Reflation rally pauses as safe haven flows recover
US Session Highlights
(US) JAN HOUSING STARTS: 1.25M V 1.23ME; BUILDING PERMITS: 1.29M V 1.23ME
(US) FEB PHILADELPHIA FED BUSINESS OUTLOOK: 43.3 V 18.0E (highest since Jan 1984); New Orders: +38.0 (highest since Feb 2000) v +26.0 prior (44% of firms reported increases, 6% reported decreases)
(US) Fed’s Lockhart (moderate, non-voter): we are moving towards the Fed’s inflation target sooner than thought – press interview
(US) Atlanta Fed raises Q1 GDP forecast to 2.4% from 2.2% on 2/15
US markets on close: Dow flat, S&P500 -0.1%, Nasdaq -0.1%
Best Sector in S&P500: Utilities
Worst Sector in S&P500: Energy
Biggest gainers: SRCL +7.7%, NTAP +4.2%, IFF +4.1%, ETR +2.8%, DUK +2.8%
Biggest losers: TRIP -11.0%, COTY -5.5%, RRC -5.3%, MDLZ -4.8%, SWN -4.7%
At the close: VIX 11.8 (-0.2pts); Treasuries: 2-yr 1.22% (-3bps), 10-yr 2.45% (-5bps), 30-yr 3.05% (-4bps)
US movers afterhours
TRUE: Reports Q4 -$0.01 v -$0.05e, R$74.1M v $71.1Me; +14.0% afterhours
COHU: Reports Q4 $0.24 v $0.09e, R$70.7M v $65.1Me; +9.6% afterhours
ANET: Reports Q4 $1.04 v $0.82e, R$328.0M v $316Me; +8.8% afterhours
TMST: Reports Q4 -$1.52 v -$0.46e, R$215M v $213Me; +8.6% afterhours
CYTK: Reports Q4 $0.18 v -$0.27e, R$33.1M v $14.1Me; +7.1% afterhours
CGNX: Reports Q4 $0.43 v $0.30e, R$129.3M v $115Me; +5.7% afterhours
TTD: Reports Q4 $0.33 v $0.21e, R$72.4M v $62.2Me; +3.4% afterhours
BKD: Blackstone interest in Brookdale said to be fading; Reportedly Ventas now in talks to buy all or part of Brookdale – press; -3.2% afterhours
FLS: Reports Q4 $0.72 v $0.65e, R$1.07B v $1.07Be; -4.2% afterhours
PI: Reports Q4 $0.11 v $0.09e, R$33.7M v $33.0Me; SVP sales to leave; -6.0% afterhours
NUS: Reports Q4 $0.69 v $0.80e, R$531M v $552Me; Announces CFO transition, raises dividend 1.4% to $0.36/shr (implied yield 2.6%); -7.5% afterhours
Politics
(US) President Trump’s choice as replacement for National Security Adviser, Robert Harward, has turned down the offer – FT
(US) President Trump nominates Alexander Acosta as Labor Secretary – press
Asia Key economic data:
(NZ) NEW ZEALAND Q4 RETAIL SALES (EX-INFLATION): 0.8% v 1.0%E (6-quarter low)
(NZ) NEW ZEALAND JAN BUSINESS MANUFACTURING PMI: 51.6 V 54.2 PRIOR (2-year low)
Asia Session Notable Observations, Speakers and Press
Asian equity markets have retreated modestly going into the weekend after solid gains for much of the week, tracking less upbeat sentiment on Wall St. US stocks paused after the biggest weekly rally in 3 years, as Treasuries rose for the first time in 6 days, safehaven Utilities were favored, and high-beta energy names came in. With US earnings season dwindling and Fed chair Yellen effectively signalling March meeting being live for a rate hike, investors are looking for more concrete fiscal policy action from the ambitious White House agenda, even as the President remains on the defensive about his ties to Russia and cabinet appointments.
FX majors were in narrow ranges in the absence of meaningful data; NZD was somewhat more volatile early after a miss in Q4 retail sales and a 2-year low in PMI, though analysts still see the pair driven by fundamentals of the US given RBNZ’s entrenched "very neutral" policy stance. NZ PM English also held talks with his Australian counterpart, discussing possibility of a regional free trade agreement.
