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Asian Market Update: China Trade In Deficit For The First Time In 3 Years

China Trade in deficit for the first time in 3 years

Asia Mid-Session Market Update: Japan Q4 final GDP revised higher on stronger CAPEX; China Trade in deficit for the first time in 3 years

US Session Highlights

(US) JAN TRADE BALANCE: -$48.5B V -$48.5BE (widest deficit since Mar 2012): China: -$31.3B v -$27.8B prior


(CA) CANADA JAN INT’L MERCHANDISE TRADE: C$0.8B V C$0.8BE (3rd straight surplus)

(US) President Trump tweets: "I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!”

(SA) Saudi Oil Min Al-Falih: Saudi output is now below 10M bpd after cuts; production cutting deal is working well – CERAweek conf comments

(US) Atlanta Fed cuts Q1 GDP forecast to 1.3% from 1.8%

(US) Commerce Sec Ross: US trade deficit data shows there is much work to be done

US markets on close: Dow -0.1%, S&P500 -0.3%, Nasdaq -0.3%

Best Sector in S&P500: Technology

Worst Sector in S&P500: Energy

Biggest gainers: HUM +2.5%, VIAB +1.8%, ALB +1.7%, FFIV +1.6%, BBY +1.5%

Biggest losers: FTR -5.1%, ENDP -4.4%, SWN -4.2%, ESRX -3.8%, SIG -3.6%

At the close: VIX 11.5 (+0.2pts); Treasuries: 2-yr 1.33% (+2bps), 10-yr 2.51% (+2bps), 30-yr 3.11% (+1bps)

US movers afterhours

HRB: Reports Q3 -$0.49 v -$0.46e, R$452M v $451Me; H&R Block return volume outperformed industry results compared to IRS data; +7.8% afterhours

AVAV: Reports Q3 -$0.09 v -$0.34e, R$53.2M v $50.7Me; guides initial FY17 $0.20-0.35 v $0.50e, R$260-280M v $283Me; +7.0% afterhours

CLNE: Reports Q4 -$0.02 v -$0.09e, R$101.8M v $96.5Me (2 est); +7.0% afterhours

APC: Guides initial FY17 capex $4.5-4.7B v ~$2.9B y/y; -1.2% afterhours

URBN: Reports Q4 $0.55 v $0.56e, R$1.03B v $1.04Be; -1.6% afterhours

BOJA: Reports Q4 $0.28 v $0.21e, R$139.4M v $140Me; Guides initial FY17 $0.87-0.93 v $1.02e; R$560-569M v $592Me; -4.8% afterhours

GEO: Files to sell 6M shares through JPM, SunTrust, BCS, Merrill (8% of shares outstanding); -5.0% afterhours


(US) State of Hawaii to sue the Federal Govt to block implementation of the revised Executive Order on travel – press

(US) Atlanta Fed said to be considering Raphael Bostic as the next President, replacing retiring (Feb 28th) Dennis Lockhart (moderate, non-voter) – financial press

(US) CNBC’s Kudlow: Sources say Commerce Sec Ross now opposes border adjustment tax

(UK) Govt ministers said to call for PM May to call a snap election to give her a clear mandate for her Brexit plan – UK press

Asia Key economic data:

(CN) CHINA FEB TRADE BALANCE (CNY-TERMS): -60.4B V +172.5BE; First deficit since Feb 2014

(JP) JAPAN Q4 FINAL GDP Q/Q: 0.3% V 0.4%E; ANNUALIZED GDP: 1.2% V 1.5%E

(JP) JAPAN JAN BOP CURRENT ACCOUNT TOTAL: ¥65.5B (2-year low) V ¥270BE; ADJ CURRENT ACCOUNT TOTAL: ¥1.26T V ¥1.46TE; TRADE BALANCE BOP BASIS: – ¥853B (first deficit in a year) V – ¥800BE


(NZ) NEW ZEALAND Q4 MANUFACTURING ACTIVITY (SA) Q/Q: 0.8% V 0.4% PRIOR; VOLUME Q/Q: -1.8% (biggest decline since Q2 of 2013) V 2.1% PRIOR

(NZ) New Zealand Feb ANZ Truckometer Heavy M/M:+2.3% v -1.0% prior

Asia Session Notable Observations, Speakers and Press

Asia equity markets are mixed despite another day of modest declines on Wall St in both equity and bond markets. Investors look ahead to Wednesday’s release of ADP and Friday’s non-farm payrolls to confirm expectations of this month’s Fed hike, as only a very weak print on the jobs front would derail that view. After yesterday’s advance, the Energy sector lagged all others, and the soft patch may carry over as API petroleum saw a large build – its 6th in 7 weeks – despite the claims from Saudi Oil Min that demand is picking up. Regionally, Nikkei225 lagged as USD/JPY remained below ¥114 despite the uptick in US yields, weighed down by chip equipment stocks. JPY was also firmer as risk aversion was felt in US equity futures – S&P eminis hit 1-week lows of 2,360. Hang Seng outperformed with rallies in Geely Auto and China Unicom.

