Asia Mid-Session Market Update: China sells US Treasuries for 6th straight month; Australia net employment rises for 3rd month as participation rate improves
***US Session Highlights***
- (US) DEC CPI M/M: 0.3% V 0.3%E; CPI EX FOOD AND ENERGY M/M: 0.2% V 0.2%E; CPI INDEX NSA: 241.432 V 241.508E
- (US) Dec Real Avg Weekly Earnings Y/Y: 0.2% v 0.5% prior
- (US) DEC INDUSTRIAL PRODUCTION M/M: 0.8% V 0.6%E; CAPACITY UTILIZATION: 75.5% V 75.4%E
- (US) Fed's Kaplan (moderate, 2017 voter): Sees 2017 US growth at about 2.3%, underpinned by the US consumer; US households have the capacity to spend - comments in Dallas
- (CA) BANK OF CANADA (BOC) LEFT INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
- (US) JAN NAHB HOUSING MARKET INDEX: 67 V 69E; prior revised slightly lower
- (US) NOV TOTAL NET TIC FLOWS: $23.7B V $18.8B PRIOR; NET LONG-TERM TIC FLOWS: $30.8B V $9.4B PRIOR
***US markets on close: Dow -0.1%, S&P500 +0.2%, Nasdaq +0.3%***
- Best Sector in S&P500: Industrials
- Worst Sector in S&P500: Utilities
- Biggest gainers: AA +6.7%, FAST +5.8%, MJN +5.3%, NUE +3.7%, URI +3.5%
- Biggest losers: MNK -5.9%, TGT -5.8%, NTRS -4.7%, HBI -3.7%, UA -3.2%
- At the close: VIX 12.5 (+0.6pts); Treasuries: 2-yr 1.22% (+5bps), 10-yr 2.39% (+6bps), 30-yr 2.99% (+6bps)
***US movers afterhours***
- CSX: Departing Canadian Pacific CEO Hunter Harrison and Paul Hilal said to potentially target CSX - financial press; +12.5% afterhours
- OCLR: Reports prelim Q2 R$153.5-154M v $151Me (prior guidance $146-154M)- Reports prelim Q2 gross margin ~40% (prior guidance 33-36%); +8.9% afterhours
- NFLX: Reports Q4 $0.15 v $0.13e, R$2.48B v $2.47Be- Guides Q1 $0.37 v $0.18e, total streaming Rev $2.52B v $1.81B y/y, domestic streaming Rev $1.47B; +7.9% afterhours
- FMC: Positive Mad Money mention - CNBC; +2.2% afterhours
- KMI: Reports Q4 $0.08 v $0.18e, R$3.39B v $3.32Be; -2.0% afterhours
- PLXS: Reports Q1 $0.82 v $0.76e, R$635M v $649Me; -2.3% afterhours
- ZYNE: Reportedly plans to price share offering at $18-19/shr - press; -8.7% afterhours
- RCII: Guides Q4 -$0.30 to -$0.20 v $0.11e; Q4 SSS down ~-14%; -12.7% afterhours
***Asia Key economic data:***
- (AU) AUSTRALIA DEC EMPLOYMENT CHANGE: +13.5K (3rd straight increase) V +10.0KE; UNEMPLOYMENT RATE: 5.8% (6-month high) V 5.7%E
- (AU) AUSTRALIA JAN CONSUMER INFLATION EXPECTATION: 4.3% V 3.4% PRIOR (32-month high)
- (NZ) NEW ZEALAND JAN ANZ CONSUMER CONFIDENCE INDEX: 128.7 V 124.5 PRIOR; M/M: +3.4% V -2.1% PRIOR (21-month high)
- (NZ) NEW ZEALAND NOV BUILDING PERMITS M/M: -9.2% V +2.0% PRIOR (first decline in 3 months, biggest decline since Mar 2013)
- (NZ) NEW ZEALAND DEC BUSINESS MANUFACTURING PMI: 54.5 V 54.5 PRIOR (remains at lowest level since Oct 2015)
- (KR) South Korea DEC PPI Y/Y: 1.8% v 0.7% prior (2nd straight increase, 4-year high)
- (UK) DEC RICS HOUSE PRICE BALANCE: 24% V 30%E (first m/m decline in 5 months)
***Asia Session Notable Observations, Speakers and Press***
- Asian equities mixed again; Nikkei225 with an outsized gain on reversal in Yen strength following some hawkish comments by Fed Chair Yellen late in the US session; Hang Seng underperforms on weakness in Energy and property developers
- USD consolidating gains in late US session that followed Yellen signaling continued commitment to policy tightening with the Fed close to its dual goals; US rates also rise across the curve; AUD/USD briefly falls below $0.75 on mixed jobs data.
