China inflation rises to new multi-month highs
Asia Mid-Session Market Update: China inflation rises to new multi-month highs; Risk trade dented by NSA Flynn resignation
US Session Highlights
(US) NY Fed Jan Survey of Consumer Expectations: inflation expectations highest since summer 2015; household spending expectations lowest since Jan 2016 – OPEC Sec Gen Barkindo: prelim numbers show a very high level of compliance with supply cut agreement – press
(US) Pres Trump: US will be seeking to “tweak” the terms of its trade relationship with Canada.
US markets on close: Dow +0.7%, S&P500 +0.5%, Nasdaq +0.5%
Best Sector in S&P500: Financials
Worst Sector in S&P500: Telecom
Biggest gainers: GT +5.9%, REGN +4.4%, NUE +4.3%, CCI +3.0%, STX +2.9%
Biggest losers: NVDA -4.6%, ATVI -3.2%, GPS -3.0%, EQT -2.8%, EXPE -2.6%
At the close: VIX 11.1 (+0.2pts); Treasuries: 2-yr 1.21% (flat), 10-yr 2.43% (+3bps), 30-yr 3.03% (+2bps)
US movers afterhours
GUID: Reports Q4 $0.09 v $0.06e, R$29.5M v $28.7Me; Guides initial FY17 $0.28-0.36 to $ v $0.29e, R$112-118M v $115Me; +3.9% afterhours
CSOD: Reports Q4 $0.00 v -$0.03e, R$109.9M v $109Me; Guides Q1 R$109-111M v $112Me; +3.9% afterhours
BKD: Reports Q4 -$1.45 (unclear if comp) v $0.47e, R$1.21B v $1.22Be (2 est); -5.3% afterhours
HIBB: Guides Q4 $0.53-0.55 v $0.68e, R$247M v $255Me; SSS – 2.2%; -5.4% afterhours
AMKR: Reports Q4 $0.42 v $0.27e, R$1.02B v $1.03Be (1 est)- Guides Q1 -$0.11 to 0.05 v $0.11e, R$860-940M v $970Me, gross margin 13-17%; -10.9% afterhours
Politics
(US) President Trump’s National Security Adviser Michael Flynn resigned; Keith Kellogg is now acting National Security Adviser – financial press
(US) Federal judge in Virginia also rules against upholding President Trump’s executive order on immigration – press
(US) Steven Mnuchin confirmed by US Senate as the next US Treasury Secretary in 53-47 vote
Asia Key economic data:
(CN) CHINA JAN CPI M/M: 1.0% (11-month high) V 0.2% PRIOR; Y/Y: 2.5% (32-month high) V 2.4%E
(CN) CHINA JAN PPI Y/Y: 6.9% V 6.5%E (5th straight increase and highest since Aug 2011)
(JP) JAPAN DEC FINAL INDUSTRIAL PRODUCTION M/M: 0.7% V 0.5% PRELIM; Y/Y: 3.2% V 3.0% PRELIM
(AU) AUSTRALIA JAN NAB BUSINESS CONFIDENCE: 10 (19-month high) V 6 PRIOR; CONDITIONS: 16 (9-year high) V 10 PRIOR
(NZ) New Zealand Jan Food Prices M/M: +2.8% v -0.8% prior (First rise in 5 months)
(NZ) New Zealand Jan REINZ median home price y/y: +9.4% v +11% prior; Home sales y/y: -14.7% v -10.7% prior
Asia Session Notable Observations, Speakers and Press
‘Re-flation Trump trade’ sent US equities to record highs on Monday, but risk is on the back foot in the latter part of the Asia session. After days of DOJ investigations, National Security Advisor Michael Flynn has submitted his resignation after acknowledging he gave ‘incomplete information regarding phone calls with the Russian ambassador’ about US sanctions prior to inauguration, potentially sending the US administration into damage control mode. White House press Sec Spicer will hold a press conference on Tuesday and may be faced with questions about the timing when the cabinet became aware of compromising intel on Flynn, particularly in light of Pres Trump stating Flynn had his confidence as recently as Monday. S&P futures are down slightly, Gold is up $5 from the lows above $1,330, and USD/JPY is off by 40pips below 113.30.
China released its January CPI and PPI numbers that topped expectations while hitting multi-year highs. PPI remained especially notable as it rose for the 4th month and reached the highs not seen since 2011. CPI increase was more heavily skewed to food inflation (2.7% v 2.4% prior) as non-food component slowed to 0.7% v 2.0% prior. China Stats Bureau noted the CPI was skewed by the Lunar New Year effect, since it came in January this year as opposed to February of last year. Also of note in China, US financial press report indicating US Commerce Sec may not choose to name the country a currency manipulator, but rather designate the practice of currency manipulation as an unfair subsidy when employed by any state.
