Trump promises tax relief and $1T infrastructure investment
Asia Mid-Session Market Update: Trump promises tax relief and $1T infrastructure investment; China manufacturing PMIs top estimates; Aussie GDP recovers
US Session Highlights
(US) Fed’s Kaplan (moderate, voter): Should begin removing accommodation; path of rates more important than exact timing – CNBC
(US) Q4 PRELIMINARY GDP ANNUALIZED Q/Q: 1.9% V 2.1%E; PERSONAL CONSUMPTION: 3.0% V 2.6%E
(US) JAN ADVANCE GOODS TRADE BALANCE: -$69.2B V -$66.0BE
(US) Q4 PRELIMINARY GDP PRICE INDEX: 2.0% V 2.1%E; CORE PCE Q/Q: 1.2% V 1.3%E
(US) DEC S&P / CASE-SHILLER 20-CITY M/M: 0.93% V 0.70%E; Y/Y: 5.58% V 5.40%E; HOUSE PRICE INDEX (HPI): 192.61 V 192.14 PRIOR
(US) JAN PENDING HOME SALES M/M: -2.8% V +1.0%E; Y/Y: +2.7% V -2.0% PRIOR (falls to one-year low)
(US) Feb Chicago Purchasing Manager Index: 57.4 v 53.5e (highest since Dec 2014); new orders 59.2 v 49.1 prior
(US) FEB RICHMOND FED MANUFACTURING INDEX: 17 V 10E; Volume of new orders 24 v 15 prior
(US) FEB CONSUMER CONFIDENCE: 114.8 V 111.0E (highest since 2001)
(CO) Colombia Jan National Unemployment Rate: 11.7% v 8.7% prior; Urban Unemployment Rate: 13.4% v 11.4%e
(US) Fed’s Dudley: Case for raising rates "has become a lot more compelling"; animal spirits have been unleashed after the election – CNN international taped interview
(US) Senior Trump officials reportedly disagree on border adjustment tax; said to still lack sufficient votes to pass the Senate – press
US markets on close: Dow -0.1%, S&P500 -0.3%, Nasdaq -0.6%
Best Sector in S&P500: Utilities
Worst Sector in S&P500: Consumer Discretionary
Biggest gainers: ALB +9.8%, PCLN +5.6%, ADM +3.5%, AES +3.5%, ENDP +2.7%
Biggest losers: SIG -12.8%, TGT -12.2%, PRGO -11.7%, FTR -10.9%, ETFC -7.2%
At the close: VIX 12.9 (+0.8pts); Treasuries: 2-yr 1.30% (+10bps), 10-yr 2.36% (-1bp), 30-yr 2.97% (-2bps)
US movers afterhours
BGFV: Reports Q4 $0.35 v $0.32e, R$266M v $266Me- Guides Q1 $0.12-0.18 v $0.05e; Guides Q1 SSS "positive mid-single-digit range"; +16.0% afterhours
WTW: Reports Q4 $0.20 v $0.18e, R$267.4M v $271Me; Guides initial FY17 $1.30-1.40 v $1.12e; +10.5% afterhours
LOGM: Reports Q4 $0.62 v $0.59e, R$88.0M v $87.3Me; Guides Q1 $0.72-0.76 v $0.60e; +7.5% afterhours
ROST: Reports Q4 $0.77 v $0.75e, R$3.51B v $3.45Be; Launches $1.75B share repurchase program (~6.5% of market cap); -0.8% afterhours
CRM: Reports Q4 $0.28 v $0.25e, R$2.29B v $2.27Be; -3.0% afterhours
CHUY: Reports Q4 $0.18 v $0.17e, R$79.1M v $81.4Me- Guides initial FY17 $1.11-1.15 v $1.19e; SSS +1-2%; -3.3% afterhours
EVHC: Reports Q4 $1.15 v $1.24e, R$1.39B v $1.40Be; Guides Q1 $0.75-0.81 v $0.99e; -12.1% afterhours
SRPT: Reports Q4 -$0.71 v -$1.26e, R$5.4M v $5.0Me; -14.3% afterhours
PANW: Reports Q2 $0.63 v $0.62e, R$422.6M v $430Me; Adds $500M to buyback plan; Guides Q3 $0.54-0.56 v $0.71e, R$406-416M v $453Me; -20.0% afterhours
Politics
(US) US President Trump: To provide massive tax relief for middle class; To seek $1T infrastructure investment program financed through public and private capital – speech to Congress
(US) Pres Trump said to be open to a legal pathway for undocumented immigrants – NY Times
(IQ) President Trump’s new Executive Order on immigration will reportedly drop Iraq from the list of nations facing a travel bank – US press
Asia Key economic data:
(CN) CHINA FEB CAIXIN MANUFACTURING PMI: 51.7 V 50.8E (8th consecutive expansion)
(CN) CHINA FEB MANUFACTURING PMI (GOVT OFFICIAL): 51.6 V 51.2E; NON-MANUFACTURING PMI: 54.2 (4-month low) V 54.6 PRIOR
(JP) JAPAN FEB FINAL PMI MANUFACTURING: 53.3 V 53.5 PRELIM
(JP) JAPAN Q4 CAPITAL SPENDING Y/Y: 3.8% V 0.8%E; EX-SOFTWARE Y/Y: 3.3% V 1.1%E
(JP) JAPAN FEB DOMESTIC VEHICLE SALES Y/Y: 13.4% V 8.6% PRIOR
(AU) AUSTRALIA Q4 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 2.4% V 2.0%E
(AU) AUSTRALIA FEB AIG MANUFACTURING INDEX: 59.3 v 51.2 PRIOR; 15-year high; 5th month of expansion
(AU) AUSTRALIA FEB CORELOGIC RPDATA HOUSE PRICES M/M: 1.4% V 0.7% PRIOR
(KR) SOUTH KOREA FEB TRADE BALANCE: $7.2B V $4.9BE
(HK) Macau Feb Gaming Rev MOP22.99B v MOP21.5Be; y/y: +17.8% v +10%e
Asia Session Notable Observations, Speakers and Press
Asia tracking slightly firmer, with Nikkei225 a clear outperformer on weaker JPY; USD/JPY has added to gains with the case for March Fed rate hike growing rapidly in the wake of stronger economic data (Richmond Fed index and Chicago PMI today) and notably more hawkish Fed-speak (typically a dove, New York’s Dudley said case for March is more compelling). Rates on the short end of the curve spiked higher, while the Vix closed at its highest level of 2017.
