China lowers 2017 GDP, M2, Retail Sales targets
Asia Mid-Session Market Update: China lowers 2017 GDP, M2, Retail Sales targets; North Korea fires more missiles ahead of US-South Korea drills
Friday US markets on close: Dow flat, S&P500 +0.1%, Nasdaq +0.2%
Best Sector in S&P500: Financials
Worst Sector in S&P500: Real Estate
Biggest gainers: MU +3.5%; UAL +3.2%; GPN +3.0%
Biggest losers: M -4.4%; COST -4.3%; PRGO -3.7%
At the close: VIX 11.0 (-0.9pts); Treasuries: 2-yr 1.30% (-1bp), 10-yr 2.49% (flat), 30-yr 3.08% (flat)
Weekend US/EU Corporate Headlines
DB: Confirms plans to raise €8B (31.9% of market cap) through rights issue on Mar 21st priced at a discount of about 39% to Friday’s €19.14/shr close price – press
MGM: Reportedly MGM has made offer to acquire Las Vegas Sands’ casino in Bethlehem, Pennsylvania for as much as $1B – press
STAN.UK: Confirms in talks about an all share merger with Aberdeen Asset Management
Politics
(US) President Trump claims President Obama ordered wire taps on his phones in October; Obama spokesperson denies the allegation
(US) FBI Director Comey calls on DOJ to publicly reject Pres Trump’s assertion that his phones were tapped under Pres Obama in 2016 – NY Times
(JP) Japan PM Abe said to consider potential snap election in 2018; LDP may also revise rules to allow him to serve 3 consecutive terms (until 2021) – Japan press
Key economic data:
(AU) AUSTRALIA JAN RETAIL SALES M/M: 0.4% V 0.4%E
(AU) AUSTRALIA FEB ANZ JOB ADVERTISEMENTS M/M: -0.7% V 3.9% PRIOR
(AU) AUSTRALIA FEB MELBOURNE INSTITUTE INFLATION M/M: -0.3% (first decline in 7 months) V 0.6% PRIOR; Y/Y: 2.1% V 2.1% PRIOR
(NZ) NEW ZEALAND JAN BUILDING PERMITS M/M: +0.8% V -7.9% PRIOR (1st increase since Sept)
Asia Session Notable Observations, Speakers and Press
Asia indices are mixed to positive, all in spite of Fed Chair Yellen virtually confirming intentions to raise rates this month in her speech on Friday and US/European futures coming under pressure on more political polarization in Washington and geopolitical concerns on Korean peninsula. Nikkei225 is underperforming as JPY reversed 4 consecutive declines on Friday with a modest rally, while Australia is among the gainers as miners rally after recent slump. In FX, USD/JPY and NZD/USD are among the bigger movers, falling 40pips and 30pips to 113.70 and 0.7005 session lows.
China kicked off its National People’s Congress (NPC) with 2017 GDP target of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016, also lowering 2017 M2 money supply to 12% from 13% and Retail sales to 10% from 11. China kept its CPI target and Fiscal Budget deficit to GDP ratios unchanged at 3% and 3%. PBoC pledged to pursue prudent, neutral monetary policy in 2017, while Fin Min expressed concerns over imbalances between revenue and spending as well as local govt debt risks. In other notable developments, Defense Ministry’s 2017 growth was set at 7%, down from 7.6% last year and the lowest in a decade. Expressing continued commitment to reducing pollution, regulators also announced cuts in steel capacity by another 50M tons and coal output by over 150M tons.
Reeling from the unexpected recusal by AG Sessions from campaign investigations last week due to misleading testimony on his contact with Russian ambassador, President Trump and his team went on offense this weekend, claiming that President Obama ordered wire taps on his phones in October. FBI Director Comey is denying those claims and calling for the DOJ to also publicly reject that assertion.