Corporate news front was somewhat more active. Australia earnings season saw a positive update from ANZ posting high-single-digit gains in profit and revenue, while expectations for bad debts were more positive. Santos also beat on earnings, though gains are contained by the headwinds in the energy sector. South Korea’s Samsung Electronics traded lower after news of arrest of its vice chairman in a bribery case. Japan’s Toshiba also remains under heavy pressure, falling another 10% to 1-year lows below ¥200 as management works to rein in costs with freeze on wage hikes, bonuses, overtime, and travel expenses.
China:
(CN) China regulators said to consider tightening measures targeting IPO fraud – Chinese press
(CN) China interbank liquidity said to remain in a tight balance amid keeping monetary policy on a ‘neutral and prudent’ course – Chinese press
Japan:
(JP) Japan Fin Min Aso: hasn’t decided on specific contents of US-Japan economic talks
Australia/New Zealand:
(AU) Fitch: Australia property market to rise 3-5% in 2017
(AU) Australia PM Turnbull: Agreee with NZ PM English to seek TPP trade agreement without US participation – press
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.5%, Hang Seng -0.4%, Shanghai Composite -0.5%, ASX200 -0.2%, Kospi -0.1%
Equity Futures: S&P500 flat; Nasdaq flat; Dax -0.1%; FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0660-1.0675; JPY 113.15-113.50; AUD 0.7685-0.7710; NZD 0.7200-0.7220
Apr Gold -0.2% at $1,239/oz; Mar Crude Oil +0.1% at $53.43/brl; Mar Copper +0.3% at $2.73/lb
(CN) PBOC SETS YUAN MID POINT AT 6.8456 V 6.8629 PRIOR; Strongest Yuan setting since Jan 24th; 4th consecutive firmer setting
(CN) PBOC to inject combined CNY150B v CNY250B prior in 7-day, 14-day and 28-day reverse repos
(CN) China MOF sells 30-yr bond, avg yield 3.77%; sells 91-day bonds, avg yield 2.555%
(AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 2.116%; bid-to-cover: 5.86x
Asia equities / Notables / movers by sector
Consumer discretionary: 2282.HKMGM China -3.4% (H1 result); MTR.AU Mantra Group -5.6% (H1 result); 6808.HK Sun Art Retail Group +6.6% (Alibaba and Tecent show interest); SEK.AU Seek +6.1% (in talks to buy Zhaopin)
Financials: 6837.HK Haitong Securities +1.2%, 6030.HK Citic Securities +2.1% (China to ease curbs on stock index futures trading); LNK.AU Link Administration +6.0% (H1 result); MPL.AU Medibank -3.7% (guidance);23.HK Bank of East Asia -1.7% (FY16 result); ANZ.AU ANZ Bank +1.7% (Q1 result); ASX.AU Australian Stock Exchange -0.7% (H1 result)
Industrial: STE.SG Singapore Technologies Eng +4.7% (Q4 result); 1044.HK Hengan International +4.6% (Morgan Stanley raises rating)
Technology: 005930.KR Samsung Electronics -1.5% (vice Chairman under arrest); 6753.JP Sharp Corp +2.8% (adjusts guidance); 4704.JP Trend Micro Inc +12.2% (FY16 result); RHP.AU Rhipe Limited -16.7% (H1 result); 992.HK Lenovo -2.7% (Bank of China cuts rating)
Materials: RSG.AU Resolute Mining +4.6%, EVN.AU Evolution Mining +2.8%; SAR.AU Saracen Mineral +1.6% (gold bulls); WHC.AU Whitehaven Coal -2.0% (H1 result); 028260.KRSamsung C&T Corp +2.8%
Energy: 1898.HK China Coal Energy -2.8% (Jan result); STO.AU Santos +0.3% (FY16 result); SEA.AU Sundance Energy Australia -2.1% (no further steps to raise funds)
Healthcare: SIP.AU Sigma Pharmaceuticals -4.0% (guidance)
