as homeowners do up new properties or refresh them for the market. The Office for National Statistics reported that UK housing transactions hit a 10-year high in March 2016.
However a fiercely competitive plumbing and heating sector challenged companies last year, with Grafton closing 47 branches across its UK plumbing and heating contracts businesses, incurring a £19.7m exceptional charge
Travis Perkins, which fell out of the FTSE 100 in December and this month reported that 2016’s pre-tax profit was down 0.3 per cent, had to restructure its plumbing and heating business after “unsatisfactory performance”.
It was not the only merchant wounded in 2016. Building supplies company SIG appointed Meinie Oldersma as its new chief executive on Tuesday, after a torrid year in which the company warned on profits and suffered a share price fall of almost a quarter.
What you need to know after FOMC meeting
Dollar falls as Fed signals just 2 further increases likely in 2017
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https://www.ft.com/content/8f256ac6-09aa-11e7-ac5a-903b21361b43
Key points
https://www.ft.com/content/8f256ac6-09aa-11e7-ac5a-903b21361b43
Key points
● Treasury yields have fallen, with the 10-year yield lower by 12 basis points to 2.48 per cent
● Market expectations for at least four Federal Reserve rate increases this year dipped to less than one-in-five
● US dollar falls. Dollar index down as much as 1 per cent while euro hits five-week high at $1.0745
● Emerging market currencies rise, Mexican peso reaches best level since Trump was elected at 19.19 pesos
● Asian equities struggle to match Wall Street rally. Gainers led by the energy sector
● Wall Street rallied. The S&P 500 ended 0.8 per cent higher at 2,385 — just 0.4 per cent short of its record close
● Commodities rally as focus turns to growth — copper, oil and gold all higher
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Financial markets reacted swiftly after the US Federal Reserve on Wednesday tightened policy and signalled just two further rate increases are likely for 2017.
When Fed doves raise rates
While the Fed quickened the pace of easing with a quarter-point just three months after the last one, it left its median forecasts for a total of three rate rises in 2017 unchanged.
Leading up to the meeting, a string of upbeat economic data and hawkish remarks from a handful of Fed speakers had prompted some to expect the Fed’s “dot plot” of interest-rate projections could be revised to reflect four rate rises in 2017, up from its previous estimates of three moves.
The median implies that rates will rise to 1.375 per cent by the end of this year, with a three-quarter percentage point increase to follow in 2018.
Here’s a look at the dot plot in March:
Asia Mid-Session Market Update: BOJ maintains policy stance with more upbeat view of longer-run inflation; Australia employment, New Zealand GDP miss expectations
***US Session Highlights***
- (US) MAR EMPIRE MANUFACTURING: 16.4 V 15.0E; new orders 21.3 v 13.5 prior
- (US) FEB ADVANCE RETAIL SALES M/M: 0.1% V 0.1%E; RETAIL SALES EX AUTO M/M: 0.2% V 0.1%E; Control Group revised higher from 0.4% to 0.8%
- (US) FEB CPI M/M: 0.1% V 0.0%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 243.603 V 243.416E
- (US) MAR NAHB HOUSING MARKET INDEX: 71 V 65E (highest since June 2005)
- (US) JAN BUSINESS INVENTORIES: 0.3% V 0.3%E
- (US) FOMC RAISES FED FUNDS TARGET RANGE 25BPS TO 0.75-1.00% (AS EXPECTED); ECONOMIC CONDITIONS WILL EVOLVE IN WAY THAT WARRANTS GRADUAL INCREASES
