Apple Cuts Guidance And Sends Wave Of Risk Aversion Through FX Markets, Commodity Currencies Underperform

Jan 03 19, 07:03 GMT

General Trend:

Apple declines over 7% in afterhours trading: cut revenue guidance for the 1st time since 2002, sending component makers across the region into the red
Speculation that Samsung may cut inventories has also weighed on Asian chip makers
China and Hong Kong markets outperformed in early trade, supported by IT and financial names; PBoC rule change in focus
China markets later pare gains
Australian equities supported by the resources and energy sectors
PBoC uses OMO to drain liquidity for second consecutive day
Japanese Yen gains on risk aversion and Apple guidance cut
In early Asian trade, Yen spiked higher by over 7% against both Aussie and Lira; USD/JPY tested below ¥105; some speculation that USD/JPY volatility is part of Apple hedge or Japan retail investors
AUD/USD trades at lowest level since early 2009
Thin currency market liquidity conditions noted amid extended holiday in Japan
China PBoC to allow more SMEs to be eligible for bank loans with adjustment to RRR policy, markets expect additional easing ahead of Chinese New Year
China Commerce Ministry expected to hold weekly press conference later today
Japan markets are due to reopen on Friday (Jan 4th)
China Caixin Services PMI due for release on Friday’s session
US government’s partial shutdown entered 12th day as of Wednesday

Headlines/Economic Data

Japan

Nikkei 225 closed
“Flash crash” in the currency markets, triggered early Asia session, saw yen increase against all pairings, said to be spurred on by Japan retail investors and exacerbated by algorithmic programming and thinner trade with Japan markets closed for holiday – SCMP

Korea

Kospi opened +0.1%
(KR) South Korea state-run think tank Korea Institute for National Unification: North Korean leader Kim Jong-un’s warning that he could seek “a new way” if the US insists on sanctions appears to be rhetoric, rather than a threat to go back to the policy of enlarging his country’s nuclear arsenal – Yonhap
005930.KR Will cut chip inventory due to oversupply – Korean press
005930.KR Opening new 5G network equipment manufacturing line
(KR) Bank of Korea (BOK) sells KRW2.3T in 2-yr Monetary Stabilization Bonds (MSBs) at 1.81% v 1.82% prior
(KR) South Korea Fin Min Hong said will try to reach $700B in exports in 2019 v more than $600B in 2018 – Yonhap
(KR) South Korea sells KRW1.8T v KRW1.8T indicated in 30-yr Bonds, avg yield 1.96%, bid to cover 2.57x

China/Hong Kong

Hang Seng opened -0.2%, Shanghai Composite -0.1%
(CN) China Ministry of Commerce and National Development and Reform Commission (NDRC) considering new package of measures to boost private consumption
(CN) China PBoC adjusted rules on bank lending to small business, now defined as companies with bank credit lines of less than CNY10M (prior CNY5M); bank lending to these companies, if reaching certain amount, can make lenders eligible for lower reserve requirements (RRR)
(CN) China CICC Research: PBoC’s RRR criteria easing may release up to CNY400B
(US) Pres Trump: repeats that trade talks with China are coming along very well; ‘we’ll see what happens’
(CN) According to Rong360.com banks in Shanghai and Shenzhen have started to offer mild discounts for first-time home buyers, while Beijing’s mortgage rate remains unchanged – Chinese press
(CN) China PBoC Open Market Operation (OMO): Injects CNY60B in 7 and 14-day reverse repos v CNY40B injected in 7 and 14-day reverse repos prior; Net: CNY90B drain v CNY70B drain prior
(CN) China PBoC sets yuan reference rate: 6.8631 v 6.8482 prior

Australia/New Zealand

ASX 200 opened +0.2%
KMD.AU Cuts H1 profit to +4-8% y/y (prior profit ‘expected to be strongly above last year’) due to below expected sales during Dec in NZ and Australia
(NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +2.8% v +1.7% prior; Average winning auction price: $2,986 v $2,844 prior

Other

(TW) Taiwan sells NT$24B v NT$30B indicated in 3-month treasury bills at 0.428% v 0.355% prior, bid to cover 1.75x

North America

(US) House Maj Leader McCarthy (R-CA): Democrats did not make a counteroffer today in today’s meeting; hopes to see border wall counteroffer on Friday
AAPL Cuts Q1 Rev $84B v $91.3Be, gross margin 38%, opex $8.7B (prior Rev $89-93B, gross margin 38.0-38.5%; op-ex $8.7-8.8B) on emerging market challenges and lower anticipated iPhone Rev
SPDR Gold Trust holdings +1.0% or ~7.6 tons to 795.31 ton

Europe

(UK) Prime Min May to hold talks on Brexit this week with Germany Chancellor Merkel, Dutch PM Rutte, and EU Council Pres Tusk – FT
(UK) Foreign Min Hunt: Believe that PM May can find a way to get her Brexit deal through parliament
(UK) British Chambers of Commerce (BCC): In Q4 2018 UK services sales growth hit 2-year low
(FR) France President Macron’s Head of Communications Sylvain Fort said to resign – French Press

Levels as of 12:50ET

Hang Seng -0.7%; Shanghai Composite -0.1%; Kospi -0.5%; Nikkei225 -0.3%; ASX 200 +1.3%
Equity Futures: S&P500 -1.5%; Nasdaq100 -2.5%, Dax -0.7%; FTSE100 -0.3%
EUR 1.1372-1.1309; JPY 108.90-104.78; AUD 0.6985-0.6743; NZD 0.6686-0.6591
Feb Gold +0.6% at $1,291/oz; Feb Crude Oil -2.3% at $45.48/brl; Mar Copper +0.2% at $2.61/lb