- US TICS flow showing China reducing its holdings of US debt for the 6th straight month and by the biggest margin in 5 years; China Commerce Ministry official nonetheless reiterates China prepared to cooperate with the new US govt on trade.
- Nikkei previews next BOJ decision with expectation of a 2nd consecutive upgrade in overall economic assessment amid improvements in exports, production, and consumption; Separate report however notes the headwinds from lower rents as NIRP BOJ policy stimulates investment housing supply.
- Australia jobs data come in mixed - net employment tops forecast but growth is smallest in 3 months; Unemployment rises to 6-month high, though participation rate also ticks up for its best 2-month stretch since mid-2015.
- South Korea defence officials monitoring for potential ICBM test by the North.
China:
- (CN) China National Energy Administration (NEA): China aims to cap coal consumption at 4.1B MT by 2020; Share of coal in China energy mix should fall below 58% - Chinese press
- (CN) China MOFCOM spokesperson Jiwen: China will cooperate with new US govt on economy and trade
- (CN) Some China banks have asked staff to be more careful on IPO due diligence - HK press
Japan:
- (JP) Falling rents in Japan seen as another obstacle in the way for BOJ's 2% inflation target - Nikkei
- (JP) BOJ said to consider another upward revision to its economic assessment at the upcoming Jan 31st meeting - Nikkei
Australia
- (AU) Goldman Sachs chief economist Toohey: Next RBA policy move is up amid global economic recovery and rising incomes - press
- (AU) Capital Economics: Australia labor market is still fragile - AFR
***Asian Equity Indices/Futures (00:30ET)***
- Nikkei +1.0%, Hang Seng -0.6%, Shanghai Composite -0.2%, ASX200 +0.2%, Kospi +0.1%
- Equity Futures: S&P500 flat; Nasdaq flat, Dax flat, FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.0620-1.0645; JPY 114.40-114.90; AUD 0.7490-0.7525; NZD 0.7115-0.7145
- Feb Gold -0.9% at $1,202/oz; Feb Crude Oil +0.8% at $51.49/brl; Mar Copper +0.5% at $2.63/lb
- (US) Weekly API Oil Inventories: Crude: -5.0M v +1.5M prior (largest draw since Jan 4th)
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8568 V 6.8525 PRIOR
- (CN) PBOC to inject combined CNY250B in 7-day and 28-day reverse repos v CNY460B prior
- (JP) Japan investors bought net ¥332B in foreign bonds v bought ¥208B in prior week; Foreign investors bought net ¥247B in Japan stocks v bought ¥347B bought in Japan stocks in prior week
- JGB: (JP) Japan MoF sells ¥2.18T in 0.1% 5-year JGB bonds; avg yield -0.116% v -0.063% prior; bid-to-cover 3.66x v 4.48x prior
- (NZ) New Zealand sells NZ$200M 2.75% in 2025 bonds; avg yield 3.133%
***Asia equities / Notables / movers by sector***
- Consumer discretionary: TCL Multimedia Technology 1070.HK -0.3% (profit alert); Luk Fook Holdings 590.HK -0.7% (Q3 result); Bega Cheese BGA.AU +17.2% (agrees to buy Vegemite and other brands); Sapporo Holdings 2501.JP -0.8% (FY17 result speculation); KT & G Corp 033780.KR +3.0% (Q4 result)
- Financials: ANZ Bank ANZ.AU -1.0% (Macquarie cuts rating)
- Industrials: Japan Aviation Electronics Industry 6807.JP -4.6% (NEC becomes parent); Laox Co 8202.JP +2.0% (business revamp)
- Technology: Toshiba Corporation 6502.JP -23.9% (writedown speculation) ; Samsung Electronics 005930.KR +1.4% (court decision); Japan Display Inc 6740.JP -0.3% (exclusive supplier for Nintendo's Switch)
- Materials: Sims Metal Management SGM.AU +3.0% (raises forecast); South32 S32.AU -1.3% (Q2 result)
- Energy: Woodside Petroleum WPL.AU -1.1% (Q4 result)
- Healthcare: CSL CSL.AU +12.4% (raises guidance)
- Telecom: Softbank Corp 9984.JP +1.0% (Deutsche Bank raises rating)
After Hours Summary: OCLR and NFLX +8% following earnings/guidance, Hunter Harrison spec lifting Class 1 rails... RCII -13%, KMI -3%, PLXS -2% following earnings/guidanceAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: OCLR +8.2%, NFLX +8.1%, PTC +3.4%
Companies trading higher in after hours in reaction to news: SSH +15% (continued strength), SYN +6% (confirms plans to initiate a Phase 2b/3 adaptive pivotal trial for SYN-010; anticipates initiating this trial by the end of 1Q17), GALT +4.9% (very thinly traded; Richard Uihlein disclosed 7.89% active stake), PSO +2.4% (light volume; modestly rebounding), MNK +2.3% (rebounding in after hours trade after confirming details regarding FTC / Questcor matter; says no impact on Mallinckrodt net sales and will host call tomorrow), LQ +1.7% (pursuing the separation of its businesses into two stand-alone publicly traded companies, which could involve spinning off owned real estate assets as a separate company), MDLZ +1% (to sell most of its grocery business in Australia and New Zealand to Bega Cheese for A$460 mln), SWN +0.9% (upgraded at UBS)