***US markets on close: Dow +0.5%, S&P500 +0.8%, Nasdaq +0.7%***
- Best Sector in S&P500: Energy
- Worst Sector in S&P500: Financials
- Biggest gainers: SWN +5.8%, NEM +5.3%, FCX +5.1%, HOG +4.7%, RIG +4.6%
- Biggest losers: M -2.0%, COF -2.0%, AZO -1.7%, ORLY -1.7%, DFS -1.6%
- At the close: VIX 11.6 (-0.7 pts); Treasuries: 2-yr 1.31% (-7bps), 10-yr 2.51% (-9bps), 30-yr 3.11% (-7bps)
***US movers afterhours***
- ALRM: Reports Q4 $0.19 adj v $0.13e, R$69.8M v $64.0Me; +9.0% afterhours
- GPRO: Affirms Q1 revs at upper end of $190-210M v $199Me; +8.8% afterhours
- FRSH: Reports Q4 $0.09 (*incl benefit) v $0.01e, R$35.5M v $39.2Me; Guides initial FY17 SSS flat to +2%; +8.7% afterhours
- ORCL: Reports Q3 $0.69 v $0.62e, R$9.21B v $9.24Be; Raises dividend 27% to $0.19/shr (implied yield 1.8%); +5.9% afterhours
- KCG: Confirmed that it has received an unsolicited proposal from Virtu Financial for $18.50-20.00/shr in cash; +4.7% afterhours
- WSM: Reports Q4 $1.55 v $1.50e, R$1.58B v $1.61Be; Increases dividend 5% to $0.39/shr (implied yield 3.2%); +3.4% afterhours
- TSLA: Announces offerings of $250M Common Stock (0.6% of market cap) and $750M Convertible Senior Notes (1.8% of market cap); CEO Musk to purchase $25M of common stock; +2.1% afterhours
- JBL: Reports Q2 $0.48 v $0.45e, R$4.45B v $4.36Be; -1.8% afterhours
- GES: Reports Q4 $0.41 v $0.45e, R$679M v $689Me; Guides Q1 -$0.33 to -$0.30 v +$0.16e; -12.5% afterhours
***Politics***
- (US) Hawaii judge blocks President Trump's second travel ban saying likely a violation of First Amendment protections
- (US) House Speaker Ryan: Working on improving and refining the Republican healthcare bill - press
- (US) Pres Trump's proposed budget plan said to cut EPA funds by 31% and State Dept by 28% - NY Times
- (US) Trump Administration say it plans to rescind the Bureau of Land Management (BLM) Fracking rule on public lands with US Circuit Court of Appeals in 10th district - press
- (NL) Netherlands election results (1st exit poll): PM Rutte's VVD party wins the most seats with 31 out of 150 in the lower house; Wilders' PVV wins 19 seats - Ipsos
***Asia Key economic data:***
- (JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; Maintains 10-yr JGB yield target around 0%
- (AU) AUSTRALIA FEB EMPLOYMENT CHANGE: -6.4K (first decline in 5 months) V +16.0KE; UNEMPLOYMENT RATE: 5.9% (13-month high) V 5.7%E
- (AU) AUSTRALIA MAR CONSUMER INFLATION EXPECTATION: 4.0% V 4.1% PRIOR (3-month low)
- (NZ) NEW ZEALAND Q4 GDP Q/Q: 0.4% V 0.7%E; Y/Y: 2.7% V 3.2%E
***Asia Session Notable Observations, Speakers and Press***
- FOMC raised Fed Funds target range by 25bps as had been widely expected, but the outlook of the accompanying statement and Fed Chair Yellen press conference were perceived to be less hawkish. Median forecast for this year remained at 1.375%, implying 2 more hikes and reversing hints of markets anticipating a potential 4th hike. 2018 median forecast was also left unchanged with 3 more hikes, as the Fed judgednear-term outlook as "roughly balanced" and market-based inflation compensation remaining low. In the Q/A, Fed Chair Yellen said current policy setting is still below the current 'neutral' rate, but it's not that far below it.
- Bonds rallied on the statement, with benchmark 10-year falling to 1-week low around 2.5%. USD was also weaker across the board, particularly in USD/JPY as it fell as much as 140pips below 113.20. EUR/USD rose about 50pips above 1.0740, also helped by weaker showing for euroskeptic party in the Dutch elections, where PM Rutte's party took 31 seats vs populist Wilders' 19 seats.
