Fed minutes lift likelihood of a May hike
Asia Mid-Session Market Update: Austalia CapEx falls more than expected; BOK on hold; Fed minutes lift likelihood of a May hike
US Session Highlights
(US) JAN EXISTING HOME SALES: 5.69M V 5.55ME (highest since Feb 2007)
OPEC Committee reports sees Jan OPEC cuts compliance at above 90%, sees non-OPEC cuts compliance near 60% – press
(US) Pres Trump: to submit a healthcare reform plan by mid-March
(US) Minutes from the previous FOMC meeting showed the committee said it would be appropriate to raise rates “fairly soon” should jobs and inflation come inline with expectations
US markets on close: Dow +0.2%, S&P500 -0.1%, Nasdaq -0.1%
Best Sector in S&P500: Utilities
Worst Sector in S&P500: Energy
Biggest gainers: GRMN +7.3%, DOW +4.0%, DD +3.4%, VFC +2.1%, AET +1.9%
Biggest losers: FSLR -8.3%, NFX -8.1%, CXO -6.8%, NEM -3.9%, MRO -3.8%
At the close: VIX 11.7 (+0.2pts); Treasuries: 2-yr 1.22% (-2bps), 10-yr 2.42% (-1bp), 30-yr 3.04% (flat)
US movers afterhours
UCTT: Reports Q4 $0.36 v $0.27e, R$174.5M v $173Me; Guides Q1 adj $0.40-0.45 v $0.26e, R$190-197M v $165Me; +13.8% afterhours
SQ: Reports Q4 $0.05 v -$0.09e, R$452M v $453Me; Guides Q1 adj 0.00-0.02 v -$0.10e; EBITDA $14-18M, adj Rev $440-452M v $450Me; +8.6% afterhours
CTRP: Reports Q4 $0.17 v -$0.01e, Total Rev $746M v $734Me; +5.0% afterhours
HPQ: Reports Q1 $0.38 v $0.37e, R$12.7B v $11.8Be; +2.4% afterhours
TSLA: Reports Q4 -$0.69 v -$0.13e, R$2.28B v $2.20Be; Model S and Model X K deliveries 22.3K units, -10% q/q, +27% y/y; +1.5% afterhours
FIT: Reports Q4 -$0.56 v -$0.48e, R$573.8M v $576Me; +1.2% afterhours
CAKE: Reports Q4 $0.67 v $0.67e, R$603.1M v $594Me; announces $100M share repurchase plan (3.6% of market cap); -0.5% afterhours
NVDA: Nomura Cuts NVDA to Reduce from Buy, price target: $90; -2.4% afterhours
SAM: Reports Q4 $1.75 v $1.19e, R$219.4M v $226Me; Guides initial FY17 $4.20-6.20 v $6.35e; -7.7% afterhours
JACK: Reports Q1 $1.18 v $1.24e, R$487.9M v $498Me; -9.7% afterhours
ARRS: Reports Q4 $0.79 v $0.70e, R$1.76B v $1.69Be; Guides Q1 $0.36-0.40 v $0.67e, R$1.44-1.49B v $1.66Be; -10.4% afterhours
LB: Reports Q4 $2.03 v $1.90e, R$4.49B v $4.50Be; Guides Q1 $0.20-0.25 v $0.50e; Guides initial FY17 $3.05-3.35 v $3.70e; -13.1% afterhours
TSRA: Reports Q4 $0.45 v $0.61e, R$70.1M v $72.0Me; changes name and stock symbol; -13.6% afterhours
Asia Key economic data:
(BR) BRAZIL CENTRAL BANK (BCB) CUTS SELIC TARGET RATE BY 75BPS TO 12.25%; AS EXPECTED
(KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
(AU) AUSTRALIA Q4 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -2.1% V -0.5%E
(JP) JAPAN JAN PPI SERVICES Y/Y: 0.5% V 0.5%E
Asia Session Notable Observations, Speakers and Press
Asia equity markets are modestly lower as investors digest the implications of the latest Fed policy minutes. Fed noted it may be appropriate to raise rates "fairly soon", while some members urged going at the upcoming meeting to give FOMC more flexibility. However, traders looked for a more concrete signal as March Fed funds futures probability remained below 20%, even as the odds for May has risen above 50%. The caveat is that May does not have an accompanying press conference while March does, and the Fed has never raised rates in a meeting when the Fed chair did not take the podium.
USD weakened in US hours on release of the Fed minutes and remains under pressure in Asian session. USD/JPY is down over 30pips from the highs below 113.10, EUR/USD up 30pips above 1.0570, while NZD/USD is up 40pips at 0.7215. AUD/USD is the only exception among the majors, trading unchanged on the day around $0.77 after falling some 30pips on soft headline Q4 Australia Capex data below $0.7670.
