Australian treasurer scoffs at RBA's neutral stance

Asian Market Update: Australian treasurer scoffs at RBA's neutral stance; Netflix sets the pace for beaten down momentum stocks

Economic Data

- (AU) AUSTRALIA FEB CONFERENCE BOARD LEADING INDEX M/M: 0.3% V 0.2% PRIOR

- (TW) TAIWAN MAR UNEMPLOYMENT RATE: 4.1% V 4.1%E

- (SL) SRI LANKA LEAVES REVERSE REPO RATE UNCHANGED AT 8.00% (EXPECTED); LEAVES REPURCHASE RATE UNCHANGED AT 6.50% (EXPECTED)

- (US) NORTH AMERICA MAR SEMI BOOK/BILL RATIO: 1.06 (4-month high) V 1.01 PRIOR

Market Snapshot (as of 03:30 GMT):

- Nikkei225 +0.3%, S&P/ASX +0.4%, Kospi +0.1%, Shanghai Composite -0.1%, Hang Seng -0.2%, Jun S&P500 flat at 1,864, Jun gold -0.1% at $1,287, May crude oil -0.1% at $104.24/brl

Highlights/Observations/Insights

- Asian indices are mixed with largely the same themes dictating sentiment as in overnight trade. Nikkei225 is outperforming, boosted by continued modest pressure on the Yen, while Shanghai Composite remains weighed down by speculation over renewed mainland IPOs. Note that the Shanghai index fell some 1.5% on Monday - the biggest decline in 6 weeks. S&P/ASX is also up a respectable 0.4% in afternoon trade, catching up after extended holiday weekend.

- Australia Treasurer Hockey expressed increasing dissatisfaction with the entrenched neutral stance by the RBA. Hockey noted that the upward pressure in AUD makes it harder to manage the economy, as the conservative coalition continues to struggle with measuring up to budget expectations. After falling below $0.87 at the start of the year, AUD/USD has been in a well-defined uptrend for 3 months, and analysts are beginning to speculate over a return to parity. Conditions will likely be much more volatile tomorrow when Australia puts out its quarterly CPI data and China releases HSBC flash manufacturing PMI.

- Japan was also proactive with an eye toward a generally stalled sell-off in its currency, promoting new members to Japan Pension Fund (GPIF) committee to pursue PM Abe's goal of a more aggressive investment strategy. Waseda University professor Yonezawa - known for arguing for a bolder approach to asset management - was reported to take the reins as the next head of investment committee, which would then presumably rotate some of its holdings away from fixed income and toward riskier equity/ETF assets, thus contributing to achieving the BOJ objective of 2% inflation.

- Only 24 hours after a high-profile speculation of M&A in the healthcare space (Pfizer/AstraZeneca), Bill Ackman of Pershing Square partnered with Valeant in pursuit of a bid for Allergan. Pershing put out a filing indicating it has built its stake to 9.7%, with an indicated cash component of the bid coming at $15B. Allergan responded later in the day, noting it is aware of recent filings but has had no discussions with either Valeant or Pershing Square with respect to this matter.

- Netflix is up nearly 7% in extended session after Q1 earnings. Revenues were in line and EPS was a 3-cent beat relative to estimates, however the company also posted strong adds in the US streaming segment and announced a price increase, having successfully tested for elasticity of its offerings in Ireland. The company is betting US consumers would not drop its service even if it costs $1-2 more per month, and that it can avoid a debacle the last time it announced an update to its price scheme. Shares traded up above $370 afterhours, which is up nearly 20% from a multi-month low seen only a week ago.

Fixed Income/Commodities/Currencies

- (CN) PBoC to drain CNY100B in 28-day repos (19th consecutive drain)

- SLV: iShares Silver Trust ETF daily holdings rise to 10,282 tonnes from 10,229 tonnes prior (highest level since Dec 10th)

- GLD: SPDR Gold Trust ETF daily holdings fall 3.0 tonnes to 792.1 tonnes (lowest since 790.5 on Jan 28th)

- USD/CNY: (CN) PBoC sets yuan mid point at 6.1610 v 6.1591 prior setting (weakest Yuan setting since Sept 10th)

US markets:

- AGN: Pershing Square (Bill Ackman) and Valeant said to be partnering to pursue a takeover of Allergan - financial press; Pershing Square confirms 9.7% stake in Allergan; confirms teamed with Valeant for intended offer for Allergan - filing; +17.4% afterhours

- NFLX: Reports Q1 $0.86 v $0.83e, R$1.27B v $1.27Be; NFLX: Exec: modest price increases will help improve content; will make sure to grandfather current customers "cleanly"; +6.8% afterhours

- RCII: Reports Q1 $0.57 (ex $0.03 charge) v $0.55e, R$834M v $845Me; +4.6% afterhours

- CE: Reports Q1 $1.33 v $1.21e, R$1.71B v $1.68Be; "Raises FY14 earnings outlook"; +3.6% afterhours

- FB: Credit Suisse Raised FB to Outperform from Neutral, price target: $87; +1.0% afterhours

- RMBS: Reports Q1 $0.17 v $0.02e, R$78.3M v $72.8Me; -7.7% afterhours

Notable movers by sector:

- Consumer Discretionary: Great Wall Motor 2333.HK -8.7% (Q1 results); Sichang Changhong Electric 600839.CN -6.5% (Q1 results); Citic Offshore Helicopter 000099.CN -3.8% (Q1 results)

- Energy: Anton Oilfield Services Group 3337.HK +4.8% (Q1 new orders); Inner Mongolia Pingzhuang Energy 000780.CN -3.6% (FY13 results); Oil Search Ltd OSH.AU +0.6% (Q1 results); Paladin Energy Ltd PDN.AU +1.1% (quarter op results); Tokyo Gas 9531.JP +1.2% (share repurchase plans)

- Industrials: Air China 753.HK -6.1% (profit warning)

- Healthcare: Tasly Pharmaceutical Group 600535.CN -5.6% (Q1 results)

- Utilities: TEPCO +3.8% 9501.JP (refinancing plans)