AUD benefited from strong NAB Business Conditions reaching multi-year highs. NAB economist noted the employment index improvement was expecially notable since it had previously ‘stubbornly muted’. Comments from UBS economist said the NAB data puts RBA into ‘rate hike territory’.
Toshiba remains in focus on Japan. After confirming several recent press reports estimating rougly ¥700B charge related to Westinghouse writedown, the company has once again postponed its earnings release as it continues to work with its auditor on the review. A Nikkei report earlier today also noted the company may not be able to continue as a ‘going concern’, potentially requiring bankruptcy proceedings and/or state bailout.
China:
(CN) US said to consider new currency strategy to pressure China from undervaluing currency to boost exports – financial press
(CN) China NBS: Jan CPI boosted due to Lunar New Year factors
(CN) China National Development Reform Commission (NDRC): Expect to invest more than CNY800B in railway improvements in 2017 v CNY801.5B in 2016 – Chinese press
Japan:
(JP) BOJ Gov Kuroda: Will not alter monetary policy just because global yields are rising
(JP) Japan Fin Min Aso: PM Abe has proposed an economic dialogue to US president Trump – press
Australia/New Zealand:
(AU) UBS economist: Latest NAB Business confidence data suggests conditions have moved into ‘rate hike territory’ – AFR
(NZ) Westpac: New Zealand housing prices showed marked slowdown in Jan – press
(NZ) New Zealand Jan REINZ median home price y/y: +9.4% v +11% prior; Home sales y/y: -14.7% v -10.7% prior
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.6%, Hang Seng flat, Shanghai Composite -0.2%, ASX200 -0.1%, Kospi -0.3%
Equity Futures: S&P500 -0.1%; Nasdaq -0.1%; Dax -0.1%; FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0590-1.0625; JPY 113.25-113.80; AUD 0.7635-0.7690; NZD 0.7165-0.7195
Apr Gold +0.3% at $1,230/oz; Mar Crude Oil +0.3% at $53.06/brl; Mar Copper +0.3% at $2.79/lb
SPDR Gold Trust ETF daily holdings rise 4.2 tonnes to 840.9 tonnes; 8th consecutive increase; Highest since Dec 15th
(CN) PBOC SETS YUAN MID POINT AT 6.8806 V 6.8898 PRIOR
(CN) PBOC to inject combined CNY130B v CNY100B on Feb 2nd in 7-day, 14-day and 28-day reverse repos
(JP) Japan MoF sells ¥2.17T in 0.1% 5-year JGB bonds; avg yield -0.089% v -0.116% prior; bid-to-cover 4.26x v 3.66x prior
(AU) Australia MoF (AOFM) sells A$150M in 1.25% 2022 Bonds; avg yield: 4785%; bid-to-cover: 4.83x
Asia equities/Notables/movers by sector
Consumer discretionary: 1958.HK BAIC Motor Corp Ltd +2.0% (guidance); 3389.HK Hengdeli Holdings +1.0% (guidance); TWE.AU Treasury Wine -4.7% (H1 result); DMP.AU Domino ’ s Pizza +2.5% ; COH.AU Cochlear -3.7% (H1 result); NCK.AU Nick Scali +10.4% (H1 result); JBH.AU JB Hi-Fi -3.1%
(Credit Suisse cuts rating); 7936.JP Asics Corp -10.3%, 6098.JP Recruit Holdings +1.4% (9-month result); 9041.JP Kintetsu Corp -1.2%, 2501.JP Sapporo Holdings -6.0% (9-month result); 2587.JP Suntory Beverage & Food -2.9%, 2503.JP Kirin Holdings Co -3.5% (FY16/17 result)
Financials: 1109.HK China Resources Land +1.2% (Jan result); CGF.AU Challenger Financial Services Group -2.4% (H1 result); OCBC.SG Oversea-Chinese Banking Corp -3.4% (Q4 result); NOBL.SG Noble Group +9.1% (potential strategic investment)
Industrials: RIC.AU Ridley Corp -3.3% (H1 result); AZJ.AU Aurizon Holdings -3.4% (Macquarie cuts rating); 6479.JP Minebea +17.2% (9-month result)
Technology: 7731.JP Nikon Corp -13.9% (9-month result); 6728.JP Ulvac Inc +17.3% (Nomura raises rating); 6773.JP Pioneer Corp -6.6% (9-month result); 6502.JP Toshiba Corporation
7.8% (May issue first-ever risk warning; May delay earnings, in disagreement with auditors)
Materials: 1090.HK DaMing International Holdings +3.2% (guidance); 5706.JP Mitsui Mining & Smelting +13.4% (9-month result); 486.HK RUSAL -4.4% (Onexim sold stake)