Optical names are higher following Oclaro (OCLR) earnings/guidance: FNSR +2.1%, LITE +1.9%, ACIA +1%, NPTN +0.6%Class 1 rail names are higher after mogul Hunter Harrison confirmed plans to step down as Canadian Pacific CEO and 'pursue opportunities involving other Class 1 Railroads': CSX +10%, NSC +6%, KSU +1.2%
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: RCII -12.7% (issues downside guidance), KMI -2.8%, PLXS -2.3%, CP -1.4% (also announces that Keith Creel will become President and CEO of the company effective January 31, 2017 following E. Hunter Harrison's decision to retire)
Companies trading lower in after hours in reaction to news: AMDA -22.6% (to offer and sell common stock and warrants in an underwritten public offering), VNOM -7.3% (commences public offering of 7,000,000 common units representing limited partner interests; reports prelim Q4 operational results/acquisition update), ZYNE -6.9% (commences common stock offering), AAN -4.4% (RCII sympathy), HRTX -3.1% (commenced underwritten public offering of $150 million of shares of its common stock), EPE -2.9% (downgraded to Sell from Neutral at UBS), AA -1.2% (files for 36,311,767 share common stock offering by selling stockholders), HTGC -1% (commences $150 mln offering of its Convertible Senior Notes due 2022)
Netflix shares pop as subscriber growth tops estimates -->
Netflix blew past estimates for new customers in the fourth quarter, sending shares up 8 per cent in after-hours trade on Tuesday.
The California-based company said it added 7.1m subscribers globally in the three months to the end of December, beating its previous guidance of 5.2m new additions and marking its biggest quarter ever for new customers.
Revenues climbed to $2.48bn in the quarter while earnings grew to 15 cents a share — slightly above analysts’ forecasts and up from 10 cents a share in the same period a year ago.
Netflix shares have grown by more than a third in the past six months, as investors have been encouraged by strong customer growth and fresh deals with pay-TV companies such as Comcast.
Last year Netflix flagged ambitions to reach 100m subcribers this year, as it expanded to more than 130 countries. The company is on course to spend $6bn to produce and license original content in 2017, building on demand for hits such as House of Cards and The Crown.
Closing Market Summary: Market Ekes Out a Gain with Help of FinancialsWednesday's trading session closed in the neighborhood of where it opened as investors generally elected to watch rather than act amid a batch of economic data and a slew of corporate news. The major averages finished mixed with the S&P 500 and the Nasdaq adding 0.2% and 0.3%, respectively, while the Dow fell 0.1%. A late burst of buying interest led by the financial sector, however, left each of the major average at, or near, their best levels of the day when the closing bell rang.
Frankly, there wasn't a lot of trading excitement throughout the session. The major indices all held to tight trading ranges, reined in by a lack of any meaningful sector leadership, a stark jump in long-term rates, and an awareness that Fed Chair Yellen was going to be speaking at 3:00 p.m. ET on the goals of monetary policy.
Ms. Yellen's speech, as it turned out, was mostly an academic exercise. She didn't provide any "new" information for the market per se, yet her reminder that interest rates are apt to creep higher provided some verbal reassurance that facilitated the positive finish for today's market.
Her speech followed a mixed batch of economic data this morning, which featured a stronger than expected Industrial Production report for December, a weaker than expected NAHB Housing Market Index for January, and the highest year-over-year increase in the Consumer Price Index (+2.1%) since June 2014.
In aggregate, Ms. Yellen's remarks and today's data didn't alter the view that the Fed will continue to abide by its projection for three rate hikes in 2017.
The financial sector (+0.8%) had a slow-developing rally today, but eventually got it in gear toward the end of the session and finished at its highs for the day. A lackluster response to better-than-expected earnings news from Goldman Sachs (GS 234.29, -1.45), Citigroup (C 57.39, -0.99), and U.S. Bancorp (USB 50.56, +0.25) kept a lid on things, yet there was underlying strength in other components that proved to be an effective offset and a driver of today's gains.
Thus far, the financial sector has been fairly slow to respond to better-than-expected earnings reports as it continues to digest a huge move following the election, which produced a 20.5% gain for the sector in the fourth quarter.
