Investors digest dovish Fed hike, hawkish BOE hold, and deleveraging steps in China
US Session Highlights
(US) FEB HOUSING STARTS: 1.29M V 1.26ME; BUILDING PERMITS: 1.21M V 1.27ME; increases in single family starts (highest since 2007) and permits offset declines in multifamily
(US) INITIAL JOBLESS CLAIMS: 241K V 240KE; CONTINUING CLAIMS: 2.03M V 2.05ME
(US) MAR PHILADELPHIA FED BUSINESS OUTLOOK: 32.8 V 30.0E; new orders rise to highest reading since 1987
(US) JAN JOLTS JOB OPENINGS: 5.626M V 5.56ME; quits rate 2.2% v 2.0% prior
(EU) ECB’s Nowotny (Austria): ECB strategy for tightening policy will be different from the US Fed; ECB could raise rates before QE ends – Handelsblatt interview
US markets on close: Dow -0.1%, S&P500 -0.2%, Nasdaq flat
Best Sector in S&P500: Financials
Worst Sector in S&P500: Utilities
Biggest gainers: ORCL +6.2%, FTR +4.2%, NRG +2.5%, TDG +2.3%, BEN +2.1%
Biggest losers: BIIB -4.7%, ILMN -3.9%, NEM -3.8%, RIG -3.5%, INCY -2.8%
At the close: VIX 11.2 (-0.4 pts); Treasuries: 2-yr 1.34% (+3bps), 10-yr 2.52% (+1bps), 30-yr 3.14% (+3bps)
US movers afterhours
VSLR: Reports Q4 -$0.41 v -$0.42e, R$41.8M v $39.2Me; Guides Q1 MW installed 43-46 MWs- Guides FY17 MW installed 210-230 MWs; +7.3% afterhours
VRX: ValueAct bought 3M shares from $10.81-10.88/shr on March 14th, adding to existing position (stake increased to 5.2% from 4.4%); +4.3% afterhours
SXC: Said to explore a sale – financial press; +4.1% afterhours
ADBE: Reports Q1 $0.94 v $0.87e, R$1.68B v $1.64Be; +4.0% afterhours
VRAY: Reports Q4 -$0.25 v -$0.34e, R$16.1M v $13.7Me- Guides FY17 Rev $45-50M, primarily from 7 to 8 MRIdian Linac Systems; -3.0% afterhours
SNAK: Delays filing 10K; -8.3% afterhours
CAL: Reports Q4 $0.33 v $0.40e, R$639.5M v $632Me; Guides initial FY17 $2.10-2.20 v $2.39e, Rev $2.7-2.8BB v $2.71Be; -8.6% afterhours
STLD: Guides Q1 $0.77-0.81 v $0.62e; Raises dividend 11% to $0.155 (implied yield 1.7%)
Politics
(US) Pres Trump tweets: "Great progress on healthcare. Improvements being made – Republicans coming together!"
Asia Key economic data:
(NZ) NEW ZEALAND FEB BUSINESS MANUFACTURING PMI: 55.2 V 52.2 PRIOR (4-month high)
(NZ) NEW ZEALAND MAR ANZ CONSUMER CONFIDENCE INDEX: 125.2 V 127.4 PRIOR; M/M:-1.7% V -1.0% PRIOR
(SG) SINGAPORE FEB NON-OIL DOMESTIC EXPORTS M/M: +1.4% V -0.1%E; Y/Y: 21.5% V 12.5%E
(CL) CHILE CENTRAL BANK (BCCH) CUTS OVERNIGHT RATE TARGET BY 25BPS TO 3.00%; AS EXPECTED
Asia Session Notable Observations, Speakers and Press
Asian equities traded mixed, tracking a more subdued session in the US where some of yesterday’s flows that followed less hawkish than anticipated Fed were reversed. After a slump in Financials on flatter post-FOMC yield curve, the sector outperformed, while Utilities came in. Australia stocks were weighed down by materials names, even as gold stocks tracked the price of the metal higher. Hang Seng outperformed on strength in gaming stocks.
FX majors were also relatively contained to narrow ranges. EUR/USD saw a pronounced move higher in late US session after comments from Australia Central Bank’s Nowotny suggesting ECB could start to raise rates before its QE program is complete. GBP/USD consolidated its post-BOE spike as the decision mentioned price pressures. Dissenter Forbes also clarified his surprise call for a 25bp hike, noting growth and inflation data suggest BOE interest rates should rise. USD/JPY came off its recent lows with a 20pip rise after 3 days of declines. AUD and NZD were both up about 0.1% against USD, paring yesterday’s sell-off after soft Australia employment and New Zealand GDP data.
