Stocks build on overnight gains as US consumer confidence rises
Asia Mid-Session Market Update: Stocks build on overnight gains as US consumer confidence rises; China banks rally on earnings; Japan retail sales miss estimates
US Session Highlights
(US) FEB ADVANCE GOODS TRADE BALANCE: -$64.8B V -$66.4BE (widest deficit in 22 months)
(US) FEB PRELIMINARY WHOLESALE INVENTORIES M/M: 0.4% V 0.2%E; RETAIL INVENTORIES M/M: 0.4% V 0.8% PRIOR
(US) JAN S&P / CASE-SHILLER 20-CITY M/M: 0.86% V 0.70%E; Y/Y: 5.73% V 5.60%E; HOUSE PRICE INDEX (HPI): 192.81 V 192.41 PRIOR
(US) House Republican lawmakers reportedly seeking ways to force vote on full repeal of Obamacare through a discharge petition (would require 218 signatories)
(US) MAR RICHMOND FED MANUFACTURING INDEX: 22 V 15E; Volume of new orders 26 v 24 prior
(US) MAR CONSUMER CONFIDENCE: 125.6 V 114.0E (highest since Dec 2000)
US markets on close: Dow +0.7%, S&P500 +0.7%, Nasdaq +0.6%
Best Sector in S&P500: Financials
Worst Sector in S&P500: Healthcare
Biggest gainers: DRI +9.3%, RHT +5.2%, CHK +4.5%, NBL +4.0%, MUR +3.9%
Biggest losers: MCK -2.9%, NEM -2.7%, FTR -2.0%, EW -1.5%, EVHC -1.4%
At the close: VIX 11.5 (-1.0 pts); Treasuries: 2-yr 1.30% (+3bps), 10-yr 2.41% (+4bps), 30-yr 3.01% (+3bps)
US movers afterhours
VRTX: Two Phase 3 Studies of the Tezacaftor/Ivacaftor Combination Treatment Met Primary Endpoints with Statistically SignificantImprovements in Lung Function (FEV1) in People with Cystic Fibrosis; +18.2% afterhours
RH: Reports Q4 $0.23 GAAP* v $0.05e, R$587M v $480Me; Guides Q1 $0.02-0.06 v +$0.56e, R$530-545M v $577Me; +15.8% afterhours
RTTR: Announces Lactose Intolerance Treatment, RP-G28, Demonstrated Efficacy and Clinically Meaningful Benefit in Phase 2b/3 Clinical Trial; +15.4% afterhours
VRNT: Reports Q4 $0.90 v $0.86e, R$299.5M v $294Me; Guides FY18: Rev $1.14B with a range of +/- 2%; +7.5% afterhours
OLLI: Reports Q4 $0.39 v $0.35e, R$283.4M v $281Me; +1.1% afterhours
SONC: Reports Q2 $0.15 v $0.15e, R$100.2M v $107Me; -1.8% afterhours
DEPO: Announces cooperation agreement with Starboard Value; names Arthur Higgins as CEO; Guides Q1 Rev $95-100M v $113Me (2 est); -3.0% afterhours
PLAY: Reports Q4 $0.63 v $0.58e, R$270.2M v $271Me; Q4 SSS 3.2% v 3.7%e; FY16 SSS 3.3% v 3.1-3.6% prior forecast; -4.4% afterhours
Politics
(FR) Wife of French presidential candidate formally charged in fake jobs probe – French press
Asia Key economic data:
(JP) JAPAN FEB RETAIL SALES M/M: 0.2% V 0.3%E; RETAIL TRADE Y/Y: 0.1% (4-month low) V 0.7%E
(KR) South Korea Apr Business Manufacturing Survey: 82 v 81 prior; Non-Manufacturing Survey: 80 v 77 prior
Asia Session Notable Observations, Speakers and Press
Asian equity markets are modestly higher, tracking more pronounced bullish sentiment that followed a swift turnaround from the initial losses of the prior session. Investors continue to shrug the political stumbles of the Trump administration and focusing on improving US economic data – particularly the 16-year high in Consumer Confidence. Financials did particularly well as interest rates rose across the curve, while Gold came in back below 1,250 after a recent run.
In FX, USD majors were in more narrow ranges, particularly in Asian hours. The most notable pair was GBP/USD, which fell some 80pips from the highs to 1.2380 as PM May signed the letter invoking Article 50 that will start Brexit process. German press report indicated that German govt wants the talks to be completed within the 2-year time limit. Separately, USD/JPY pair remained supported above ¥111 and NZD/USD found buyers below $0.70.
