Shanghai Composite slumps as PBoC extends the streak of zero liquidity injection
US Session Highlights
(US) MBA MORTGAGE APPLICATIONS W/E MAR 24TH: -0.8% V -2.7% PRIOR
(US) Fed’s Evans (dove, voter): there has been good progress towards Fed goals; supports one or two more rate hikes this year
(US) FEB PENDING HOME SALES M/M: 5.5% V 2.5%E; Y/Y: -2.4% V +2.7% PRIOR
(US) DOE CRUDE: +0.9M V +1ME; GASOLINE: -3.7M V -2ME; DISTILLATE: -2.5M V -1ME
US markets on close: Dow -0.2%, S&P500 +0.1%, Nasdaq +0.4%
Best Sector in S&P500: Energy
Worst Sector in S&P500: Financials
Biggest gainers: VRTX +20.5%, CHK +7.8%, JWN +5.4%, HES +4.9%, URBN +4.5%
Biggest losers: FFIV -3.4%, MYL -3.3%, ARNC -3.1%, PAYX -2.5%, EVHC -2.4%
At the close: VIX 11.4 (-0.1 pts); Treasuries: 2-yr 1.28% (-2bps), 10-yr 2.39% (-2bps), 30-yr 2.99% (-2bps)
US movers afterhours
EXTR: To acquire Brocade’s Data Center Networking business for $55M; +13% afterhours
COP: Cenovus agrees to acquire ConocoPhillips’ 50% interest in the FCCL Partnership for $17.7B in cash and shares; +6% afterhours
PRGS: Reports Q1 $0.34 v $0.28e, R$91.0M v $88.3Me; Guides Q2 $0.35-0.37 v $0.38e, $89-92M v $92Me; +4.7% afterhours
CVE: Agrees to acquire COP interst in FCCL Partnership; announces $3.0B bought-deal offering of common shares; selling 187.5M shares at $16/shr through RBC and JPM (20% of shares outstanding); -8.0% afterhours
LULU: Reports Q4 $1.00 (adj) v $1.01e, R$790.0M v $785Me; Guides Q1 $0.25-0.27 v $0.39e, R$510-515M v $555Me; -17.5% afterhours
Politics
(CN) China Premier Li Keqiang expected to win another term as Premier – financial press
(US) Federal Judge in Hawaii indefinitely extends court order blocking Trump administration’s revised travel ban – press
(US) House speaker Ryan: Does not want Pres Trump to work with Democrats on healthcare reform – CBS interview
(US) Interviews with GOP’s Freedom Caucus members said to reveal division on potential tax reform measures – press
(US) City of Seattle files lawsuit against President Trump for his sanctuary cities order
(US) Two Republican House members: House GOP is considering another try on Obamacare repeal next week – press
Asia Key economic data:
(AU) AUSTRALIA FEB HIA NEW HOME SALES M/M: +0.2% V -2.2% PRIOR
(AU) AUSTRALIA DEC-FEB SKILLED VACANCIES Q/Q: 1.8% V 2.5% PRIOR
Asia Session Notable Observations, Speakers and Press
Asian equity markets are down modestly, tracking a lackluster session on Wall St where Energy sector rallied on a jump in oil prices while Financials lagged as US interest rates turned lower. Australia continued to outperform, helped by strength in iron ore boosting miners, with ASX200 index adding to near-2 year gains as it approaches the psychological multi-year high level of 6,000. Shanghai Composite was one of the worst performers, as investors ponder PBOC support after the central bank skipped its reverse repo operation injection for the 5th straight day. Separately, a researcher with CASS forecast China Q1 GDP at a solid 6.8% and H1 GDP slowing to just 6.7% – well above the 6.5% official 2017 target.
USD majors traded mostly in narrow ranges with an upside bias for the greenback. USD/JPY hit session highs of 111.40 after a press report citing US Transportation Sec Chao that Pres Trump will announce a $1T infrastructure package later this year that will run for 10 years and cover energy, water, and potentially broadband and veteran hospitals. AUD/USD brifly rose toward 0.7680 on stronger HIA New Home Sales growth, though the pair was confined to a 20-pip range. GBP/USD consolidated its Brexit-commencing overnight slide, holding above $1.24.
Australia’s Bank of Queensland put out its H1 results that showed a slight decline in Net profit and Revenue, but shares rose over 1% on positive H2 outlook. Toshiba spiked up over 3% after reports of Westinghouse coming to terms with bankruptcy proceedings. Samsung Electronics has launched its Galaxay S8 smartphone featuring smaller battery and a high-end AI system, though share gains were contained by political risk in the country as court hearings on former Pres Park arrest warrant began this morning.
