Asian Mid-session Update: RBNZ on hold after 3 straight cuts; Japan industrial output recovers, denting BOJ easing expectations
***Economic Data***
- (NZ) NEW ZEALAND CENTRAL BANK (RBNZ) LEAVES OFFICIAL CASH RATE UNCHANGED AT 2.75%; AS EXPECTED
- (JP) JAPAN SEPT PRELIMINARY INDUSTRIAL PRODUCTION M/M: +1.0% V -0.6%E; Y/Y: -0.9% V -2.6%E
- (AU) AUSTRALIA Q3 IMPORT PRICE INDEX Q/Q: 1.4% V 1.5%E; EXPORT PRICE INDEX Q/Q: 0.0% V 0.6%E
- (AU) AUSTRALIA SEPT HIA NEW HOME SALES M/M: -4.0% v +2.3% PRIOR; biggest decline in 14 months
- (NZ) RBNZ bought net NZ$138M in Sept v bought NZ$81M in Aug
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.1%, S&P/ASX -0.9%, Kospi -0.2%, Shanghai Composite +0.1%, Hang Seng -0.3%, Dec S&P500 -0.2% at 2,079
***Commodities/Fixed Income***
- Dec gold -1.3% at $1,160/oz, Dec crude oil -0.3% at $45.80/brl, Dec copper -0.5% at $2.35/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 694.3 tonnes
- (JP) Japan investors bought net ¥463B in foreign bonds v bought ¥496B in prior week; Foreign investors bought net ¥325B in Japan stocks v sold ¥29.3B in prior week
- (CN) PBoC to inject CNY10B in 7-day reverse repos (34th consecutive injection); Drains net CNY25B this week v drained CNY45B prior (3rd week of drain)
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥400B in 3-5yr JGBs, ¥400B in 5-10yr JGBs
***Market Focal Points/FX***
- Asian equity markets are holding up reasonably well despite the FOMC policy statement that re-established December as the odds-on favorite for the Fed rate liftoff. The decision seemed to counter the unexpected dovish hold last month with a much more upbeat assessment, most notably doing away with concern over international developments "restraining economic activity". FOMC statement went as far as to specify that it will determine with it was appropriate to "raise the target range at its next meeting," though analysts were quick to point out that every meeting has been a live meeting for the impending tightening. The market response however was unmistakable, as yield curve steepened, USD strengthened, and Gold fell some $20/oz below $1,160. EUR/USD fell nearly 200pips below $1.09 and USD/JPY spiked up 70pips to 121.20 following FOMC, largely consolidating gains for the greenback over the Asia session.
- Reserve Bank of New Zealand decision was less groundbreaking and did not produce any clear bias. Holding rates for the first time after 3 straight cuts, RBNZ downcast its assessment for global economic growth as "below average", but was also more vocal on the short term fluctuations in the exchange rate, noting that NZD rallied since September, and if sustained, would dampen tradables sector activity and medium-term inflation. NZD/USD initially fell some 40pips below 0.6630 on the release before regaining its footing, trading back up to $0.67 later in the day.
- The case for further BOJ policy easing in tomorrow's meeting has been dented by surprisingly strong Japan industrial production in September. Cabinet Office actually upgraded its view of production to "moving sideways", anticipating more strength in Oct before modest decline in November. USD/JPY fell over 40pips below 120.60 after the release of industrial output. Finance Ministry official said the rise in output was due to brisk production of parts for smart phones, cosmetics and autos.
- As investors await more details of the China 13th plenum and the next five-year plan, Premier Li Keqiang said China needs average GDP of 6.53% for the next 5-years to build a prosperous society by 2020. China state researcher speculated 2016 GDP target would be reduced to 6.8%, while PBoC official Yin remarked China FX reserves and liquidity were high, even as RRR levels were also at a relatively high level.
