China inflation data diverge with a pop in wholesale and a slump in retail
US Session Highlights
Appaloosa’s David Tepper: market on multiple basis is kind of full, but seeing synchronized growth globally; short bonds, long US and European stocks; thinks Central Banks, ECB in particular, will have to play catch-up following French elections
(US) FEB ADP EMPLOYMENT CHANGE: +298K V +187KE; Jan revised higher, weather helped
(US) Q4 FINAL NONFARM PRODUCTIVITY: 1.3% V 1.5%E; LABOR COSTS: 1.7% V 1.6%E
(US) JAN WHOLESALE INVENTORIES (FINAL) M/M: -0.2% V -0.1%E; WHOLESALE TRADE SALES M/M: -0.1% V +0.5%E
(US) DOE CRUDE: +8.2M V +1.5ME; GASOLINE: -6.5M V -1.5ME; DISTILLATE: -2.7M V -1.5ME (largest weekly drop in gasoline stocks since 2011); total production rose by 56K bbls
US markets on close: Dow -0.3%, S&P500 -0.2%, Nasdaq +0.1%
Best Sector in S&P500: Healthcare
Worst Sector in S&P500: Energy
Biggest gainers: HRB +14.9%, TRIP +6.1%, PPG +6.0%, COH +33%, M +3.1%
Biggest losers: MRO -8.7%, MUR -6.7%, DVN -6.5%, CHK -6.1%, NFX -5.4%
At the close: VIX 11.9 (+0.4pts); Treasuries: 2-yr 1.37% (+4bps), 10-yr 2.55% (+4bps), 30-yr 3.15% (+4bps)
US movers afterhours
APRI: Announces sale of Ex-U.S. Vitaros Assets and Rights to Ferring Pharmaceuticals; +32.3% afterhours
VVUS: Reports Q4 $0.54 v -$0.09e, R$81.8M v $15.3M y/y; +26.9% afterhours
ELF: Reports Q4 $0.19 v $0.13e, R$76.4M v $74.4Me- Guides initial FY17 $0.40-0.43 v $0.36e, R$285-295M v $281Me; Adj EBITDA $61-64M; +16.2% afterhours
SMTC: Reports Q4 $0.37 v $0.35e, R$140M v $138Me; Guides Q1 $0.39-0.43 v $0.37e, Rev $138-146M v $141Me, gross margin 58.6-59.7%, capex $10.0M; +7.1% afterhours
TGTX: Announces Proposed Public Offering of Common Stock for an indeterminate amount through Jefferies; -3.4% afterhours
CWH: Reports Q4 $0.14 adj v $0.09e, R$670M v $676Me; -4.8% afterhours
RATE: Reports Q4 $0.16 v $0.18e, R$113.6M v $122Me; Guides Q1 adj EBITDA $26-28M, R$115-118M v $113Me; -10.5% afterhours
TLRD: Reports Q4 -$0.19 v -$0.11e, R$793M v $824Me; Guides FY17 $1.47-1.75 v $2.12e; -29.2% afterhours
Politics
(US) Former US Ambassador to China Jon Huntsman said to accept Pres Trump’s offer to serve as Ambassador to Russia – press
(US) Pres Trump said to consider sending up to 1K troops to Kuwait to serve as reserve force in a battle against ISIS – press
Asia Key economic data:
(CN) CHINA FEB CPI M/M: -0.2% (first decline in 4 months, biggest decline in 9 months) V +1.0% PRIOR; Y/Y: 0.8% (2-year low) V 1.7%E
(CN) CHINA FEB PPI Y/Y: 7.8% V 7.7%E; 6th consecutive and biggest increase since Sept 2008
(JP) JAPAN DEC LABOR CASH EARNINGS Y/Y: 0.5% V 0.4%E ; REAL EARNINGS (EX-INFLATION) Y/Y: 0.0% V +0.1% PRIOR
(JP) JAPAN FEB M2 MONEY STOCK Y/Y: 4.2% (highest since Aug 2015) V 4.2%E; M3 MONEY STOCK Y/Y: 3.6% V 3.6%E
Asia Session Notable Observations, Speakers and Press
Asia indices are largely lower, tracking the 3rd consecutive down day in the S&P500. Nikkei225 is among the few gainers, helped by weaker JPY in the wake of a blowout ADP jobs report that sent US Treasury yields and USD higher across the board. Benchmark 10-year yield rose as high as 2.58% – the highest level of 2017 – while Fed Funds futures now price in over 40% chance of 2 rate hikes in the first half of the year.
In FX, USD/JPY approached 114.60 in Asia session, just shy of US hours high, while AUD/USD fell to 7-week lows near 0.75. NZD/USD was also sold off on USD strength, falling below $0.79 for the first time since early Jan.
Energy sector was the worst performer on the S&P500 for the 2nd straight day, remaining in the doldrums in the wake of the latest inventories data that showed little evidence of production curbs – DOE increase was the 9th straight build and also the highest in 3 weeks. Weakness in the energy space in Australia and Hong Kong reflected falling oil prices.