Reaction to US President Trump’s first address before the joint session of Congress (first year’s equivalent to State of the Union) has been largely positive among the pundits and initial surveys, though critics would point to lack of substantive policy proposals; Most notably, Trump called for $1T public-private investment in infrastructure, reiterated intent to repeal/replace Obamacare, and again pledged massive tax relief for middle class.
China PMI data were mostly positive, particularly on the Manufacturing front; Official manuf print was a beat at 51.6 V 51.2E as key components such as New Export Orders and Employment hit multi-month highs; Caixin PMI also improved and is now in expansion for 8 months, with resident economist noting fastest increase in new export business since September 2014, post-Lunar New Year employment demand, and sharp rise in input costs.
Australia Q4 GDP was also a beat after a surprising q/q contraction in Q3. Terms of Trade component jumped 9.1% v 4.5% prior thanks to higher commodity prices, consumption improved to +0.7% v +0.3% prior, and capital investment rose a solid +2.6% v -2.7% prior.
China
(CN) China Labor Minister: Expect employment to remain relatively stable in 2017 despite complex situation – press
Japan
(JP) Japan Coast Guard claims 3 China Coast Guard vessels entered its waters – financial press
(JP) Japan Fin Min Aso: Economic growth is more important than fiscal balance
(JP) BOJ Gov Kuroda: Fiscal policy and BOJ easing can have synergy effects – press
Australia
(AU) Australia Treasurer Morrison: GDP data confirms Australia’s successful change in economy
Asian Equity Indices/Futures (00:30ET)
Nikkei +1.5%, Hang Seng +0.1%, Shanghai Composite +0.5%, ASX200 -0.1%, Kospi +0.3%
Equity Futures: S&P500 +0.2%; Nasdaq +0.2%; Dax +0.2%; FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET
EUR 1.0550-1.0590; JPY 112.75-113.60; AUD 0.7635-0.7700; NZD 0.7130-0.7190
Apr Gold -0.8% at $1,244/oz; Apr Crude Oil +0.1% at $54.07/brl; May Copper +0.9% at $2.74/lb
(US) Weekly API Oil Inventories: Crude: +2.5M v -0.9M prior (5th build in the past 6 weeks)
USD/CNY PBOC SETS YUAN MID POINT AT 6.8798 V 6.8750 PRIOR
(CN) PBOC to inject combined CNY30B v CNY30B prior in 7-day, 14-day and 28-day reverse repos
(CN) China MoF sells 1-yr bonds at 2.73% v 2.71%e, bid-to-cover 1.67x and 10-yr bonds at 3.26% v 3.26%e, bid-to-cover 2.87x
(JP) BOJ To buy ¥320B (prior ¥400B) in 1-3yr JGBs
Asia equities/Notables/movers by sector
Consumer discretionary: 880.HK SJM Holdings -3.1% (FY16 result); HVN.AU Harvey Norman -5.8% (Macquarie cuts rating); PRR.AU Prima BioMed +9.1% (confirms granted US patent); 9603.JP HIS -3.5% (Q1 result); 1928.hk Sands China +4.2%, 1128.HK Wynn Macau +3.9% (Macau gaming rev)
Financials: 535.HK Gemdale Properties and Investment Corp +2.0% (profit alert); 27.HK Galaxy Entertainment Group +4.7% (FY16 result)
Industrials: 2343.HK Pacific Basin Shipping +7.1% (FY16 result)
Technology: ACX.AU Aconex +0.3% (signs pact); 6502.JP Toshiba Corporation +1.0% (seeks bids for chip unit)
Materials: DRM.AU Doray Minerals +1.5% (H1 result); RSG.AU Resolute Mining -4.0% (Baillieu Holst cuts rating)
Utilities: 6370.JP Kurita Water Industries +6.9% (first buyback in 2 years)