In other FX majors, AUD was supported by a research note out of Goldman estimating 60% chance of an RBA rate hike as soon as November, but came in on release of disappointing China trade data. In CNY terms, trade fell into deficit for the first time in 3 years, with Exports undershooting at Y/Y 4.2% v 14.6%e and Imports surging 44.7% v 23.1%e. Some of the deviation will likely be attributed to the timing of Lunar New Year coming in late Jan this year vs early Feb last year. Also of note in China, Foreign Min Wang said Beijing is working to expand cooperation with US while also calling on Washington to back away from THAAD missile system in South Korea and for North Korea to stop its nuclear development.

In other economic data, Japan Q4 Final GDP improved slightly from Prelim levels but missed expectations. Consumption growth remained flat, though the CAPEX component was revised sharply higher to 2.0% from 0.9% prelim, also beating 1.7% est.


(CN) China Feb iron ore total inventory 12.1Mt, +44.3% m/m – Chinese press

(CN) China Foreign Minister Wang Yi: One belt and One road initiative is critical amid protectionism

(CN) PBoC Dep Gov Yi Gang: China to steadily promote global use of Yuan – press


(JP) Japan investors sold net ¥1.69T of US sovereign debt during Jan (3rd consecutive sale, longest streak since June 2013)

(JP) Japan PM Abe: Japan completely out of deflation

(JP) Japan Fin Min Aso: easy cuts to corporate tax rates would harm trust in system

Australia/New Zealand

(AU) CitiGroup Australia to limit its mortgage loans for overseas borrowers to high net worth clients with minimum deposits of A$250K amid concerns of capacity, as most other Australian banks withdrew from lending to foreign clients – AFR

(AU) Hearing Goldman Sachs said to be calling for a RBA rate hike as soon as this Nov

(NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -6.3% v -3.2% prior; 2nd straight decline, biggest decline since Feb 2nd (out in US session)

(NZ) Westpac lowers FY16/17 milk payout target to NZ$5.90 from NZ$6.20 following today’s auction price decline – NZ press

(NZ) ANZ: New Zealand Feb non-tradable inflation 0.2% m/m, 2.2% y/y


(KR) Korean press speculates Korea’s currency swap total may be halved due to tensions with China on THAAD deployment

(KR) South Korea Fin Min Yoo: Economy showing signs of recovery – press

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.5%, Hang Seng +0.5%, Shanghai Composite +0.1%, ASX200 -0.1%, Kospi flat

Equity Futures: S&P500 -0.2%; Nasdaq -0.2%; Dax -0.2%; FTSE100 flat

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.0570-1.0595; JPY 113.85-114.10; AUD 0.7575-0.7630; NZD 0.6980-0.7020

Apr Gold flat at $1,225/oz; Apr Crude Oil flat at $53.20/brl; May Copper +0.1% at $2.66/lb

(US) Weekly API Oil Inventories: Crude: +11.6M v +2.5M prior (6th build in the past 7 weeks; Highest build since Feb 7th)

(SA) Saudi Oil Min: Global oil demand is picking up

(US) DoubleLine’s Gundlach: Reiterates 10-year yield to drop below 2.25% before rising again

(CN) PBOC SETS YUAN MID POINT AT 6.9032 V 6.8957 PRIOR; weakest Yuan setting since Jan 12th

(CN) China MoF sells CNY20B in 5-yr bonds; avg yield 3.0265% v 3.0387% prior; bid-to-cover 1.85x

(CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos

(AU) Australia MoF (AOFM) sells A$800M in 2.25% 2028 Bonds; avg yield: 2.9816%; bid-to-cover: 3.78x

Asia equities / Notables / movers by sector

Consumer discretionary: SVW.AU Seven Group Holdings -0.2% (considers privatization); 3099.JP Isetan Mitsukoshi -4.2% (Mizuho cuts rating)

Financials: 1375.HK Central China Securities Co -0.7%; 813.HK Shimao Property +6.0% (Feb result); 978.HK China Merchants Land +3.3% (FY16 result)

Industrials: QUB.AU Qube +3.1% (Peer DP World raised charges at ports in Melbourne and Sydney)

Technology: 6502.JP Toshiba Corporation +2.6% (no signs for Q3 earnings delay); 7741.JP Hoya Corp +2.2% (Morgan Stanley raises rating)

Materials: 5406.JP Kobe Steel +0.9% (Mizuho raises rating)

Healthcare: 570.HK China Traditional Chinese Medicine Co +1.0% (profit alert); MYX.AU Mayne Pharma -1.8% ( US President Trump tweeted about new system for lower drug prices in America); CAJ.AU Capitol Health +3.3% (Credit Suisse raises rating)

Telecom:763.HK ZTE Corp +5.9% (FY16 result, US settlement)

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