BOJ on hold, raises GDP forecasts and inflation outlook
Asia Mid-Session Market Update: Political showdown over Trump's immigration curbs keeping markets on edge; BOJ on hold, raises GDP forecasts and inflation outlook
US Session Highlights
(US) DEC PCE DEFLATOR M/M: 0.2% V 0.2%E; Y/Y: 1.6% V 1.7%E
(US) DEC PERSONAL INCOME: 0.3% V 0.4%E; PERSONAL SPENDING: 0.5% V 0.5%E
(US) DEC PCE CORE M/M: 0.1% V 0.1%E; Y/Y: 1.7% V 1.7%E
(US) JAN DALLAS FED MANUFACTURING ACTIVITY: 22.1 V 15.0E; new orders, capex and employment rise m/m
(US) Atlanta Fed forecasts initial Q1 GDP growth at 2.3% v Friday’s advanced government figure of 1.9%
VIX and Gold pop as investors look to offload risk
US markets on close: Dow -0.6%, S&P500 -0.6%, Nasdaq -0.8%
Best Sector in S&P500: Utilities
Worst Sector in S&P500: Basic Materials
Biggest gainers: AMG +4.8%, ADS +2.6%, WHR +2.4%, DG +2.4%, LM +2.3%
Biggest losers: VAR -12.5%, RIG -7.1%, CHK -6.7%, RRC -6.6%, DO -6.5%
At the close: VIX 11.9 (+1.3pts); Treasuries: 2-yr 1.20% (-1bps), 10-yr 2.48% (flat), 30-yr 3.08% (-1bps)
US movers afterhours
SANM: Reports Q1 $0.75 v $0.66e, R$1.72B v $1.68Be; Guides Q2 $0.67-0.72 v $0.64e, R$1.68-1.73B v $1.66Be; +10.9% afterhours
AEIS: Reports Q4 $1.06 v $0.81e, R$135.3M v $129Me- Guides Q1 $0.90-1.00 v $0.77e, R$141-151M v $125Me; Op margins 29-31%; +6.7% afterhours
WERN: Reports Q4 $0.30 v $0.26e, R$518.8M v $509Me; Guides initial FY17 net CAPEX expenditures "$225-275M" vs $430M y/y; +5.8% afterhours
IDTI: Reports Q3 $0.35 v $0.34e, R$176M v $178Me; Guides Q4 R$175M +/-$5M v $180Me; -4.4% afterhours
GBX: Files to sell $125M 2024 convertible unsecured notes; -4.6% afterhours
RMBS: Reports Q4 $0.16 v $0.16e, R$97.6M v $93.8Me; -5.4% afterhours
TEVA: Confirms District Court Decision in COPAXONE® 40 mg/mL Patent Trial; to appeal court decision; -8.9% afterhours
RRTS: Restates prior 2014-2016 period financial statements; -14.7% afterhours
Asia Key economic data:
(JP) BOJ LEAVES INTEREST RATE ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%, AS EXPECTED; RAISES OUTLOOK FOR PRICES
(JP) JAPAN DEC OVERALL HOUSEHOLD SPENDING Y/Y: -0.3% V -0.9%E
(JP) JAPAN DEC JOBLESS RATE: 3.1% V 3.1%E; Job to applicant: 1.43 v 1.42e
(JP) JAPAN DEC PRELIMINARY INDUSTRIAL PRODUCTION M/M: 0.5% V 0.3%E; Y/Y: 3.0% V 3.0%E
(JP) JAPAN DEC VEHICLE PRODUCTION Y/Y: 4.2% V 6.6% PRIOR
(AU) AUSTRALIA DEC PRIVATE SECTOR CREDIT M/M: 0.7% V 0.5%E; Y/Y: 5.6% V 5.4%E
(AU) AUSTRALIA DEC NAB BUSINESS CONFIDENCE: 6 V 6 PRIOR; CONDITIONS: 11 (6-month high) V 6 PRIOR
Asia Session Notable Observations, Speakers and Press
Tremors from US president Trump’s broad-sweeping executive order on immigration curbs from 7 Middle East countries continue to be felt in the markets, as safe-haven JPY and Gold remain bid while Asian equities and US futures are under pressure. Obama-appointed Acting Attorney General Sally Yates has instructed DoJ attorneys not to defend the EO – one which has already been criticized by lawmakers of both parties, foreign leaders, tech and financials (Goldman) CEOs, and State Sec nominee Tillerson. In response, Pres Trump has fired Yates, proclaiming her to be "weak on borders and very weak on illegal immigration". Knee-jerk market response to the firing was to the downside, as the contentious stance could further polarize the anti-Trump protests and complicate the confirmation process for AG-nominee Sessions.
