China CPI rises on food costs

Asian Market Update: China CPI rises on food costs; Soft Australia employment renews the case for more easing

Economic Data

- (CN) CHINA JAN CPI Y/Y: 1.8% V 1.9%E; 5-month high

- (CN) CHINA JAN PPI Y/Y: -5.3% V -5.4%E; 47th straight month of decline; smallest decline in 7 months

- (JP) JAPAN JAN TOTAL MERCHANDISE TRADE BALANCE: -¥646B V - ¥658BE; ADJUSTED TRADE BALANCE: ¥119.4B V ¥61.6BE

- (AU) AUSTRALIA JAN EMPLOYMENT CHANGE: -7.9K (biggest decline in 9 months) V +13.0KE; UNEMPLOYMENT RATE: 6.0% (4-month high) V 5.8%E

- (NZ) NEW ZEALAND FEB ANZ CONSUMER CONFIDENCE INDEX: 119.7 V 121.4 PRIOR; M/M: -1.4% V +2.3% PRIOR

- (NZ) NEW ZEALAND Q4 PPI INPUT Q/Q: -1.2% V +1.6% PRIOR; PPI OUTPUT Q/Q: -0.8% V +1.3% PRIOR

- (NZ) NEW ZEALAND JAN ANZ JOB ADVERTISEMENTS M/M: -3.2% V +0.7% PRIOR

Index Snapshot (as of 05:30 GMT)

- Nikkei225 +2.9%, S&P/ASX +2.3%, Kospi +1.1%, Shanghai Composite +0.6%, Hang Seng +2.4%, Mar S&P500 +0.3% at 1,929

Commodities/Fixed Income

- Apr gold -0.2% at $1,209/oz, Mar crude oil +2.0% at $31.29/brl, Mar copper -0.1% at $2.07/lb

- (US) API Petroleum Inventories: Crude: -3.3M v +2.4M prior; 1st draw in 5 weeks

- (CN) PBoC said to conduct Medium-term Lending Facility (MLF) operation - financial press

- (CN) PBOC to inject CNY80B in 7-day reverse repos

- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.5152 V 6.5237 PRIOR

- JGB: (JP) Japan MoF sells ¥2.28T in 0.1% (0.1% prior) 5-year JGBs; Avg yield: -0.138% v 0.016% prior; Bid-to-cover: 3.57x v 4.10xprior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5152 V 6.5237 PRIOR

- (JP) Japan investors net sell ¥1.3T in foreign bonds v net buy ¥1.4T in prior week; Foreign investors net sell ¥563B in Japan stocks v net sell ¥610B in Japan stocks in prior week

- USD/VEF: (VE) Venezuela Pres Maduro: Venezuela devalued its official FX rate for priority goods 37% to 10 VEF/USD from 6.3; effective tomorrow

Market Focal Points/FX

- Asian equity markets continue to march higher, buoyed by another strong session of gains on Wall St. Oil prices are still trending upward, as Iranian officials appear to have given a nod to efforts to stabilize the market. Post-close API inventories also showed a surprising draw. The latest set of Fed meeting minutes also predictably underscored increasing concern about the impact of global volatility on US economy and inflation, with many members judging that volatility has increased. Materials names are helping Australia to strong gains, while weaker JPY continues to lift the Nikkei. In the Asia session, USD/JPY was up as much as 50pips at 114.30, EUR/USD up 25 pips above 1.1140, and NZD/USD up about 50pips near 0.6670. AUD/USD plunged 50pips below 0.7140 on the release of softer than expected jobs data, but subsequently pared about half of those losses.

- Economic data from China saw CPI hit a 5-month high but miss consensus at 1.8% V 1.9%E, with m/m CPI maintaining 0.5% growth as in December. As govt officials warned overnight, food component was behind much of the move, with Food CPI y/y 4.1% v 2.7% prior and Non-food y/y at 1.2% v 1.1% prior. China stats bureau added that labor costs are holding up, boosting services prices. Separately, state researcher Wang reiterated that it is not wise for speculators to short CNY, just as the central bank set Yuan weaker. Another researcher with CASS estimated 2016 GDP to come down to 6.7% from 6.9% reported in 2015.

