Asia Mid-Session Market Update: BOJ on hold as expected; Trump nixes bailing on NAFTA; Samsung Electronics shares rise on outlook
US Session Highlights
Stocks remained mostly unchanged on the day after giving up small gains made during the first half of today’s session. Investors digested Trump’s relatively broad tax reform plan as it was presented. Fixed income become the asset of choice again, as the 10-year yield dropped 3bps on the day. Volume continued to show strength, on NYSE at 3:30pm was 18% above its 3-month average.
Trump proposed an overhaul of the tax system with large reductions in corporate rates and amount of income brackets, though many precise details remain to be fleshed out. In the plan presented today, the corporate tax would be cut from 35% to 15% and the number of income brackets would be reduced from 7 to 3. The top income tax rate would be 35% and the lower brackets would be set to 25% and 10%. The proposal would also look at repealing the inheritance tax and limiting tax deductions.
US markets on close: Dow -0.1%, S&P500 flat, Nasdaq flat
Best Sector in S&P500: Telecommunications
Worst Sector in S&P500: Real Estate
Biggest gainers: EW +10.5%; WYN +9.0%; PRGO +7.7%
Biggest losers: STC -16.8%; CHRW -6.3%; DPS -5.5%
At the close: VIX 10.85 (bps); Treasuries: 2-yr 1.28% (bps), 10-yr 2.32% (bps), 30-yr 2.97% (bps)
US movers afterhours
TER Reports Q1 $0.44 v $0.38e, R$457M v $439Me; Guides Q2 $0.81-0.90 v $0.60e, R$660-700M v $564Me; +11.1% afterhours
UCTT Reports Q1 $0.47 v $0.42e, R$204.6M v $192Me; Guides Q2 adj $0.49-0.55 v $0.33e, R$210-220M v $181Me; +10.4% afterhours
INTU Reports season to date total Turbo Tax units were up 2% y/y; +7.3% afterhours
ALSN Reports Q1 $0.52 v $0.35e, R$499M v $463Me; +6.8% afterhours
WTW Names Mindy Grossman President and CEO, effective in July; +6.0% afterhours
SAM Reports Q1 $0.45 v $0.26e, R$161.7M v $170Me; Affirms FY17 $4.20-6.20 v $5.46e; -0.3% afterhours
ETH Reports Q3 $0.23 v $0.27e, R$180.5M v $184Me; -4.0% afterhours
CTXS Reports Q1 $0.97 v $0.94e, R$663M v $661Me; Guides Q2 $0.97-1.00 v $1.08e, R$685-695M v $693Me; -5.5% afterhours
FFIV Reports Q2 $1.95 v $1.97e, R$518M v $523Me; Guides Q3 $2.01-2.04 v $2.08e, R$520-530M v $537Me; -7.9% afterhours
AMSC; AMSC Guides Q4 rev $15-16M v $24.6Me; -35.7% afterhours
Key economic data
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10% AND 10-YEAR JGB YIELD TARGET AT AROUND 0.0%; AS EXPECTED
(CN) CHINA MAR INDUSTRIAL PROFITS Y/Y: 23.8% V 2.3% PRIOR
(AU) AUSTRALIA Q1 IMPORT PRICE INDEX Q/Q: 1.2% V -0.5%E; EXPORT PRICE INDEX Q/Q: 9.4% V 8.0%E
(KR) SOUTH KOREA PRELIM Q1 GDP Q/Q: 0.9% V 0.8%E; Y/Y: 2.7% V 2.6%E
(JP) Japan investors net sold ¥1.82T in foreign bonds v sold ¥796B in prior week; Foreign investors net bought ¥258B in Japan stocks v bought ¥315.2B in prior week
Asia Session Notable Observations, Speakers and Press
Asian equity markets are mixed as investors digest the news out of Washington, as Trump administration has clearly shifted into a higher gear on policy. After unveiling the broad outlines to a massive corporate tax cut reduction, White House officials have taken on the trade agenda, as Commerce Min confirmed "investigation into whether aluminum imports compromise national security". This has been perceived as a shot across the bow by Beijing, calling for direct dialogue on handling trading of the metal. In similar vein, White House announced that after speaking with leaders of Canada and Mexico, Pres Trump decided not to terminate NAFTA at this time, as all leaders agreed to "enable renegotiaton of NAFTA deal" at later date.
