Asian Market Update: Cisco plummets on earnings; Yellen statement to Senate banking committee sounds dovish, supporting equities; Japan Q3 GDP slows; BOK on hold as expected
***Observations/Insights*** - Shares of Cisco are down over 10%, wrapping up what has been a fairly disappointing earnings season in the tech space. EPS beat but the top line was shy of estimates, as Cisco also announced a 11% market cap share repurchase authorization. Q2 guidance on the conference call was atrocious, sending shares to its lows around $21.50. - Fed chair nominee Yellen will face confirmation hearings in the Senate banking committee on Thursday. Her opening remarks released just after the US close were characteristically dovish, stating unemployment remains too high with inflation running below 2% target and will continue to do so for some time. Dollar briefly sold off on the statement and US equity futures are up about 5 handles, as worries that Yellen will try to strike a more moderate tone to generate consensus among the more hardline inflation hawks appear to have dissipated. Investors had previously speculated the Fed may be entertaining the possibility of a December taper after the stronger than expected jobs figures. - Japan preliminary Q3 GDP slowed to a 3-quarter low but beat estimates by a decimal at 0.5%. Delving into the data, exports contracted 0.6% and private consumption slowed to 0.1% from 0.6%, while private residential investment was much stronger at 2.7% v 0.4% prior. - BOK was on hold as expected at 2.5% for the 6th consecutive meeting. Gov Kim maintained 2.8% GDP target for 2013 and noted that negative domestic output gap would dissipate sometime in H2 of 2014. - In China, PBoC once again deferred its Thursday open market operations, leading some to suggest the central bank will only conduct its money market activity once a week. Short-term rates tightened, with overnight Shibor rising to 2-week highs.
***Economic Data*** - (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 2.50% (AS EXPECTED); SIXTH STRAIGHT PAUSE - (AU) AUSTRALIA NOV CONSUMER INFLATION EXPECTATION: 1.9% V 2.0% PRIOR (*NOTE: Below RBA's 2-3% target range) - (JP) JAPAN Q3 PRELIM GDP Q/Q: 0.5% (3-quarter low) V 0.4%E; NOMINAL GDP Q/Q: 0.4% V 0.4%E; GDP ANNUALIZED Q/Q: 1.9% V 1.7%E; GDP DEFLATOR Y/Y: -0.3% V -0.5%E - (JP) JAPAN SEPT FINAL INDUSTRIAL PRODUCTION M/M: 1.3% V 1.5% PRELIM; Y/Y: 5.1% V 5.4% PRELIM; CAPACITY UTILIZATION M/M: +1.2% V -2.1% PRELIM - (JP) Japan Sept Conference Board Leading Economic Index: 100.1, +1.2% v -0.1% prior - (JP) Japan investors bought net ¥357.1B in foreign bonds last week (5th straight week of net purchases) vs bought net ¥276.6B in prior week (5th straight week of net purchases); Foreign Investors bought net ¥273.1B in Japan stocks v bought net ¥247.9B in prior week - (NZ) NEW ZEALAND Q3 RETAIL SALES EX-INFLATION Q/Q: 0.3% V 0.9%E (1-year low) - (NZ) NEW ZEALAND OCT BUSINESS MANUFACTURING PMI: 55.7 V 54.2 PRIOR - (NZ) NEW ZEALAND NOV ANZ CONSUMER CONFIDENCE INDEX: 128.4 V 122.3 PRIOR; M/M: 5.0% V 2.9% PRIOR - (NZ) NEW ZEALAND OCT NON RESIDENT BOND HOLDINGS: 64.8% V 67.0% PRIOR
***Fixed Income/Commodities/Currencies*** - (CN) PBoC won't conduct open market operations (OMO) in today's session; Drains net CNY15B this week v drained CNY5B last week; Said to drop Thursday OMO - (CN) Daily Shibor fixings: O/N: 4.1880% v 3.3360% prior (2nd consecutive rise, highest since Oct 31st); 1-week: 4.1930% v 3.6350% prior (2nd consecutive rise, highest since Nov 4th) - (JP) Japan's MoF sells ¥2.45T in 0.2% (0.2% prior) 5-yr notes; Avg yield: 0.193% v 0.230% prior; Bid to cover: 5.03x v 4.83x prior - GLD: SPDR Gold Trust ETF daily holdings fall 2.7 tonnes to 865.7 tonnes (lowest since Feb 2009) - (US) API PETROLEUM INVENTORIES: CRUDE: +599K v +1Me (lowest build in 7 weeks); GASOLINE: -1.67M v -1Me; DISTILLATE: +605K v -1Me
- USD/CNY: (CN) PBoC sets yuan mid point at 6.1315 v 6.1342 prior setting (record high setting for yuan)
- USD/JPY is the biggest mover on the session among the dollar majors as investors cheered slightly better than expected Q3 preliminary GDP with a yen-funded purchase of risky assets. Comments from Fin Min Aso mentioning the possibility of an intervention, presumably to combat the downward pressure from dovish US Fed, also generated a fair amount of yen selling. USD/JPY was up nearly 60pips from the lows, testing 99.70, while EUR/JPY and AUD/JPY rose 50 and 60 pips to as high as 134.30 and 93.20 respectively. In other dollar majors, EUR/USD was contained in 1.3460-90 range despite the initial spike on dovish Yellen comments. NZD/USD shook off weak Q3 retail sales, rising over 70pips above 0.8340 at session's best levels.