Economic calendar was once again light, limited to lower than expected growth in Japan retail sales for Feb. Recall Japan consumption was flat in Q4, and it remains to be seen whether Capex growth can sustain the economy.
In China, AgBank and BoCom released their FY16 results overnight. BoCom profits topped consensus at CNY67.2B v CNY65.4Be and NPL raio was marginally higher at 1.52% v 1.51% y/y, sending shares up 1%. AgBank was up just under 1% as FY16 results saw Net rise CNY184B v CNY181By/y, Rev fall to CNY510B v CNY541B y/y, and NPLs improve to 2.37% v 2.39% y/y. Both S&P and Moody’s reports on China also warned about the risks of potential property market adjustment following recent runup in prices as interest rates rise and PBoC manages liquidity.
China
(CN) S&P: China debt overhand and property market adjustment, as well as US trade policies, among top Asia-Pacific risks
(CN) Moody’s: China economy faces heightened risks from potential future property downturn
Japan
(JP) Japan LDP party panel proposes to develop long-range strike capability – press
(JP) BOJ’s Sato: Reforms needed to raise inflation expectations; central bank does not impact inflation expectations as much as traditionally expected – speaking at Yale
Korea
(KR) South Korea Federation of Korean Industries (FKI): Business Survey Index (BSI) for Apr rises to 93.3 v 92.1 in Mar; 6-month high – Korean press
(KR) South Korea Fin Min Yoo said to seek meeting with India – Korean press
Asian Equity Indices/Futures (00:30ET)
Nikkei flat, Hang Seng +0.2%, Shanghai Composite +0.1%, ASX200 +0.9%, Kospi flat
Equity Futures: S&P500 +0.1%; Nasdaq +0.2%; Dax +0.1%; FTSE100 +0.2%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.0808-1.0826; JPY 111.03-111.33; AUD 0.7630-0.7660; NZD 0.6998-0.7018
Apr Gold -0.6% at $1,248/oz; May Crude Oil +0.5% at $48.59/brl; May Copper -0.2% at $2.67/lb
(US) Weekly API Oil Inventories: Crude: +1.9M v +4.5M prior (8th build in the past 10 weeks)
SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 833.5 tonnes
iShares Silver Trust ETF daily holdings fall to 10,377 tonnes from 10,342 tonnes prior
(CN) PBoC skips open market operations for 4th straight session; Said to drain CNY70B v CNY70B prior
(CN) PBOC SETS YUAN MID POINT AT 6.8915 V 6.8782 PRIOR; 2nd straight weaker setting; Weakest setting since Mar 21st
(JP) BOJ lowers amount of 3-5-yr JGB in its daily operations to ¥380B from ¥400B
(AU) Australia MoF (AOFM) sells A$800M in 2.75% 2027 Bonds; avg yield: 2.8096%; bid-to-cover: 3.55x
Asia equities / Notables / movers by sector
Consumer discretionary: 305.HK Wuling Motors Holdings +1.4% (FY16 results); 210.HK Daphne International Holdings -3.7% (FY16 results); 489.HK Dongfeng Motor -1.5% (FY16 results); FXJ.AU Fairfax Media +0.9% (TPG may buy stake)
Financials: 656.HK Fosun International +0.4% (FY16 results); 3333.HK Evergrande Real Estate Group +7.1% (FY16 results); 3328.HK BoCom +1.0%; 1288.HK AgBank +0.8% (FY16 results)
Industrials: 1211.HK BYD Company -2.3%, 1133.HK Harbin Electric Co +1.7%, 285.HK BYD Electronic International -1.9%, 3898.HK Zhuzhou CSR Times Electric +1.0%, 1800.HK China Communications Construction -0.5% (FY16 results); 7012.JP Kawasaki Heavy Industries +2.9% (CLSA raises rating)
Technology: 6502.JP Toshiba Corporation +0.7% (SK Hynix offers investment); 700.HK Tencent Holding +0.9% (investment in Tesla)
Materials: 3983.HK China BlueChemical -0.4% (FY16 results); 347.HK Angang Steel +2.2%, 1618.HK Metallurgical Corporation of China +0.3% (FY16 results); EVN.AU Evolution -0.7%, RSG.AU Resolute Mining -1.1%, SBM.AU St Barbara -1.2% (Gold miners track North American peers lower)
Energy: 1193.HK China Resources Gas Group -4.2% (FY16 results); 5019.JP Idemitsu Kosan Co +2.7% (founding family opposes merger)
Healthcare: 2196.HK Shanghai Fosun Pharmaceutical Group -4.0% (FY16 results)
Utilities: 1071.HK Huadian Power International Corp -0.9% (FY16 results)