In other corporate news, Target (TGT 66.85, -4.09) lowered its Q4 guidance following disappointing holiday sales. The news had a ripple effect on other retailers, which led to a 0.3% decline in the SPDR S&P Retail ETF (XRT 44.25, -0.11, -0.39). Naturally, the consumer discretionary sector (-0.2%) felt the pressure and closed near the bottom of today's leaderboard.
The energy sector (-0.3%) also posted a lackluster performance, falling in tandem with crude oil. The commodity's downtick was forced by some renewed strength in the dollar and expectations that U.S. producers will boost output in response to the higher prices. The U.S. Dollar Index (101.25, +0.92) finished 0.9% higher while gold closed down 0.1% at $1,212.10/ozt.
The top-weighted technology sector outperformed the broader market with a 0.3% increase. The sector was driven primarily by a bullish performance from chipmakers, which rebounded from Tuesday's selling and drove a 1.4 gain in the PHLX Semiconductor Index.
The U.S. Treasury market came under selling pressure in the overnight trade -- pressure which never relented much during the regular session. Securities across the curve were on the defensive, with the belly and back end of the curve getting hit the hardest. The yield on the 5-yr note jumped 10 basis points to 2.23%. The yield on the 10-yr note, meanwhile, also increased 10 basis points to 2.42%
Reviewing today's economic data:
- Total CPI rose 0.3% (consensus +0.3%) in December while core CPI, which excludes food and energy, increased 0.2% (consensus +0.2%). On a year-over-year basis, total CPI is up 2.1% and core CPI has increased 2.2%.
- The key takeaway from this report is that the consumer inflation rate is steadily rising, which is supporting the Federal Reserve's tightening bias at this juncture.
- December Industrial Production increased 0.8% (consensus +0.6%) while Capacity Utilization rose to 75.5% (consensus 75.4%).
- The key takeaway from the report is that overall industrial production remains soft, having slipped at an annual rate of 0.6% in the fourth quarter and increasing just 0.5% year-over-year.
- The NAHB Housing Market Index for January fell to 67 from a revised 69 in December (from 70).
Tomorrow's economic data will include Initial Claims (consensus 252,000), Housing Starts (1.193 million), and Philadelphia Fed (consensus 15.3). All reports will be released at 8:30 a.m. ET.
Safran lance une OPA amicale sur Zodiac
Après la fusion géante Essilor-Luxottica, l’aéronautique entre à son tour dans le bal des fusions-acquisitions de l’année 2017. Selon nos informations, le motoriste Safran annonce, ce jeudi 18 janvier, le rachat de Zodiac Aerospace pour près de 10 milliards d’euros (avec la reprise de dette). Approuvée par le conseil de surveillance de Zodiac la veille, l’opération est amicale. Elle prend la forme d’une Offre publique d’achat (OPA) qui valorise le spécialiste des sièges d’avions, à 8,3 milliards, contre 6,77 milliards de capitalisation boursière mercredi.
Goldman Sachs Weighs Deep London Cuts amid Brexit Concerns
Goldman Sachs is weighing plans to halve its London staff to 3,000 and transfer key operations to New York and the European continent, particularly Frankfurt.
Goldman Sachs is weighing plans to halve its London staff to 3,000 and transfer key operations to New York and the European continent, particularly Frankfurt, according to Handelsblatt’s financial sources.
Britain’s pending exit from the European Union will likely hamper Goldman’s ability to advise customers on the European continent from London.
Goldman is mulling the transfer of up to 1,000 personnel to Frankfurt, the sources said, where the bank is setting up a new subsidiary, Europe SE, to bring its European operations under one roof.
The people moving to Frankfurt would include traders as well as top managers who are responsible for regulation and compliance, the sources said.
Under the plans, back office personnel would move from London to Warsaw, the sources said, and investment bankers who advise French and Spanish companies would move to those countries.
Personnel in Goldman’s trading business who develop new products as opposed to advising customers would move to the bank’s headquarters in New York, the sources said.
Fed Chair Janet Yellen full speech follow up
- As the economy approaches our objectives, it makes sense to gradually reduce the level of monetary policy support. Changes in monetary policy take time to work their way into the economy. Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road--either too much inflation, financial instability, or both. In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession. Lowering short-term rates in turn puts downward pressure on longer-term interest rates, making credit more affordable--for families, for instance, to buy a house or for businesses to expand. Similarly, when the economy is threatening to push inflation too high down the road, we increase interest rates to keep the economy on a sustainable path and lean against its tendency to boom and then bust.
- The economy is vast and vastly complex, and its path can take surprising twists and turns. What I can tell you is what we expect--along with a very large caveat that our interest rate expectations will change as our outlook for the economy changes. That said, as of last month, I and most of my colleagues--the other members of the Fed Board in Washington and the presidents of the 12 regional Federal Reserve Banks--were expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent.
Link to full speech : https://www.federalreserve.gov/newsevents/speech/yellen20170118a.htm