- After several months of strong employment numbers from Australia, January employment change posted its 2nd straight losing month and also the biggest job loss in 9 months. Unemployment rate edged up to a 4-month high of 6.0%, even as Participation Rate remained at 65.2%. Aggregate hours worked was the silver lining with a 4-month high of +10.9M, however the numbers did some damage to the rise of the non-mining industry narrative. Goldman Sachs economist changed their call on RBA forecasts, projecting 2 rate cuts in May and July, taking cash rate down to 1.50%. Fixed income markets have also shifted, with rates now pricing in a rate cut by Q3 of this year. RBA's Edey was more upbeat, noting China economy is still growing at a healthy rate, local banks have limited direct exposures to risk factors, and commercial property risks are manageable.

- In Japan, January merchandise trade balance was slightly better than consensus, but components were again underwhelming. Exports fell -12.9% v -10.9%e and Imports fell -18.0% v -15.8%e, with shipments to Asia and China down over 17% and those to US and Europe down in mid-single digits. February trade data will likely be progressively worse, considering that much of the recent Yen appreciation has taken place this month. Nonetheless, BOJ officials remain resolute in their remarks. BOJ Gov Kuroda reiterated economy will continue a moderate recovery, CPI will reach 2% around H1 of FY17 as inflation is improving steadily, and that negative rates will neither weigh on bank profits nor alter BOJ's JGB purchase plans. Comments from BOJ's Ishida were only slightly more tempered, noting there are some soft spots in exports and that prolonged global market volatility may in fact impact real economy.

Equities

US equities/ADRs:

- IM: Agrees to be acquired for $38.90/shr by .cn Tianjin Tianhai to become a Part of HNA Group in transaction valued at $6.0B cash; +23.2% afterhours

- AERI: Reports positive Rhopressa QD (netarsudil ophthalmic solution) 0.02% 12 Month Interim Safety Results for Rocket 2; +16.6% afterhours

- NVDA: Reports Q4 $0.52 v $0.32e, R$1.40B v $1.31Be; +7.2% afterhours

- MRVL: Discloses settlement with Carnegie Mellon University; will pay $750M; +6.2% afterhours

- NTAP: Reports Q3 $0.70 v $0.68e, R$1.39B v $1.45Be; announces restructuring and 12% workforce reduction; +4.0% afterhours

- MRO: Reports Q4 -$0.48 v -$0.50e, R$1.48B v $1.16Be; +3.8% afterhours

- SPWR: Reports Q4 $1.73 v $1.52e, R$1.36B v $1.28Be; +2.9% afterhours

- ABX: Reports Q4 $0.08 v $0.07e, R$2.24B v $2.40Be; -2.4% afterhours

- MAR: Reports Q4 $0.77 v $0.76e, R$3.71B v $3.72Be; -2.5% afterhours

- NEM: Reports Q4 $0.04 v $0.13e, R$1.82B v $1.75Be; -3.3% afterhours

- CF: Reports Q4 $0.76 v $0.86e, R$1.12B v $1.11Be; -4.4% afterhours

- GDDY: Reports Q4 $0.00 v -$0.03e, R$425.4M v $424Me; -5.2% afterhours

- JACK: Reports Q1 $0.93 v $1.03e, R$470.8M v $475Me; -19.1% afterhours

Notable movers by sector:

- Consumer discretionary: Chow Tai Fook Jewellery Group 1929.HK -5.3% (Lunar New Year result); Tatts Group TTS.AU +0.5% (H1 result); Sydney Airport SYD.AU +2.7% (FY15 result); Perfect World Pictures 002624.CN +4.6% (agreement with Universal Pictures)

- Financials: China Galaxy Securities Co 6881.HK +4.0% (Jan result); Devine DVN.AU -24.6% (guidance)

- Industrials: Sany Heavy 600031.CN +10.0% (agreement); Bridgestone Corp 5108.JP -1.7% (FY15 result)

- Technology: Hangzhou Hikvision Digital Technology Co 002415.CN -1.4% (FY15 result); Toshiba Corporation 6502.JP +4.3% (discuss sale of appliance unit)

- Energy: Origin Energy ORG.AU +8.7% (H1 result)

- Telecom: Telstra Corp. TLS.AU +0.6% (H1 result)

- Utilities: Huaneng Renewable Corp 958.HK 13.1% (guidance)