***Equities***
US equities / ADRs:
- LOCK: Reports Q3 $0.28 v $0.25e, R$152M v $123M y/y; +41.9% afterhours
- HBI: Reports Q3 $0.50 v $0.45e, R$1.59B v $1.56Be; +12.9% afterhours
- SPWR: Reports Q3 $0.13 v -$0.01e, R$441M v $418Me; +6.2% afterhours
- VRTX: Reports Q3 -$0.13 v -$0.37 y/y, R$310M v $231Me; +5.0% afterhours
- YELP: Reports Q3 -$0.11 v -$0.09e, R$144M v $142Me; +3.3% afterhours
- NE: Reports Q3 $0.72 v $0.53e, R$760M v $759Me; +2.4% afterhours
- ORLY: Reports Q3 $2.64 v $2.37e, R$2.08B v $2.02Be; +3.4% afterhours
- TSO: Reports Q3 $6.13 v $6.05e, R$7.74B v $5.58Be; Board approves $1B share buyback (7.7% of market cap); +2.3% afterhours
- NEM: Reports Q3 $0.23 v $0.17e, R$2.03B v $1.95Be; +2.1% afterhours
- ABX: Reports Q3 $0.11 adj v $0.06e, R$2.32B v $2.35Be; +1.4% afterhours
- AMGN: Reports Q3 $2.72 v $2.38e, R$5.52B v $5.31Be; +1.0% afterhours
- WDC: Reports Q1 $1.56 v $2.10 y/y, R$3.36B v $3.46Be; flat afterhours
- OII: Reports Q3 $0.70 v $0.69e, R$744M v $788Me; Cuts FY15 guidance; -2.3% afterhours
- PYPL: Reports Q3 $0.31 v $0.29e, R$2.26B v $2.26Be; -4.2% afterhours
- FFIV: Reports Q4 $1.84 v $1.72e, R$501M v $506Me; -7.5% afterhours
- ARRS: Reports Q3 $0.56 v $0.56e, R$1.22B v $1.24Be; -10.5% afterhours
- BWLD: Reports Q3 $1.00 (unclear if comparable) v $1.28e, R$455M v $464Me; -14.0% afterhours
- GPRO: Reports Q3 $0.25 v $0.29e, R$400M v $438Me; announces $300M capital stock repurchase (8% of market cap); -17.4% afterhours
Notable movers by sector:
- Consumer discretionary: Shanghai Lujiazui Finance & Trade Zone Development Co 600663.CN +0.5% (9-mo result); JB Hi-Fi JBH.AU +0.5% (Q1 result)
- Consumer staples: Woolworths WOW.AU -10.1% (Q1 result); Henan Shuanghui Investment & Development Co 000895.CN +1.2% (9-mo result); Zhejiang Beingmate Technology Industry & Trade Co 002570.CN +2.1% (acquisition);Luzhou Lao Jiao Co.000568.CN +1.5% (9-mo result)
- Financials: China Life Insurance 2628.HK -5.6% (9-mo result); Haitong Securities 600837.CN -0.1% (9-mo result); Bank of Nanjing Co 601009.CN +2.2% (9-mo result); ANZ Bank ANZ.AU -1.0% (FY15 result); BT Investment Management BTT.AU +5.5% (FY15 result)
- Industrials: Kawasaki Heavy Industries 7012.JP -1.2% (H1 result, cuts guidance); Beiqi Foton Motor Co 600166.CN +10.0% (new business plan); China National Chemical Engineering Co 601117.CN +0.7% (9-mo result); ANA Holdings Inc 9202.JP -3.1% (H1 result)
- Technology: ASM Pacific Technology 522.HK -3.0% (9-mo result); Samsung Electronics 005930.KR +1.9% (Q3 result)
- Materials: Baoshan Iron & Steel Co 600019.CN -1.0% (9-mo result, guidance); Sinopec Yizheng Chemical Fibre Co 600871.CN -2.9% (9-mo result); Samsung C&T Corp 028260.KR +1.3% (Q3 result); CIMIC Group CIM.AU +2.4% (9-mo result); Hitachi Ltd 6501.JP -2.2% (H1 result)
- Energy: CNOOC 883.HK +4.0% (9-mo result); Tohoku Electric 9506.JP -5.5% (H1 result)
- Healthcare: Kangmei Pharmaceutical Co 600518.CN -0.7% (9-mo result); Blackmores BKL.AU +12.6% (Q1 result, partnership)
- Telecom: China Telecom Corp 728.HK -1.2% (9-mo result); Telstra Corp.TLS.AU -1.3% (affirms guidance)
- Utilities: DUET Group DUE.AU -0.4% (traffics decision)
After Hours Summary: LOCK +40.9%, CGI +14.5%, RYAM +13.4%, GPRO -17.1%, BWLD -13.7%, VECO -13.6% following earnings/guidance
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: LOCK +40.9%, CGI +14.5%, RYAM +13.4%, HBI +12.8%, LUB +8%, NVDQ +7.5%, EPE +7.4%, SPWR +6.2%, THRX +6.1%, VRTX +5.3%, LCI +4.4%, WSTL +4.3%, CRUS +3.7%, DRII +3.5%, YELP +3%, INVN +2.8%, STAA +2.8%, NEM +2.7%, ORLY +2.7%, NE +2.4%, TSO +2.3%, ANIK +2.3%, POWI +2.2%, IMAX +1.9%, ELLI +1.9%, AEM +1.8%, ABX +1.4%, EIG +1.3%, HUBG +1.3%, ECHO +1.1%