China
(CN) China CISA’s Vice-Chair Li: China to cut additional 140Mt in steel capacity; sees 2017 steel demand -1.9% y/y
(CN) China Stats Bureau: Service sector employed 43.5% of China’s workforce in 2016, up from 36% in 2012 – Chinese press
(CN) US Treasury said to prepare to review China’s market-economy status; expected to keep large tariffs on Chinese goods – financial press
(CN) China Academy of Social Sciences (CASS) sees China Q1 GDP at 6.8%; H1 GDP at ~6.7% – Chinese press
(CN) Former Treasury Sec Lew: China is not intervening in FX to gain trade advantage, but doing the opposite, intervening at its own expense to protect its currency – press
Japan
(JP) Bank of Japan (BOJ) Deputy Gov Iwata: Japan’s economic recovery gaining momentum reflecting improvements in overseas economies
(JP) Japan Chief Cabinet Sec Suga: Created a govt task force to minimize negative impact of Brexit; to be led by Hagiuda
(JP) BOJ’s 2% inflation target is in jeopardy due to the recent JPY strength – Nikkei
Australia/New Zealand
(AU) Morgans equity strategist: We see higher global bond yields as a tipping point for equity markets toward 2017-end – SMH
(NZ) Westpac economist: See some upside risk to its FY16/17 milk price forecast of NZ$5.90/kg; See FY17/18 price at NZ$6.10/kg
Korea
(KR) South Korea Court to decide on former Pres Park’s arrest warrant; Hearing taking place this morning
(KR) South Korea Fin Min Yoo: Will respond to economic risks with active policy – speaking at parliament
(KR) Bank of Korea (BOK) report to Parliament: Raises ratio of USD reserves to 70.3% in 2016 from 66.6% in 2015 (highest since started publishing data in 2008)
(KR) South Korea and US seeking to limit oil supply to North Korea – Korean press
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.3%, Hang Seng -0.4%, Shanghai Composite -1.1%, ASX200 +0.3%, Kospi -0.3%
Equity Futures: S&P500 +0.1%; Nasdaq +0.1%; Dax +0.2%; FTSE100 flat
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0740-1.0770; JPY 111.00-111.40; AUD 0.7655-0.7675; NZD 0.7020-0.7045
Apr Gold -0.4% at $1,249/oz; May Crude Oil +0.1% at $49.57/brl; May Copper -0.3% at $2.67/lb
iShares Silver Trust ETF daily holdings fall to 10,292 tonnes from 10,337 tonnes prior; 2nd straight decline
(CN) PBoC skips open market operations for 5th straight session; Said to drain CNY40B v CNY70B prior
(CN) PBOC SETS YUAN MID POINT AT 6.8889 V 6.8915 PRIOR; firmer setting after 2 consecutive weaker fixes
(JP) Japan MoF sells ¥1.99T v ¥2.2T indicated in 2-yr 0.1% JGBs; Avg yield: -0.206% v -0.252% prior; bid to cover: 3.82x v 3.93x prior
(JP) Japan investors sold net ¥152B in foreign bonds v bought ¥151B in prior week; Foreign investors sold net ¥754B in Japan stocks v sold ¥585B in prior week
Asia equities/Notables/movers by sector
Consumer discretionary: 494.HK Li & Fung -9.1% (FY16 result); 525.HK Guangshen Railway Co -4.4% (FY16 result); DLX.AU Dulux Group -3.7% (UBS downgrades); NVT.AU Navitas +3.8% (trading update); TGA.AU Thorn Group -3.0% (potential class action)
Consumer staples: 1230.HK Yashili International Holdings +0.7%, 2319.HK Mengniu Dairy +1.5% (FY16 result), BOQ.AU Bank of Queensland +1.4% (H1 result)
Financials: 813.HK Shimao Property -1.6%
Industrials: 338.HK Weichai Power -1.1% (FY16 result)
Technology: 451.HK GCL New Energy -2.3% (FY16 result); 005930.KR Samsung Electronics +0.4% (Launches the Galaxy S8 smartphone); 6502.JP Toshiba +3.5% (Westinghouse files for bankruptcy)
Materials: 2009.HK BBMG Corp -4.4% (FY16 result); WAF.AU West African Resources +7.1% (drilling result); ILU.AU Iluka Resources +1.9%, FMG.AU Fortescue +0.8% (iron ore price rise)
Energy: BPT.AU Beach Energy +3.2%, WPL.AU Woodside Petroleum +1.5% (oil rises)
Healthcare: 4502.JP Takeda Pharmaceutical +3.0% (Dengue Vaccine Triggers Immune Responses in Phase 2 Trial)