***Speakers/Political/In the Papers*** - (CN) China State Council adviser: Expects big move in property taxes within the next 1-2 years - Chinese press - (CN) China's Anhui Province announces reform plan for rural area
- (JP) Japan Fin Min Aso: Japan must always be ready to send signal to markets it can curb excessive, one-sided forex moves - (JP) Japan Chief Cabinet Sec Suga: Domestic economy continues to be on an uptrend - financial press - (JP) Japan Econ Min Amari: Japan economy remains on uptrend with solid domestic demand
- (AU) RBA Board member Ridout: AUD will hurt economy if its strength is sustained - (AU) Australia Senate said to have started debate on legislation to increase debt ceiling - financial press
***Equities*** Market Snapshot (as of 04:30 GMT): - Nikkei225 +2.6%, S&P/ASX +0.7%, Kospi +0.6%, Shanghai Composite +0.4%, Hang Seng +0.9%, Dec S&P500 +0.2% at 1,783, Dec gold +1.3% at $1,284, Dec crude oil flat at $93.89/brl
US markets: - CSCO: Reports Q1 $0.53 v $0.50e, R$12.09B v $12.3Be; board approves additional $15B buyback program (11% of market cap); Guides Q2 Rev -8 to -10% y/y v +4.1%e (implies R$10.9-11.1B v $12.6Be) - conf call; -10.3% afterhours - NTES: Reports Q3 $1.31 v $1.34e, R$410.8M v $386Me; -7.8% afterhours - GWR: Announces Sale of 5.98M Shares of Common Stock by Carlyle Investment Funds (11.6% of shares outstanding); -2.8% afterhours - WDC: Raises quarterly dividend by 20% to $0.30/shr from $0.25/shr - NTAP: Reports Q2 $0.66 v $0.63e, R$1.55B v $1.60Be; +1.0% afterhours
Notable movers by sector: - Consumer discretionary: Mizuno Corp 8022.JP -3.5% (H1 results) - Consumer staples: Warrnambool Cheese & Butter WCB.AU -0.1%, Bega Cheese BGA.AU -3.1% (Bega raises offer for Warrnambool) - Industrials: Tekken Corp 1815.JP +3.1% (H1 results); James Hardie Industries NV JHX.AU +13.9% (H1 results); First Tractor 38.HK +3.6%, Xinjiang Machinery Research 300159.CN +3.8%, Winall Hi-tech Seed 300087.CN +10.0%, Stanley Fertilizer 002588.CN +4.7% (China's Anhui province announces rural reform plan) - Materials: OceanaGold Corp OGC.AU +2.1% (exec provides FY13 outlook); Bluescope Steel Ltd BSL.AU +4.0% (provides trading update) - Technology: VTech Holdings Ltd 303.HK -3.8% (H1 results); Tencent Holdings Ltd 700.HK +5.0% (Q3 results); Hon Hai Precision Industries 2317.TW +1.8% (Q3 results) - Utilities: TEPCO 9501.JP +2.3% (facility prepared for fuel removal) - Telecom: KDDI Corp 9433.JP +5.1% (to launch LTE service while roaming in US network) - Healthcare: Shandong Weigao Group Medical Polymer 1066.HK +30.6% (Q3 results; analyst action); Sino Biopharmaceutical 1177.HK +3.4% (9-month results)