Companies trading higher in after hours in reaction to news: LOCK +40.9% (announced it has reached agreements with the Federal Trade Commission on a comprehensive settlement resolving outstanding litigation relating to its past marketing representations and information security programs; co also reported earnings), SXE +19.9% (affirmed quarterly distribution of $0.40/unit, expects to report Q3 adj-EBITDA ahead of prior guidance), WSTL +4.3% (co concluded with its auditors that various prior financial statements should no longer be relied upon), MHO +3.5% (acquired the the residential homebuilding operations of privately-held homebuilder, Hans Hagen Homes; terms not disclosed), NEM +2.7% (co to expand its Tanami operations in Australia by building a second decline in the underground mine and additional plant capacity; co also reported earnings), WTW +0.5% (Oprah Winfrey confirmed 14.72% active stake in 13D filing)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings: GPRO -17.1%, AFOP -15.7%, BWLD -13.7%, VECO -13.6%, QGEN -13%, SPN -11.5%, ROVI -11.4%, ARRS -10.5%, CAVM -9.7%, HLS -9.1%, PTC -8%, FFIV -7.3%, HOS -7%, PPC -6.1%, TAL -5%, MANT -4.8%, PYPL -4.7%, NTRI -4%, ESV -3%, NGD -2.9%, TILE -2.9%, OTEX -2.7%, ARII -2.5%, OII -2.3%, WLL -2.1%, EQIX -1.9%, MAR -1.8%, SPRT -1.6%, FORM -1.2%, CMO -1.1%
Companies trading lower in after hours in reaction to news: SIEN -11.8% (confirmed that a fire occurred in the building where Sientra's breast implants are primarily manufactured), STRP -10.7% (seeing speculation that Kerrisdale will release a short report on the company tomorrow)
Closing Market Summary: Stocks Climb While Fed Holds Pat
The stock market snapped its two-day skid on Wednesday, but not before seeing some intraday volatility. The S&P 500 added 1.2% while the Russell 2000 (+2.9%) outperformed.
Equity indices rallied out of the gate in response to a batch of mostly better than expected earnings. That lengthy list was headlined by Apple (AAPL 119.28, +4.73) with the top-weighted stock spiking 4.1% in reaction to better than expected earnings and revenue. For its part, the broader technology sector (+1.5%) settled ahead of the broader market while most other cyclical sectors also showed relative strength. None more so than the energy space (+2.2%), which spent the day in the lead after struggling over the past two days.
The growth-sensitive energy sector rallied behind crude oil, which spiked 6.3% to $45.93/bbl. Thanks to today's rally, the sector has narrowed this week's loss to 1.5%. Similarly, the materials space (+1.5%) also outperformed today after struggling earlier in the week.
After rallying through the first two hours of the session, the market hovered near its high until the 14:00 ET release of the latest policy statement from the Federal Reserve, which called for no change to the current policy stance.
That being said, the Federal Reserve took out a key line from its statement, which referred to global developments having the potential to restrain economic growth in the U.S. With that line being left out of the October statement, the Fed has left the door open to a potential rate hike in December.
Accordingly, the policy statement was met with a slide in stocks and Treasuries while the Dollar Index (97.65, +0.75) spiked to levels last seen at the start of October. The index remained near its high until the close while Treasuries settled near their lows with the 10-yr yield rising five basis points to 2.09%. Stocks, however, charged back to their highs after making a brief appearance near their flat lines immediately after the Fed statement crossed the wires.
It is worth noting that most sectors settled above their early afternoon highs while the financial sector (+2.4%) never missed a beat, charging to a fresh session-best shortly ahead of the close.
Elsewhere, the health care sector (+1.0%) settled a bit behind the market, but it is worth noting that today's underperformance followed two days of relative strength. The countercyclical sector extended this week's gain to 3.2% despite a struggling biotech group. That struggle was a distant memory by the close with the iShares Nasdaq Biotechnology ETF (IBB 331.79, +4.14) ending higher by 1.3% while one of its top components—Gilead Sciences (GILD 108.13, -2.83)—fell 2.6% despite reporting better than expected earnings and revenue.
Today's participation was ahead of average with more than 960 million shares changing hands at the NYSE floor.
Economic data released today was limited to the weekly MBA Mortgage Index, which fell 3.5% to follow last week's 11.8% spike.
Tomorrow, weekly Initial Claims (consensus 264,000) and the advance reading of Q3 GDP (consensus 1.6%) will be released at 8:30 ET while the September Pending Home Sales report (expected 0.6%) will cross the wires at 10:00 ET.
- Nasdaq Composite +7.6% YTD
- S&P 500 +1.5% YTD
- Dow Jones Industrial Average -0.2% YTD
- Russell 2000 -2.1% YTD