China inflation data was the highlight of the economic calendar for the session with what is now a trifecta of surprises, following unexpected trade deficit overnight and return of FX reserves about $3T earlier. Feb PPI rose for the 6th straight month and to its highest level since Sept 2008 thanks to recent jump in commodity prices. Conversely, CPI fell m/m for the first time in 4 months, and y/y figure hit a 2-year low after a near-3-yr high last month. Food component shrank sharply, down 4.3% after rising 2.7% previously, as NBS noted that the number of tourists declined last month with seasonality around the timing of Lunar New Year continuing to play a part in data distortions. Also of note, PBoC skipped its daily open market operations in reverse repos, claiming that liquidity in the banking system basically stable while also setting CNY weaker for the 3rd straight day.
In Japan, Toshiba was hit especially hard on press speculation of expanded loss related to nuclear ops as well as rising challenges of meeting the deadline for releasing already delayed Q3 earnings report.
China
(CN) China listed banks NPL ratio may reach 1.8% in 2017 v 1.7% prior – Chinese press
(CN) ANZ: Expect China to move back to trade surplus in the coming months – Chinese press
(CN) China regulators said to have ordered banks to inspect their internal controls – Chinese press
Japan
(JP) Japan Fin Min Aso: Keeping FY20 primary budget surplus a goal
(JP) Japan foreign min Kishida: North Korea to be important theme of US State Sec Tillerson’s visit; Aware that all options are on the table – press
Australia/New Zealand
(AU) Australia PM Turnbull: Political friction causing a risk to AAA rating: Australia has a credible path to a surplus to help maintain its AAA rating – AFR
(AU) Australia Newcastle Feb coal exports -12.2% m/m at 11.6M tons – financial press
(NZ) BNZ lowers New Zealand Q4 GDP forecast to 0.4% from 0.6% following weak manufacturing report – press
Korea
(KR) Economic Research Institute of Industrial Bank of Korea: Economic retaliation by China to Korea’s THAAD system may cost Korea GDP about 1.1pct – Korean press
(KR) South Korea Finance Ministry monthly report: Export recovery to continue; Domestic demand remains weak
Asian Equity Indices/Futures (00:00ET)
Nikkei +0.3%, Hang Seng -1.0%, Shanghai Composite -0.9%, ASX200 -0.3%, Kospi -0.1%
Equity Futures: S&P500 flat; Nasdaq flat; Dax flat; FTSE100 flat
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0530-1.0547; JPY 114.30-114.60; AUD 0.7510-0.7535; NZD 0.6895-0.6915
Apr Gold -0.4% at $1,205/oz; Apr Crude Oil +0.6% at $50.59/brl; May Copper flat at $2.59/lb
SLV: iShares Silver Trust ETF daily holdings fall to 10,303 tonnes from 10,350 tonnes prior; 11-month low
(CN) PBoC skips open market operations for today’s session v injecting CNY30B yesterday
(CN) PBOC SETS YUAN MID POINT AT 6.9125 V 6.9032 PRIOR; 3rd straight weaker setting; weakest CNY setting since Jan 12th
(JP) Japan MoF sells ¥2.21T in 0.1% 5-year JGB bonds; avg yield -0.118% v -0.089% prior; bid-to-cover 2.86x (lowest since Oct 2015) v 4.26x prior
(AU) Australia 10-yr govt bond yield rises to 2.84%; 15-month high
Asia equities/Notables/movers by sector
Consumer discretionary: 419.HK Huayi Tencent Entertainment Company -4.8% (FY16 guidance); TTS.AU Tatts Group +2.6% (ACCC comments); NEC.AU Nine Entertainment +2.7% (Macquarie raises rating)
Financials: 832.HK Central China Real Estate -4.8% (profit warning)
Industrials: 3808.HK Sinotruk -2.0% (FY16 guidance); 9064.JP Yamato Holdings +1.8% (Nomura raises rating); 6472.JP NTN Corp +2.4% (Mizuho raises rating)
Technology: 6502.JP Toshiba Corporation -6.9% (Japan press speculates co. having difficulty in preparing Q3 earnings before deadline and nuclear writedown may rise); YPB.AU YPB Group +6.5% (receives order); QMS.AU QMS Media +2.2% (APN shows interest)
Materials: 2362.HK Jinchuan Group International Resources -1.1% (guidance); WHC.AU Whitehaven -4.4% (Spot coking coal firms on China buying before contract talks)
Energy: 931.HK China LNG Group -6.0% (profit warning); 883.HK CNOOC -2.1%, WPL.AU Woodside Petroleum -1.2%, BPT.AU Beach Energy -1.8%, STO.AU Santos -3.3% (oil falls over 5% in US session); 5017.JP Fuji Oil Co -2.2% (SMBC cuts rating)
Utilities: 6841.JP Yokogawa Electric Corp -2.8% (Credit Suisse cuts rating)
