Australia trade surplus shy of estimates
Asia Mid-Session Market Update: Another Fed dove endorses more tightening; Australia trade surplus shy of estimates
US Session Highlights
(EU) ECB’s Weidmann (Germany): inflation to be somewhat lower by end 2017 but running well above expectations currently
(US) JAN PCE CORE M/M: 0.3% V 0.3%E; Y/Y: 1.7% V 1.7%E
(US) JAN PERSONAL INCOME: 0.4% V 0.3%E; PERSONAL SPENDING: 0.2% V 0.3%E
(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.2% V 1.3%E
(US) FEB ISM MANUFACTURING: 57.7 V 56.2E; PRICES PAID: 68.0 V 68.0E (Manufacturing Activity highest since Aug 2014)
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
(US) DOE CRUDE: +1.5M V +2.5ME; GASOLINE: -0.5M V -1.5ME; DISTILLATE: -0.9M V -1ME
US markets on close: Dow +1.5%, S&P500 +1.4%, Nasdaq +1.4%
Best Sector in S&P500: Financials
Worst Sector in S&P500: Utilities
Biggest gainers: LOW +9.5%, MYL +7.2%, WYNN +6.8%, SCHW +6.4%, CFG +5.9%
Biggest losers: EVHC -6.3%, ENDP -6.1%, BBY -4.5%, FSLR -3.2%, FE -2.7%
At the close: VIX 12.5 (-0.4pts); Treasuries: 2-yr 1.29% (-1bps), 10-yr 2.46% (+10bp), 30-yr 3.07% (+10bps)
US movers afterhours
MNST: Reports Q4 $0.30 v $0.30e, R$753.8M v $724Me; Adds $500M to buyback plan; +14.0% afterhours
AVGO: Reports Q1 $3.63 v $3.48e, R$4.14B v $4.06Be; Guides Q2 Rev $4.1B +/- $75M v $3.91Be; +4.0% afterhours
ANW: Reports Q4 $0.41 v $0.39e, R$1.19B v $1.06Be (2 est); +3.8% afterhours
SHAK: Reports Q4 $0.09 v $0.09e, R$73.3M v $70.5Me; Raises FY17 R$349-353M v $356Me ($348-352M); Op margin 25.4% v 28.2% y/y; -4.0% afterhours
PLNT: Reports Q4 $0.20 v $0.19e, R$116.4M v $116Me; Guides initial FY17 $0.72-0.75 v $0.76e, R$405-415M v $407Me, SSS +6-8%; -5.7% afterhours
RTRX: Reports Q4 $0.00 v -$0.21e, R$37.3M v $36.5Me; Guides FY17 net product sales $150-160M v $163Me; -8.3% afterhours
Politics
(US) AG Jeff Sessions met with Russia ambassador to US twice in 2016 while he was an advisor to the Trump campaign – US press
(US) Health and Human Services Sec Price: Getting very close to ACA replacement – US press
Asia Key economic data:
(AU) AUSTRALIA JAN TRADE BALANCE (A$): +1.3B V +3.8BE; 3rd straight surplus
(AU) AUSTRALIA JAN BUILDING APPROVALS M/M: +1.8% V -0.5%E; Y/Y: -12.0% V -11.6%E
(KR) SOUTH KOREA FEB PMI MANUFACTURING: 49.2 V 49.0 PRIOR (6th consecutive contraction)
(KR) SOUTH KOREA JAN INDUSTRIAL PRODUCTION M/M: 3.3% V 0.3%E; Y/Y: 1.7% V 2.1%E
Asia Session Notable Observations, Speakers and Press
Asia equity markets are generally higher, tracking a sharp rise in US indices widely attributed to Pres Trump’s well-received speech to Congress last night. Australia and Japan are at the top among key indices. In Sydney, miners are at the forefront of the rally, with S32 and Alumina the best performing stocks on ASX200 following reports of Aluminium output cuts in China. Nikkei remained supported by weaker Yen, with USD/JPY pair up for the 5th straight day.
