PBoC strengthens Yuan fix to 2016 highs

Asian Market Update: PBoC strengthens Yuan fix to 2016 highs; Markets process ECB moves with an eye on Fed

Economic Data

- (JP) JAPAN Q1 BUSINESS SURVEY INDEX (BSI) LARGE ALL INDUSTRY Q/Q: -3.2 V +4.6 PRIOR; BSI LARGE MANUFACTURING Q/Q: -7.9 (7-quarter low) V +3.8 PRIOR

- (NZ) NEW ZEALAND FEB FOOD PRICES M/M: -0.6% V +2.0% PRIOR

- (NZ) NEW ZEALAND FEB MANUFACTURING PMI: 56.0 V 58.0 PRIOR

- (NZ) New Zealand REINZ Feb median home price +4.7% y/y v +5.2% prior; Home sales 7.3K v 5.0K prior

- (PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; NOT EXPECTED

- NPD: Feb video game sales -12% y/y to $842.5M

Index Snapshot (as of 04:30 GMT)

- Nikkei225 flat, S&P/ASX +0.5%, Kospi +0.2%, Shanghai Composite -0.3%, Hang Seng +0.8%, Jun S&P500 +0.7% at 1,992

Commodities/Fixed Income

- Apr gold -0.1% at $1,271/oz, Apr crude oil +2.3% at $38.72/brl, May copper +1.1% at $2.2/lb

- GLD: SPDR Gold Trust ETF daily holdings rise 6.0 tonnes to 798.8 tonnes; Highest since Aug 2014

- SLV: iShares Silver Trust ETF daily holdings rise to 10,076 tonnes from 10,035 tonnes ; highest since Dec

- (CN) PBOC to inject CNY20B in 7-day reverse repos

- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥ 420B in 3-5yr JGBs, ¥450B in 5-10yr JGBs

- (AU) Australia MoF (AOFM) sells A$500M in 2.75% 2019 Bonds; avg yield: 2.0257%; bid-to-cover: 3.92x

Market Focal Points/FX

- Asian equity markets are mixed as investors digest aggressive policy efforts from the ECB overnight against the subsequently less dovish rhetoric from Pres Draghi downplaying the need for even more easing down the pike. The focus turns to FOMC next week with expectations of similarly cautious approach by Yellen and co in spite of continued run of solid job gains, some progress on inflation, and reduced volatility overseas. June is now the more active contract in S&P's rising more than 0.5% in electronic trade and oil prices extended this week's rally with a 2% spike, while safe-haven gold was on the defensive with a modest downturn. In FX, USD/JPY traded about 40pips on both sides of 113.10, favoring the upside late in the day. AUD/USD was the preferred choice of risk-on bets after the latest RBNZ easing, rising nearly 50pips toward 0.75, though NZD/USD was still up a more modest 25pips above 0.6680. EUR/USD briefly retested the upside of 1.12 before retreating to 1.1170s late in the day.

- The latest Yuan fix produced the most volatility in an otherwise quiet session, as the PBoC set USD/CNY at the highest level of 2016. PBoC's objective may be to support the exchange rate in defense against the crowded global-macro fund's short-yuan thesis in the wake of the disappointing exports and trade data out this week. The central bank could also be looking to get a buffer going into this weekend's release of lending, industrial output, and retail sales figures. Regardless, the strong yuan fix contributed to positive sentiment - opposite to the weaker settings in recent past that sparked outflow concerns from China's slowing economy. Separately, PBoC Dep Gov Yi remarked that the monetary policy remains "prudent" after last week's CNPC claim to policy "with flexibility" along with the latest RRR cut. Also of note, more sources indicated that PBoC and NDRC are working together to come up with rules that allow swapping of bank loans into equity as part of govt efforts to reduce debt levels.

- In Tokyo, local press reported that February investment fund outflows were the largest since late 2008 as investors are much more reluctant to buy into the recent weakness. Poor manufacturing data justifies the caution - today's Q1 BSI saw its biggest downturn in nearly 2 years while the prospects for Q2 also showed deterioration, portending rising possibility of another Japan recession. Japan Fin Min Aso said it was important for BOJ to strive to reach its 2% inflation target, and there were also more reports related to the possibility of more fiscal stimulus, with a ¥10T figure floated as speculation even as PM Abe has most recently reiterated there was no need for an extra budget at this point in time.

Equities

US equities / ADRs:

- ULTA: Reports Q4 $1.69 v $1.54e, R$1.27B v $1.24Be; Announces $200M buyback (2% of market cap); +12.5% afterhours

- BOJA: Reports Q4 $0.22 v $0.19e, R$128.8M v $128Me; +6.8% afterhours

- LOCO: Reports Q4 $0.15 v $0.13e, R$86.3M v $88.0Me; -5.9% afterhours

- ZUMZ: Reports Q4 $0.50 v $0.49e, R$242.4M v $242Me; FEB SSS -8.6%; -7.9% afterhours

- FXCM: Reports Q4 EBITDA $12.6M v $40.8M y/y, R$67.0M v $74M y/y; -24.5% afterhours

Notable movers by sector:

- Consumer discretionary: Belle International Holdings 1880.HK -8.3% (Q4 result)

- Consumer staples: Shanghai Jahwa United Co 600315.CN -3.7% (FY15 result)

- Industrials: Sinosteel Engineering & Technology Co 000928.CN -2.3% (FY15 result); CRRC +7.7% ($1.3B contract)

- Technology: Samsung Electronics 005930.KR +1.8% (Launches S7 flagship smartphones); Toshiba Corporation 6502.JP +1.4% (financing plan for Toshiba medical asset)

- Energy: Osaka Gas Co. 9532.JP +1.7% (guidance)