Asian Market Update: RBA outlook affirms GDP forecasts, tips higher inflation in 2016
***Economic Data*** - (AU) AUSTRALIA RBA QUARTERLY STATEMENT ON MONETARY POLICY: Reiterates AUD above fundamental value - (AU) AUSTRALIA OCT AIG PERFORMANCE OF CONSTRUCTION INDEX: 53.4 (3-month low; 5th month of expansion) V 59.1 PRIOR
***Index Snapshot (as of 02:30 GMT)*** - Nikkei225 +0.4%, S&P/ASX +0.5%, Kospi +0.1%, Shanghai Composite +0.4%, Hang Seng -0.9%, Dec S&P500 +0.1% at 2,029
***Commodities/Fixed Income*** - Dec gold -0.2% at $1,140, Dec crude oil -0.3% at $77.66/brl - GLD: SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 732.8 tonnes; Lowest level since Sept 2008 - USD/CNY: (CN) PBoC sets yuan mid point at 6.1602 v 6.1565 prior setting (weakest setting since Sept 4th) - (AU) Australia MoF (AOFM) sells A$600M in 4.25% 2026 Bonds; avg yield: 3.4418%; bid-to-cover: 3.67x - (JP) Japan investors bought net ¥806.6B in foreign bonds v bought ¥43.4B in prior week; Foreign investors bought net ¥904.7B in Japan stocks v bought ¥178.0B in prior week - (US) Weekly Fed Balance Sheet Total Assets for week ending Nov 5th: $4.49T v $4.49T prior; M1 y/y change: 8.4% v 8.1% w/w; M2 y/y change: 5.6% v 5.3% w/w
***Market Focal Points/Key Themes/FX*** - RBA quarterly policy projections offered little support to the plunging AUD as it merely maintained Australia GDP projections through 2016 while also anticipating a marginal rise in inflation to arrive later than expected. In fact, despite maintaining expectation for inflation to remain in 2-3% target range in the most recent policy statement - the 2014 year-end CPI target was reduced to 1.75% from 2% and 1H15 CPI lowered to 2.00% midpoint from 2.25% prior forecast. RBA added China property market slump poses a key external risk, albeit with some domestic relief in low rates and strong population growth supporting home building.
- Recently-appointed and seldom-speaking Cleveland Fed President Mester unfurled her relatively hawkish stance at a speech in NYU, noting she would have liked for the "considerable time" language to be taken out of the FOMC statement. Mester added she would prefer not to wait until price objectives are reached before adjusting policy, stating 2% inflation would return by the end of 2016 and unemployment of 5.5% would be achieved next year. In the long run, Mester sees the Fed funds rate around 3.75%, which is notably below the 5.25% pre-GFC peak.
- Korean officials continue to balk at the recent aggressive policy easing from the BOJ. After comments from the Finance Ministry intending to manage KRW moves in line with JPY overnight, BOK Gov Lee said Korea will not "do nothing" about weak JPY. USD/KRW is knocking at the door of KRW1,200 - a 14-month low for KRW on increasingly interventionist verbal rhetoric.
- Concurrently, USD/JPY briefly dipped lower by about 25pips after more neutral comments from Econ Min Amari calling both excessive rises AND falls in JPY as undesirable. Subsequently, Fin Min Aso took a more favorable stance on the issue, noting weak Yen's positive impact toward exports and the progress BOJ is making toward stopping deflation with extra easing measures. USD/JPY continued its upward push, approaching overnight 7-year high around 115.50.
***Equities*** US markets: - RPRX: Holds Constructive Meeting With FDA Regarding Androxal NDA Filing; +20.8% afterhours - AVG: Company said to be up for sale - financial press; +11.0% afterhours - ZNGA: Reports Q3 -$0.01 (adj) v -$0.01e, R$176.6M v $172Me; +6.8% afterhours - LGF: Reports Q2 $0.24 v $0.13e, R$552.9M v $516Me; +5.7% afterhours - FICO: Reports Q4 $1.33(adj) v $0.92e, R$221.6M v $207Me; +5.3% afterhours - KING: Reports Q3 $0.56(adj) v $0.48e, R$523.4M v $506Me; Approves $150M share repurchase program (approx 3.5% of market cap); +4.5% afterhours - GPS: Reports Oct SSS -3.0%; prelim Q3 $0.78-0.79 v $0.71e; R$3.97B v $4.06Be; +3.2% afterhours - PBR: To raise wholesale gasoline prices by 3% and diesel by 5%, goes into effect at midnight on Friday - press; +2.8% afterhours - NVDA: Reports Q3 $0.39 v $0.29e, R$1.23B v $1.20Be; +2.1% afterhours
- VWR: Reports Q3 $0.26 v $0.22 y/y, R$1.11B v $1.06B y/y (no est); -1.8% afterhours - DIS: Reports Q4 $0.89 v $0.89e, R$12.4B v $12.4Be; -2.4% afterhours - DVA: Reports Q3 $0.90(adj) v $0.91e, R$3.25B v $3.23Be; -3.2% afterhours - CSC: Reports Q2 $1.18 v $1.01e, R$3.08 v $3.18Be; -4.6% afterhours - SFM: Reports Q3 $0.17 v $0.16e, R$766.4M v $763Me; -4.9% afterhours - FSLR: Reports Q3 $0.87 (GAAP) v $0.64e, R$889M v $1.04Be; cuts FY14 Rev guidance; -7.1% afterhours - UBNT: Reports Q1 $0.48 v $0.52e, R$150.1M v $159Me; -16.3% afterhours - MDRX: Reports Q3 $0.06 v $0.10e, R$345M v $354Me; -16.6% afterhours - SLXP: Reports Q3 $1.53 v $1.56e, R$355M v $393Me; Guides Q4 and FY14 below consensus; -38.3% afterhours
Notable movers by sector: - Consumer Discretionary: Unicharm 8113.JP +2.2% (H1 results) - Financials: Huatai Securities 601688.CN +7.6%, Sinolink Securities 600109.CN +4.1%, Guoyuan Securities 000728.CN +3.1% (CSRC comments on Shanghai-Hong Kong stock connect trading); Agile 3383.HK -2.7% (Oct sales results); Greentown China 3900.HK -2.3% (Oct sales results); Mitsui & Co Ltd 8031.JP +1.9% (CEO comments on shares repurchase) - Materials: Alumina Ltd AWC.AU +2.6% (analyst action) - Industrials: Yamaha Motor 7272.JP +4.6% (9-month results) - Technology: Lenovo 992.HK -5.2% (momentum on Q2 results)