The case for March Fed rate hike has been building rapidly over the past few days amid improving economic data, Trump’s fiscal spending ambitions, and receding global concerns, sending Fed funds futures probability above 65% on the CME. Today, that case got another endorsement from Fed’s Lael Brainard
a voting member and typically a rather dovish speaker. Brainard said it is appropriate to increase rates soon given that US economy is closing in on full employment and inflation is close to target, though she also warned that strong USD may weigh on sentiment. Brainard also hinted that her FOMC colleagues are mostly in agreement about the time for the hike. USD added to gains after the hawkish Brainard comments, particularly vs JPY and NZD. USD/JPY hit a 2-week high above ¥114, NZD/USD approached 6-week lows around $0.71, and EUR/USD fell about 20pips below 1.0530.
AUD/USD was hit more notably by the shortfall in the Aussie trade surplus, falling over 30pips from the highs below 0.7650. Australia trade surplus came in at about a third of its consensus (+1.3B V +3.8BE), as exports fell 3% following last month’s 5% increase. Shipment value to China slowed to a 3-month low, while exports value of Coal and Iron Ore fell m/m for the first time in 6 months and 4 months respectively.
A potential political wrinkle for Pres Trump in the wake of his popular speech came late in the Asia session, as Washington Post reported that AG Sessions held talks with Russian
Embassador Kislyak in 2016 and then subsequently denied contact with Moscow officials during his confirmation hearings.
North Korea had some harsh words directed at South Korea and US before the two countries start their annual joint military exercises in Asia, threatening "toughest counteractions". Earlier, press report citing US govt officials stating White House is considering its options against North Korea, including possible use of force.
China
(CN) According to a poll by American Chamber of Commerce (ACC) in South China 79% of foreign companies are optimistic about China – Chinese press
(CN) Shanghai Centaline Property Consultants: Area of new homes sold in Feb fell 6.7% m/m to 363K sqm – Shanghai Daily
Japan
(JP) Japan Fin Min Aso: A wider US/Japan interest rate differential would cause USD/JPY to rise further
Australia
(NZ) RBNZ Gov Wheeler: sees risks around future rate movements as equally balanced; comfortable with economic projections
(AU) ANZ economist:: Australia still likely to be at or close to peak in residential construction – AFR
Asian Equity Indices/Futures (00:00ET)
Nikkei +1.0%, Hang Seng +0.4%, Shanghai Composite flat, ASX200 +1.2%, Kospi +0.5%
Equity Futures: S&P500 -0.1%; Nasdaq -0.1%; Dax flat; FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0525-1.0550; JPY 113.65-114.15; AUD 0.7640-0.7680; NZD 0.7110-0.7150
Apr Gold -0.2% at $1,247/oz; Apr Crude Oil -0.6% at $53.53/brl; May Copper -0.2% at $2.73/lb
(JP) Japan MoF sells ¥2.18T in 10-year 0.1% JGBs; Avg yield: 0.082% v 0.087% prior; bid to cover: 3.74x v 3.62x prior
(CN) PBOC SETS YUAN MID POINT AT 6.8809 V 6.8798 PRIOR; 2nd straight weaker setting
(CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos
Asia equities / Notables / movers by sector
Consumer discretionary: 9843.JP Nitori Holdings -1.1% (FY16/17 result speculation)
Consumer staples: 1262.HK Labixiaoxin Snacks Group -3.5% (FY16 result)
Financials: 2777.HK Guangzhou R&F Properties +0.7% (Feb result)
Industrials: WOR.AU WorleyParsons +1.2% (Dar Group stake purchase); 6301.JP Komatsu Ltd +2.1%, 6305.JP Hitachi Construction Machinery +3.3% (Jefferies raises outlook)
Technology: 6727.JP Wacom Co Ltd +14.9% (Nomura raises rating)
Materials: IGO.AU Independence Group +8.9% (RBC raises rating); AWC.AU Alumina +9.1%, S32.AU South32 +9.8% (China may curb aluminum); YAL.AU Yancoal Australia +11.6% (guidance); MML.AU Medusa Mining +1.5% (CitiGroup raises rating); 5105.JP Toyo Tire & Rubber Co +5.8% (non-auto business sale speculation); 4004.JP Showa Denko -7.3% (delays earnings again); MRC.AU Mineral Commodities -8.3% (FY16 prelim result)
