Trump’s executive order on immigration sparks protests and investor caution

Friday US markets on close: Dow flat, S&P500 -0.1%, Nasdaq +0.1%

Best Sector in S&P500: Healthcare

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Worst Sector in S&P500: Basic Materials

Biggest gainers: WYNN +7.9; BCR +5.2%; GD +4.4%

Biggest losers: RHI -7.3%; GPS -5.4%; AAL -5.3%

At the close: VIX 10.6 (-0.1pts); Treasuries: 2-yr 1.21% (-1bps), 10-yr 2.48% (-3bps), 30-yr 3.06% (-3bps)

Weekend US/EU Corporate Headlines

XXIA: Keysight Technologies said to be close to finalizing acquisition of Ixia for over $1.6B – press

CSX: Said to be in settlement talks with former CP CEO Hunter Harrison and activist investor Mantle Ridge; May result in Harrison being named CEO – press

DHT: Receives non-binding proposal from Frontline Ltd at $5.09/shr; Adopts One-Year shareholder rights plan

VRX: CVC and Advent buyout firms said to be interested in certain Valeant assets, which could yield as much as $1B in a sale – press

FIT: To announce job cuts of 5-10% of workforce while reporting Q4 results that are below expectations – press

Politics

(US) Pres Trump: Immigration order is not a "Muslim ban"

(DE) German chancellor Merkel: Told US pres Trump that the fight against terrorism does not justify Muslim travel ban – press

(FR) According to the latest survey by Le Figaro, frontrunner Fillon has 21-22% approval rating ahead of first round of elections in April, while centrist Macron has 20-21%

(JP) Japan cabinet approval rating remains unchanged at 61% – Yomiuri

(US) State of California considering options to suspend financial transfers to Washington following threats from Trump administration to withhold funds from sanctuary cities – US press

Key economic data:

(NZ) NEW ZEALAND DEC TRADE BALANCE (NZ$): -41M (6TH STRAIGHT DEFICIT, smallest deficit in 6 months) V -98ME; 12-MONTH TRADE BALANCE: -3.20B V -3.20BE

(JP) JAPAN DEC RETAIL SALES M/M: -1.7% (biggest decline in 10 months) V -0.5%E; RETAIL TRADE Y/Y: 0.6% (2nd straight increase) V 1.7%E

Asia Session Notable Observations, Speakers and Press

Despite the Lunar New Year holiday in much of Asia, there was pronounced weakness in equity indices of Japan and Australia as well as safe haven bid for Treasuries and JPY. Investors are closely watching the fallout from US President Trump’s immigration decree banning travel to the US by citizens of Iraq, Syria, Iran, Sudan, Libya, Somalia or Yemen, as well as a 120-day suspension of the US refugee program. The move sparked protests at airports across the US and words of disapproval from European leaders. Another US press report indicated the Trump administration may be headed for a showdown over money transfers with the State of California if it decides to pull funding from "sanctuary cities".

New Zealand put out its 6th straight trade deficit, though this was also its smallest in 6 months, with both exports and imports rising more than expected. Shipments to China were up 13%, while exports to Australia and US down in high single digits. Analysts noted the strong trade is not unusual this time of year given the external demand for agricultural products.

Ahead of tomorrow’s BOJ decision, a Nikkei report speculated that the central bank will heed improving trade and consumption data with an increase in its accompanying projections for growth. Today’s retail trade data for Japan were mixed, with 2nd straight annualized increase but also the biggest sequential decline in 10 months.

Japan:

(JP) BOJ expected to upgrade its GDP forecasts in this week’s policy meeting – Nikkei

(JP) BOJ adviser Kawai: BoJ to avoid raising rates until inflation rises to about 2%

Australia/New Zealand:

(AU) Macquarie: Australia H1 corporate earnings growth to show "broad improvement" – press

(AU) NAB chief economist maintaining forecast for RBA to cut rates twice this year – Australian press

(NZ) JPMorgan: Latest narrowing of trade deficit is normal since agricultural exports rise into year-end – press

(NZ) RBNZ: Dec mortgage lending slowed to NZ$5.86B v NZ$6.00B y/y and NZ$6.35B m/m

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.6%, Hang Seng closed, Shanghai Composite closed, ASX200 -0.9%, Kospi closed

Equity Futures: S&P500 -0.3%; Nasdaq -0.3%, Dax -0.3%, FTSE100 -0.2%

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

EUR 1.0705-1.0740; JPY 114.25-114.95; AUD 0.7550-0.7560; NZD 0.7260-0.7275; GBP 1.2560-1.2600

Feb Gold +0.4% at 1,196/oz; Mar Crude Oil -0.4% at $52.96/brl; Mar Copper -0.2% at $2.69/lb

SLV iShares Silver Trust ETF daily holdings rise to 10,444 tonnes from 10,420 tonnes prior; first rise since Dec 2016

(SA) Saudi Aramco said to consider investment of as much as $5B in renewable energy to diversify away from crude oil production – press

(JP) Japan MoF sells ¥2.09T v ¥2.3T indicated in 2-yr 0.1% JGBs; Avg yield: -0.173 v -0.157% prior; bid to cover: 5.19 (highest since May) v 4.51x prior

Asia equities / Notables / movers

Consumer discretionary: 4185.JP JSR Corp -3.3% (9-month result speculation); 9201.JP Japan Airlines Corp -0.6% (9-month result speculation); 6770.JP Alps Electric Co +2.5% (9-month result); 7278.JP Exedy Corp -5.9% (9-month result)

Consumer staples: WCB.AU Warrnambool Cheese & Butter +23.8% (acquisition); WOW.AU Woolworths Limited -0.9% (Morningstar cuts rating)

Financials: QBE.AU QBE Insurance Group +1.4% (not in discussion with any buyer); SRV.AU Servcorp Ltd -19.5% (adjusts guidance); 3003.JP Hulic Co +4.5% (FY16 result); 8316.JP Sumitomo Mitsui Financial Group -1.9% (9-month result)

Industrials: AJX.AU Alexium International Group +2.2% (Q3 result); 7729.JP Tokyo Seimitsu -1.2% (9-month result speculation); 7211.JP Mitsubishi Motors -0.6% (outlook speculation)

Technology: ACX.AU Aconex -41.9% (cuts guidance); 6502.JP Toshiba Corporation -4.7% (some trust banks are preparing a lawsuit); 6816.JP Alpine Electronics +4.9% (9-month result); 8036.JP Hitachi High-Technologies +5.1% (9-month result)

Materials: ORE.AU Orocobre -6.1% (Q4 result); PRU.AU Perseus Mining -5.0% (Q4 result); BDR.AU Beadell Resources +1.7% (Q4 result); OZL.AU OZ Minerals -0.8% (Q4 result); 5727.JP Toho Titanium +10.6% (9-month result); 4063.JP Shin-Etsu Chemical Co -1.1% (9-month result)

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