FX market activity was more volatile on the US policy developments. USD/MXN and USD/CAD fell 1% and 0.5% respectively on NAFTA announcement, while AUD/USD saw session lows on protectionist fears from aluminum action. USD/JPY was little changed in the wake of more upbeat BOJ policy announcement, trading around 111.20. BOJ maintained its yield curve control at 0.0% on the 10-yr JGB yield and -0.1% rate on IOER, but raised its forward GDP estimates for the current year from 1.5% to 1.6% and next year from 1.1% to 1.3%. BOJ also expressed some concerns over slow progress on inflation front, cutting FY17 CPI view from 1.5% to 1.4%. In terms of its assessment, BOJ said Japan’s economy has been turning towards a moderate expansion (prior was continues to recover moderately), while also boosting its view of Exports and Industrial Output to "increasing trend" from "picked up".
Among key corporates, Samsung Electronics final Q1 results was below consensus at KRW) Net 7.49T v 8.8Te on Rev of 50.6T v 56.5Te, but the company forecast Net profit to turn higher this year, Capex to increase, and smartphone sales to bounce. SE also announced its first ever dividend and a KRW2.3T buyback, earning praise from activist Elliott Management which had in the past called for a split into a holding vehicle even though the company did not commit to that structure. After initial downside, shares moved higher by about 2%.
China
(US) Commerce Dept confirms opening investigation into whether aluminum imports compromise national security
(CN) China Commerce Ministry: US Commerce Dept mishandled China plywood companies in subsidies probe; Urging US to abide by WTO rules in plywood probe; need a dialogue with Us to address aluminum – press
(CN) China MOFCOM reports Q1 exports to Belt and Road nations +26.2% y/y (28.2% of total exports)
(CN) China Iron and Steel Association (CISA): memorandum signed by President Trump encouraging an investigation of US steel imports is contrary to fair trade and sends a signal of protectionism
Australia
(AU) Australia PM Turnbull expected to impose a Domestic Gas Security Mechanism from July 1 this year and that it would not require legislation in Parliament as it can be imposed as a customs regulation
Korea
(KR) South Korea Trade Ministry raises 2017 export growth outlook to 6-7% v 2.9% prior
(KR) White House administration signs communique directed at North Korea following briefing with US lawmakers
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.2%, Hang Seng flat, Shanghai Composite -0.4%, ASX200 +0.2%, Kospi -0.2%
Equity Futures: S&P500 +0.1%; Nasdaq +0.1%, Dax +0.2%, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0900-1.0920; JPY 111.00-111.40; AUD 0.7470-0.7490; NZD 0.6890-0.6920
June Gold +0.3% at 1,268/oz; June Crude Oil -0.5% at $49.37/brl; July Copper -0.4% at $2.59/lb
SLV iShares Silver Trust ETF daily holdings rise to 10,273 tonnes from 10,178 tonnes prior
(CN) PBOC SETS YUAN MID POINT AT 6.8896 V 6.8845 PRIOR; 3rd straight weaker setting; weakest setting since Apr 12th
(CN) PBOC to inject combined CNY50B v CNY80B prior in 7-day, 14-day and 28-day reverse repos, 8th straight injection
(NZ) New Zealand MoF sells NZ$150M in 2037 bonds
Asia equities / Notables / movers by sector
Samsung Electrocnis, 005930.KR +1.9%, final Q1 results
AIA, 1299.HK, +4.4%, Q1 results
Sands China, 1928.HK, -3.3%, Q1 results
Tokuyama, 4043.JP, +5.8%, sells Malaysia business
Canon, 7751.JP, +3.9%, Q1 results
Yahoo Japan, 4689.JP, -9.9% FY16/17 results
China Minsheng Bank, 1988.HK, +1.3%, Q1 results
China Shipbuilding Industry, 601989.CN, -3.7%, Q1 results
BHP, BHP.AU, -1.0%, weaker on Australia Govt gas export limitation plan
Clean TeQ Holdings, CLQ.AU, +14.8%, results
Ten Networks, TEN.AU, -15.2%; H1 results, going concerns on fuding