Today’s Bank of Japan policy decision was accompanied by continued resilience of economic data, as jobless rate remained at a low 3.1%, household spending decline was lower than expected, and industrial output m/m beat consensus. As speculated BOJ raised its GDP target for FY16, FY17, and FY18 to 1.4%, 1.5%, and 1.1% respectively, while maintaining inflation expectations. In the accompanying statement, BOJ also maintained its policy of interest rates at -0.1% and JGB purchases at ¥80T, but also extended its low-rate lending facility for financials and growth industries by a year. Finally, BOJ’s Quarterly statement was notably more upbeat on inflation expectations, raising Outlook for prices to "increase from 0 to become slightly positive" vs prior "Y/Y CPI likely to be slightly negative or about 0%" thanks to diminished effect of low energy price.
Australia’s reporting season for output by mining and energy names was highlighted by Fortescue – company saw sequential rise in iron ore output and also affirmed FY17 shipments. CEO also noted improved demand in China steel sector, sending shares up by over 2%.
China
(CN) S&P: China overseas buyers will face tougher regulatory and political hurdles this year
Japan:
(JP) Japan Fin Min Aso: Critical to reach mutual agreement with US on FX; Expects economic recovery driven by domestic demand
(JP) Barclays: BOJ likely to maintain its bond-buying duration when it unveils its Feb plans at 17:00JST – press
Australia/New Zealand
(NZ) New Zealand RBNZ Gov Wheeler expected to make an announcement on his future "fairly soon" – financial press
Asian Equity Indices/Futures (23:30ET)
Nikkei -1.6%, Hang Seng closed, Shanghai Composite closed, ASX200 -0.6%, Kospi -0.4%
Equity Futures: S&P500 -0.3%; Nasdaq -0.3%; Dax -0.4%; FTSE100 -0.4%
FX ranges/Commodities/Fixed Income (23:30ET)
EUR 1.0690-1.0710; JPY 113.25-113.85; AUD 0.7550-0.7570; NZD 0.7270-0.7300
Apr Gold +0.6% at $1,204/oz; Mar Crude Oil -0.4% at $52.40/brl; Mar Copper -0.3% at $2.66/lb
(KR) South Korea sells KRW1.1T 3-month bonds, avg yield 1.37%
Asia equities/Notables/movers by sector
Consumer discretionary: NVT.AU Navitas Ltd -6.1% (H1 result); 6923.JP Stanley Electric Co +6.1% (9-month result); 9831.JP Yamada Denki -2.4% (9-month result speculation); 9022.JP Central Japan Railway Co -2.8% (9-month result)
Industrials: 4005.JP Sumitomo Chemical +4.5% (9-month result); 000270.KR Kia Motors Corporation -3.3% (US sales speculation); 7261.JP Mazda Motor Corp -3.5% (FY16/17 result speculation); 7270.JP Fuji Heavy Industries Ltd -3.3% (Jefferies cuts rating); 6305.JP Hitachi Construction Machinery -4.5% (9-month result); 9064.JP Yamato Holdings Co -5.4% (9-month result); 4005.JP Sumitomo Chemical Co +4.3% (9-month result)
Technology: 6758.JP Sony Corp -2.1% (share sales); 6502.JP Toshiba Corporation -2.7% (speculated to cut stake in Westinghouse); 6701.JP NEC Corp -16.1% (9-month result)
Materials: ERA.AU Energy Resources of Australia -4.9% (prelim FY16 result); FMG.AU Fortescue Metals Group +2.7% (Q2 result); ILU.AU Iluka Resources -2.4% (Q4 result)
Energy: TAP.AU Tap Oil -1.1% (Q1 result); 5020.JP JX Holdings -2.0% (earnings speculation); ORG.AU Origin Energy -2.1% (Q2 result)
Healthcare: 2413.JP M3 Inc -4.9% (Sony sells stake); VRT.AU Virtus Health -17.7% (H1 result)
Utilities: 9505.JP Hokuriku Electric Power -10.5% (9-month result)
