Trump campaign staff alleged to be in contract w/ Russian security officials
Asia Mid-Session Market Update: Indices rise again as Yellen threads the needle on gradual rate increase expectations; Australia Consumer Confidence further builds the case for higher rates; Trump campaign staff alleged to be in contract w/ Russian security officials
US Session Highlights
(US) JAN PPI FINAL DEMAND M/M: 0.6% V 0.3%E; Y/Y: 1.6% V 1.5%E
(US) Fed’s Lacker (hawk, non-voter): significantly higher rates are warranted; next hike should come sooner rather than later – comments in Delaware
(US) Fed Chair Yellen: waiting too long to tighten would be unwise; more policy adjustments will likely be needed if the economy remains on track – semi-annual testimony
(US) Fed Chair Yellen: ultimately want to shrink our balance sheet, will eventually be substantially smaller, but can’t put a number on it – Senate testimony Q&A
GM rises on talk of offloading European unit
US markets on close: Dow +0.5%, S&P500 +0.4%, Nasdaq +0.3%
Best Sector in S&P500: Financials
Worst Sector in S&P500: Utilities
Biggest gainers: COTY +4.9%, GM +4.8%, ENDP +4.6%, UA +4.1%, NFX +4.0%
Biggest losers: FLIR -6.2%, SCG -4.5%, ALB -3.8%, MU -3.3%, APA -2.9%
At the close: VIX 10.7 (-0.3pts); Treasuries: 2-yr 1.24% (+3bps), 10-yr 2.47% (+4bps), 30-yr 3.06% (+3bps)
US movers afterhours
SEDG: Reports Q2 $0.32 v $0.31e, R$111.5M v $115Me; Guides Q3 Rev $110-120M v $110Me, gross margin 31-33%; +6.2% afterhours
CCS: Reports Q4 $0.71 v $0.67e, R$292.4M v $273Me; Guides initial FY17 Home deliveries 3.0-3.3K, Rev $1.0-1.2B v $1.09Be; +3.9% afterhours
PG: Reportedly Trian (Peltz) has built a $3.5B position(1.5% stake); have not contacted PG management yet – CNBC; +3.0% afterhours
SIRI: Berkshire Hathaway discloses stake; +2.5% afterhours
PBPB: Reports Q4 $0.15 v $0.07e, R$102.4M v $102Me; Guides initial FY17 $0.45-0.47 v $0.45e, Company-operated SSS flat y/y; +2.4% afterhours
DVN: Reports Q4 $0.25 ex-items v $0.19e, R$3.35B v $2.76Be; +1.0% afterhours
AIG: Reports Q4 $0.84 (adj for $3.56 in prior year adverse reseve) v $1.24e, Commercial insurance net premiums written $3.70B v $4.64B y/y; -4.5% afterhours
LC: Reports Q4 -$0.02 v -$0.03e, R$129.2M v $122Me; Guides Q1 Net -$43M to -$38M, R$117-122M v $135Me, adj EBITDA -$10M to -$5M; -6.8% afterhours
FOSL: Reports Q4 $1.03 v $1.21e, R$959M v $972Me; Guides Q1 GAAP -$0.25 to -$0.10 v +$0.07e, Rev -11.5 to -8% y/y v $654Me; -14.8% afterhours
Politics
(US) Members of Donald Trump’s presidential campaign and his other associates said to have had repeated contact with members of Russian intelligence in the year before the election – NY Times
(US) President Trump hopes to pick new National Security Adviser by the end of the week – press citing WH spokesperson
Asia Key economic data:
(CN) CHINA JAN NEW YUAN LOANS (CNY): 2.03T V 2.44TE (2nd highest on record)
(CN) CHINA JAN AGGREGATE FINANCING (CNY): 3.74T V 3.00TE
(CN) CHINA JAN M2 MONEY SUPPLY Y/Y: 11.3% V 11.3%E; M1 MONEY SUPPLY Y/Y: 14.5% V 20.2%E
(AU) AUSTRALIA FEB WESTPAC CONSUMER CONFIDENCE INDEX: 99.6 V 97.4 PRIOR, M/M: 2.3% V +0.1%PRIOR
(KR) South Korea Jan Unemployment Rate: 3.6% v 3.5%e
Asia Session Notable Observations, Speakers and Press
Asia equity indices remaining bid, tracking the rebound in the 2nd half of trade on Wall St. Fed Chair Yellen’s congressional testimony, though somewhat hawkish, did not sway markets sufficiently that the Fed is gearing up for a March rate hike. Fed funds futures still see that probability below 20% and the outlook for higher rates in May at 40%. US rates did tick higher while USD advanced in US hours.
Nikkei225 among the best performing indices again as USD/JPY pair solidifies its gains above 114. Other USD majors in narrow ranges in the absence of key data in the Asia session.