- New Zealand Q4 GDP missed expectations, as consumption and capital formation growth slowed markedly from Q3 levels to 0.4% v 1.6% prior and 0.7% v 2.5% prior respectively. Analysts noted the undershoot in growth has pushed back OIS probability of the first RBNZ hike to early 2018 from late 2017. NZD/USD also fell some 40pips to $0.70 on the release.
- Australia's employment figures fared poorly, with the first negative print in 5-months. Unemployment also rose to reach 13-month highs as participation rate remained unchanged. Aussie 3-year bond yield was down a whopping 10bps in the wake of US bond rally and soft employment data, while AUD/USD pared its post-FOMC spike to 0.7720 to fall back to 0.7680.
- PBOC also eased off the monetary accommodation in the wake of the Fed decision, raising rates on its reverse repo operations by 10bps while also conducting 6-mo and 1-yr MLF operation at yields 10bps above prior. China central bank said the steps do not represent a shift in policy, but rather reflect changes in markets, firmer domestic economy, and strong credit expansion. PBoC also strengthened Yuan in its daily fix by the biggest margin since mid-January.
- Last risk event of the session - the BOJ decision - was perhaps the least volatile. Bank of Japan held its IOER rate at -0.1%, maintained the slope in the Yield Curve Control with 10-yr target of 0%, kepts its JGB buying target unchanged at about ¥80T per year, and maintained its overall assessment of economy continuing moderate recovery trend. The most notable changes was a downgrade to Housing investment component of its assessment (flat vs picking up) and a more hawkish view of medium-term inflation rising toward 2% as "output gap improves and inflation expectations rise." USD/JPY saw a brief ripple with a 15pip rise to 113.50 on the release but quickly erased those gains.
China
- (CN) China CBRC Chairman Guo Shuqing: China needs to crack down on debt evasion
Japan
- (JP) Japan Automobile Manufacturers Association (JAMA) sees FY17 Japan auto demand at 5M units, -0.8% y/y
- (JP) Japan Chief Cabinet Sec Suga: To monitor interest rates in US after today's Fed decision; Rate hike is not bad for Japan and global economy
- (JP) Japan Fin Min Aso: have to have free trade; will explain Abenomics 3 arrows at G20
Australia
- (AU) UBS: Australia bonds are attractive even if AAA rating is cut - press
- (NZ) Swaps markets have pushed back odd-on timeframe for RBNZ rate hike to Jan 2018 from Dec 2017 following lower than expected Q4 GDP - press
Korea
- (KR) South Korea Defense Ministry Official: THAAD system is for self defense only against threat from North Korea - press
- (KR) Bank of Korea (BOK) Will stabilize markets on excessive movements; closely monitoring financial market movement after the Fed
- (KR) South Korea vice Fin Min Choi: To continue to monitor markets; Prepared to take action to stabilize markets if needed - press
***Asian Equity Indices/Futures (00:15ET)***
- Nikkei -0.2%, Hang Seng +1.3%, Shanghai Composite +0.7%, ASX200 +0.2%, Kospi +0.5%
- Equity Futures: S&P500 +0.2%; Nasdaq +0.2%; Dax +0.6%; FTSE100 +0.2%
***FX ranges/Commodities/Fixed Income (00:15ET)***
- EUR 1.0720-1.0745 JPY 113.15-113.55; AUD 0.7680-0.7715; NZD 0.6990-0.7045
- Apr Gold +2.0% at $1,225/oz; Apr Crude Oil +0.6% at $49.14/brl; May Copper +0.3% at $2.68/lb
- SPDR Gold Trust ETF daily holdings rise 4.4 tonnes to 839.4 tonnes; 3rd straight increase; highest since Mar 3rd