Australia Q4 capex declined for the 4th straight quarter, and while the decline was bigger than expected, it was also the smallest decline of the past four. Components are typically more critical for this release, and here the picture was more mixed. Economists found the 0.4% rise in Plant/Machinery spending vs decline of 1.9% prior especially noteworthy and shrugged off the initial estimate for next year’s spending slowing to A$80.6B from the revised A$112.2B for this year. AUD/USD initially fell on the headline and then recovered all of its lost ground toward the market close.
Rate decisions from Brazil and South Korea were also on the docket today. Brazil was unanimous to cut for the 4th straight time by 75bps – in line with consensus – citing mixed economic activity signs and affirming next year’s inflation outlook. BOK stood pat for its 9th straight time and also voted unanimously, though policymakers pledged to monitor external risks of protectionism and US-China policy along with domestic factors such as rising household debt.
After yesterday’s property price data from China, Commerce Ministry official said the govt will continue to stabilize housing market and also doing preparation to roll out a property tax, while planning to maintain differentiated curbs across the cities.
China:
(CN) Morgan Stanley raises CNY forecast for 2017-end to CNY7.1 from CNY7.3 – press
(CN) China Deputy Housing Minister: China has the ability and methods to stabilize housing market
Japan:
(JP) Japan’s pension fund GPIF had raised its holdings of short-term assets due to negative interest rates; Will switch to JGBs when rates rise – press
(JP) Bank of Japan (BOJ) Member Kiuchi (dissenter): Must make 2% inflation target a medium to long term target
(JP) BOJ considering dates of planned JGB buying operations ahead of time to avoid a jump in yields due to market uncertainty – Nikkei
Australia/New Zealand:
(AU) Economists with AMP, ANZ, and JPMorgan note today’s Australia Q4 CAPEX data looks worse than it is given the rise in Plant/Equipment spending – SMH
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.2%, Hang Seng -0.5%, Shanghai Composite -0.4%, ASX200 -0.3%, Kospi flat
Equity Futures: S&P500 -0.1%; Nasdaq flat; Dax -0.1%; FTSE100 -0.2%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0540-1.0565; JPY 113.10-113.45; AUD 0.7665-0.7700; NZD 0.7175-0.7210
Apr Gold +0.4% at $1,238/oz; Apr Crude Oil +0.9% at $54.08/brl; Mar Copper -0.6% at $2.72/lb
(US) Weekly API Oil Inventories: Crude: -0.9M v +9.9M prior; first draw in 5 weeks
JGB: (JP) Japan’s MoF sells ¥1.0T in 0.6% (0.6% prior) 20-year JGBs; Avg yield: 0.669% v 0.589% prior; bid-to-cover: 4.05x (highest since 2014) v 3.54x prior
(CN) PBOC SETS YUAN MID POINT AT 6.8695 V 6.8830 PRIOR; first stronger Yuan setting in 4 sessions
(CN) PBOC to inject combined CNY50B v CNY120B prior in 7-day, 14-day and 28-day reverse repos
SWIFT: CNY use in international transactions: 1.68% of total in Jan v 1.68% prior
Asia equities / Notables / movers by sector
Consumer discretionary: 493.HK Gome Electrical Appliances Holding +3.7% (profit warning); 2020.HK Anta Sports Products -2.3% (FY16 result); QAN.AU Qantas Airways +5.1% (H1 result); CWN.AU Crown Resorts +8.3% (H1 result); Invocare +9.0% (FY16 result); FLT.AU Flight Centre -2.6% (cuts guidance)
Consumer staples: AHY.AU Asaleo Care +7.4% (FY16 result)
Financials: AAD.AU Ardent Leisure -21.1% (H1 result); MMS.AU McMillan Shakespeare +3.2% (Citi raises rating)
Industrials: 7201.JP Nissan Motor Co -0.6% (names new CEO); RCR.AU RCR Tomlinson +7.2% (H1 result)
Technology: ISD.AU iSentia Group -7.5% (Deutsche Bank cuts rating); XIP.AU Xenith IP Group -19.3% (H1 result)
Materials: ILU.AU Iluka Resource -2.1% (FY16 result); AWC.AU Alumina -1.2% (FY16 result); AGO.AU Atlas Iron -9.3% (H1 result); ABC.AU Adelaide Brighton +4.3% (FY16 result)
Healthcare: EHE.AU Estia Health +12.6% (affirms guidance)
Utilities: EPW.AU ERM Power +5.4% (H1 result)