Political controversy for US President Trump continues its steady trickle with NY Times reporting that campaign staff and other associates were in contract with members of Russian intelligence in the year before the election. FBI investigation is ongoing, and neither the alleged campaign sources nor the content of communications have been revealed.
In China, economic data out overnight saw very strong lending figures, though analysts are again reminded the results may be skewed by the timing of the Lunar New Year coming a month earlier than last time. Separately, a commerce ministry official warned that trade sector still faces risks of soft external demand and potential rise in protectionism.
Australia Westpac Consumer data followed yesterday’s strong NAB business confidence with an uptick, revealing that well over 50% of households are now anticipating rates to go higher in the near term.
Japan’s Abe and Aso expressed confidence that Washington understands Japan monetary policy as it pertains to its currency, and that it is not deliberately manipulating exchange rates.
China:
(CN) China Commerce Ministry (MOFCOM) official Wang Dongtang: Uncertainties and unstable factors in China trade are still increasing – China Daily
(CN) China Machinery Industry Federation: 2017 growth of value-added industrial output may slow to 7% from 9.6% in 2016 – Chinese press
(CN) China Index Academy: Jan property sales in China fell 36.7% m/m in terms of floor space – Chinese press
(CN) Shanghai regulators said to hold a meeting on SOE reforms this Thursday – Chinese press
Japan:
(JP) Bank of Japan (BOJ) Gov Kuroda: Still a long way to hit price target; Not thinking about raising target rates now
(JP) Japan Chief Cabinet Sec Suga: Expect Spring wage talks to be at least at last year’s levels
(JP) Japan Fin Min Aso: Want to tell US Treasury Sec Mnuchin that cannot call JPY weak now ; JPY is not at ¥120 level when Lehman collapsed – press
(JP) Japan PM Abe: Gained Pres Trump’s understanding that monetary policy is not currency manipulation; Hopes to see good progress on Japan and US talks by mid-term election
Australia/New Zealand:
(AU) Latest Westpac consumer confidence data shows that 60% of households in Australia are preparing for interest rates to rise – AFR
Asian Equity Indices/Futures (00:00ET)
Nikkei +1.1%, Hang Seng +1.3%, Shanghai Composite +0.4%, ASX200 +0.9%, Kospi +0.4%
Equity Futures: S&P500 flat; Nasdaq flat; Dax +0.1%; FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0565-1.0585; JPY 114.20-114.50; AUD 0.7655-0.7680; NZD 0.7150-0.7180
Apr Gold +0.1% at $1,227/oz; Mar Crude Oil -0.6% at $52.86/brl; Mar Copper +0.1% at $2.75/lb
(US) Weekly API Oil Inventories: Crude: +9.9M (4th straight build) v +14.2M prior
GLD: SPDR Gold Trust ETF receives Sharia-compliant certification – press
(CN) China sells CNY in 5-yr Govt bonds; avg yield 3.0293% v 3.04%e; bid-to-cover 2.04x
(CN) PBOC SETS YUAN MID POINT AT 6.8632 V 6.8806 PRIOR; Biggest CNY increase in 3 weeks; Strongest Yuan setting since Feb 7th
(CN) PBoC said to have injected funds through mdium term lending facility loans (MLF)
(KR) BOK sells KRW2.5T 2-yr monetary stabilization bonds at 1.61% v 1.64% prior
Asia equities / Notables / movers by sector
Consumer discretionary: 1055.HK China Southern Airlines Co +2.3% (Jan result); DMP.AU Domino & Pizza Enterprises -14.3% (H1 result)
Consumer staples: SWM.AU Seven West Media -5.8% (H1 result); 4324.JP Dentsu +9.5% (FY16 result)
Financials: CPU.AU Computershare +4.8% (guidance); 8136.JP Sanrio Co. -3.1% (9-month result); CBA.AU Commonwealth Bank of Australia +2.3% (H1 result)
Industrials: 1803.JP Shimizu +4.1% (9-month result); BLD.AU Boral Ltd +6.4% (H1 result); 5110.JP Sumitomo Rubber Industries -7.4% (FY16 result); 6326.JP Kubota Corp -1.9% (FY16 result); 4631.JP DIC Corp +10.1% (FY16 result)
Technology: 6502.JP Toshiba Corporation -8.6% (earnings release delay and govt probe)
Materials: SGM.AU Sims Metal -1.5% (guidance); PDN.AU Paladin Energy -5.0% (H1 result); ORA.AU Orora -1.7% (H1 result); MGX.AU Mount Gibson Iron +3.7% (H1 result); 5105.JP Toyo Tire & Rubber Co +9.9% (FY16 result)
Energy: ORG.AU Energy -0.9% (guidance); 1088.HK China Shenhua Energy Co +1.5% (Jan result); 5002.JP Showa Shell -2.8% (FY16 result)
Healthcare: CSL.AU CSL Limited +3.0% (H1 result); SHL.AU Sonic Healthcare +0.4% (H1 result); PRY.AU Primary Health Care -12.1% (guidance)