Geopolitical tensions on Korean peninsula flared up again ahead of the seasonal joint US-South Korea exercises. North Korea was reported to have fired 4 missiles that traveled about 1,000KM in continued show of force. South Korea said it is monitoring market impact, while Japan is lodging a formal complaint and also holding a national security council meeting.
Ahead of tomorrow’s RBA decision, key economic data for the session came out of Australia where Jan retail sales came in line with consensus. Annualized increase was 3.2%, as personal accessory/clothing category was said to print the biggest increase in spending from prior month. Expectations are widely in favor of an RBA hold, though fixed income markets are starting to price in a 50/50 chance of a hike by Q1 of next year.
China
(CN) China National People’s Congress (NPC) sets 2017 GDP target of "around 6.5% or higher if possible" vs 6.5-7.0% in 2016
(CN) PBOC Deputy Gov Pan Gongsheng: China has very adequate forex reserves in accordance with international standards or by latest indicators proposed by scholars – Chinese press
(CN) China PBoC Dep Gov Yi Gang: China does not need to raise interest rates or cut RRR for the time being; Yuan to remain relatively strong – press
(CN) NDRC: China to cut steel capacity by another 50M tons and coal output by over 150M tons in 2017 – press
(CN) China Parliament Spokeswoman: No plans to implement nationwide property tax this year – press
(CN) China sets 2017 Defense Spending increase at about 7%, down from 7.6% in 2016 and lowest in over a decade – press
Japan
(JP) Japan PM Abe: Will lodge firm protest against North Korea missile launch; launch is unacceptable
(JP) Ruling LDP party endorses changes to party rules that will allow PM Abe to remain until 2021 – Nikkei
Australia
(AU) Fixed income markets are pricing in about a 20% chance of an RBA rate hike before the end of 2017; Sees about 50% chance of a hike by the end of Q1 of 2018 – AFR
(NZ) New Zealand Treasury Monthly Economic Indicators: Q4 private consumption may be slightly lower than 1% forecast in HYEFU – press
(NZ) New Zealand PM English: planning to raise pension age to 67 from 65 within 20-yrs – NZ media
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.5%, Hang Seng +0.3%, Shanghai Composite +0.4%, ASX200 +0.3%, Kospi flat
Equity Futures: S&P500 -0.3%; Nasdaq -0.3%, Dax -0.3%, FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0600-1.0620; JPY 113.70-114.15; AUD 0.7570-0.7595; NZD 0.7005-0.7035; GBP 1.2280-1.2300
Apr Gold +0.6% at 1,234/oz; Apr Crude Oil -0.4% at $53.11/brl; May Copper -0.7% at $2.69/lb
GLD: SPDR Gold Trust ETF daily holdings fall 4.7 tonnes to 840.6 tonnes; lowest since Feb 12th
SLV: iShares Silver Trust ETF daily holdings fall to 10,350 tonnes from 10,424 tonnes prior; 11-month low
(CN) PBOC SETS YUAN MID POINT AT 6.8790 V 6.8896 PRIOR; Strongest Yuan setting since Feb 25th; first stronger fix in 4 sessions
(CN) PBOC to inject combined CNY40B v CNY30B prior in 7-day, 14-day and 28-day reverse repos
(KR) South Korea Finance Ministry sells KRW700B in 3-yr treasury bonds; avg yield 1.75% v 1.655% prior
(AU) Australia sells A$600M in 3.75% 2037 bonds; avg yield 3.4984%; bid-to-cover 2.52x
Asia equities / Notables / movers
Australia
YOW.AU Yowie Group +3.8%; Exec: In US market we continued to gain share in Jan; Affirms FY17 Rev +85-90% y/y
WSA.AU Western Areas -2.3%; Morgan Stanley cut
NVT.AU Navitas Ltd -14.7%; Named preferred AMEP program tenderer for reduced number of contract regions
Hong Kong
771.HK Automated Systems Holdings +3.8%; Acquires Grid Dynamics
229.HK Raymond Industrial Ltd +3.7%; profit alert
3333.HK China Evergrande Group +0.7%; Feb sales