In China, PBoC’s reverse repo operations were more tame at CNY60B v CNY80B overnight, and the weekly net drain rose to CNY120B from CNY110B last week. Chinese press report indicates overnight 10bp increase in reverse repo and MLF rates is part of policymakers deleveraging efforts in key sectors of the economy that include steel, coal, non-ferrous metals, and real estate.
Russian aluminum giant Rusal was out with Q4 results that showed rising profitability and better margins, but lower anticipated aluminum demand growth for 2017 at 5.0% vs 5.5% in 2016. China demand forecast was a healthy 6.7% vs non-China’s 3.3%.
US State Sec Tillerson kicked off his trip to Asia with a visit to the DMZ. Overnight, he noted that diplomatic efforts on North Korea of past 20 years have failed and a different approach is needed.
China
(CN) China National Energy Administration (NEA): Feb power consumption +17.2% y/y to 448.6B Kwh
(CN) China banks Feb net forex sales $10.1B for clients – Chinese press citing FX Regulator SAFE
(CN) Certain banks in Beijing City said to suspend housing mortgage – financial press
(CN) China final draft of its annual work report included pledge to contain rising home prices in 2017 – Chinese press
(CN) China said to start debt deleveraging in key sectors of economy, including steel, coal, non-ferrous metals, real estate – Chinese press
Australia/New Zealand
(NZ) Credit Suisse: RBNZ to begin removing accommodative policy settings starting in May 2018 – press
(NZ) ASB: Next week’s RBNZ policy statement to remain neutral – press
Korea
(KR) BOK Dep Gov Jang: US interest rate is an important reference index, but our policy stance takes consideration of our own condition – Korean press
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.4%, Hang Seng +0.3%, Shanghai Composite -0.2%, ASX200 +0.4%, Kospi +0.4%
Equity Futures: S&P500 +0.2%; Nasdaq +0.2%; Dax +0.6%; FTSE100 +0.2%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0760-1.0775 JPY 113.25-113.50; AUD 0.7665-0.7685; NZD 0.6975-0.6990
Apr Gold -0.1% at $1,226/oz; Apr Crude Oil +0.3% at $48.87/brl; May Copper -0.2% at $2.67/lb
SPDR Gold Trust ETF daily holdings fall 2.3 tonnes to 837.1 tonnes; first decline since Mar 10th
(CN) PBOC SETS YUAN MID POINT AT 6.8873 V 6.8862 PRIOR
(CN) PBOC to inject combined CNY60B v CNY80B prior in 7,14, and 28-day reverse repos; Drains net CNY120B this week v drained CNY110B prior
(AU) Australia MoF (AOFM) sells A$700M in 3.25% 2029 Bonds; avg yield: 3.037%; bid-to-cover: 3.75x
(CN) China MOF sells 91-day bonds, avg yield 2.7441%
Asia equities / Notables / movers by sector
Consumer discretionary: SXL.AU Southern Cross Media Group -3.8% (Morgan Stanley cuts rating); MYR.AU Myer +5.3% (Macquarie raises rating); 1929.HK Chow Tai Fook Jewellery Group Ltd -0.6% (acquisition); 7453.JP Ryohin Keikaku Co. +2.1% (Muji cleared of China food claims); 9681.JPTokyo Dome Corp. -3.4% (FY16/17 result)
Financials: 000002.CN China Vanke Co +2.2% (agreement between China Evergrande and SZMC)
Industrials: 1366.HK Jiangnan Group +6.9% (FY16 result); 293.HK Cathay Pacific Airways +1.6% (cut costs); 2333.HK Great Wall Motor -6.9%, 000625.CN Chongqing Changan Automobile -0.8% (concern on deeper discounts weighing on earnings); 6448.JPBrother Industries +1.7% (Mitsubishi initiates with overweight); 4042.JPTosoh Corp. -2.0% (guidance)
Technology: 6502.JP Toshiba Corporation +5.0% (Japan govt not consider public fund for co); 903.HK TPV Technology +7.7% (FY16 result)
Materials: ORE.AU Orocobre +4.7% (sold projects from Argentine unit); 486.HK RUSAL +2.0% (Q4 result)
Energy: 1088.HK China Shenhua Energy +1.8% (Feb result)
Utilities: 9501.JP Tokyo Electric Power Co -1.4% (to decommission units)