- (CN) PBoC conducts CNY303B 1-yr Medium-term Lending Facility (MLF) at 3.2% (prior 3.1%)
- (CN) PBOC to inject combined CNY80B v CNY60B prior in 7,14, and 28-day reverse repos; raises all offer yields by 10bps
- (CN) PBOC SETS YUAN MID POINT AT 6.8862 V 6.9115 PRIOR; Biggest CNY increase since Jan 18th; Strongest Yuan setting since Mar 6th
- (AU) Australia 3-yr govt bond yield extending decline to 2.00% following employment data; 1-week low
- (NZ) New Zealand sells NZ$200M 2025 bond, bid-to-cover ratio: 7.12x
***Asia equities / Notables / movers by sector***
- Consumer discretionary: 1910.HK Samsonite +4.7% (FY16 result); 670.HK China Eastern Airlines +2.0% (Feb result); MYR.AU Myer -4.7% (H2 sales )
- Consumer staples: 2218.HK Yantai North Andre Juice Co +0.7% (FY16 result)
- Financials: 993.HK Huarong International Financial Holdings -1.4%
- Industrials: 3369.HK Qinhuangdao Port -0.5% (FY16 result); 1812.JP Kajima Corp +1.5% (raises guidance)
- Technology: 268.HK Kingdee International Software Group -2.2% (FY16 result); 005930.KR Samsung Electronics +1.5% (iPhone 8 OLED screen made by Samsung speculation); 066570.KR LG Electronics -0.6% (BNP Paribas raises rating); 6502.JP Toshiba Corporation -2.5% (offers chip unit share as loan collateral); 6773.JP Pioneer Corp -2.0% (Deutsche Bank cuts rating)
- Materials: Newcrest Mining NCM.AU +0.9%, St Barbara SBM.AU +6.5%, Evolution Mining EVN.AU +4.9% (gold price rises); 338.HK Sinopec Shanghai Petrochemical Co 3.0% (FY16 result); TAW.AU Tawana Resources +5.9% (Metallurgical Test Work results)
- Energy: 991.HK Datang International Power Generation -0.9% (FY16 result), STO.AU Santos +4.8% (Credit Suisse raises rating)
- Telecom: 762.HK China Unicom +4.3% (FY16 result)
After Hours Summary: GoPro (GPRO), Oracle (ORCL), rise on upbeat guidance; Guess (GES) -12% on light Q4 and underwhelming guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: GALE +12.8%, SKLN +12.5%, ALRM +9.8%, FRSH +8.7%, GPRO +8.7%, CLRB +7.8%, IDRA +6.6%, GV +5.8%, ORCL +5.5%, CPRX +5.2%, YRD +4.5%, WSM +3.9%, RMTI +3.6%, SYNC +3.2%, CVRS +2.2%, CALL +1.9%.
Companies trading higher in after hours in reaction to news: KCG +4.4% (Confirms that it has received an unsolicited proposal from Virtu Financial (VIRT) for $18.50-$20.00 per share in cash), GBT +2.6% (Initiated with an Overweight at Cantor), DO +2.3% (Updates on injunction vs. Petrobras (PBR) regarding the Ocean Valor), TSLA +2.1% (Announces offerings of $250 mln of common stock and $750 mln aggregate principal amount of convertible senior notes due in 2022 in concurrent underwritten registered public offerings), TDG +1.8% (Insider buying), BKS +1.7% (Board authorizes new stock repurchase program of up to $50 mln of its common shares), SPWR +1.7% (Enters into a Project Supply Agreement with Next Era Energy Resources), EQC +1.2% (Board adds $150 mln to buyback program).
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: ARTX -18.2%, GES -12.2%, CNAT -6.3%, INO -5.4%, SAEX -4.1%, TROV -2.9%.
Companies trading lower in after hours in reaction to news: IPI -9.9% (Commences underwritten public offering of shares of its common stock), AVID -8.4% (Postpones conference call to discuss Q4 financial results), PEN -4.1% (Commences an underwritten public offering of 1.3 mln shares of its common stock), ELF -1.3% (Files for $175 mln offering of common stock by selling stockholders), M -1% (Reuters reporting Activist Starboard has sold its stake).