Australia inflation plummets

Asian Market Update: Australia inflation plummets, drastically increasing outlook for more RBA rate cuts

 

Economic Data

- (CN) CHINA MAR INDUSTRIAL PROFITS Y/Y: 11.1% V -4.7% PRIOR

- (CN) China Apr Westpac Consumer Confidence index: 117.8 v 118.1 prior

- (AU) AUSTRALIA Q1 CONSUMER PRICES (CPI) Q/Q: -0.2% (7-year low) V +0.2%E; Y/Y: 1.3% (1-year low) V 1.7%E; TRIMMED MEAN Q/Q: 0.2% (multi-year low) V 0.5%E ; Y/Y: 1.7% V 2.0%E

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 111.7 v 115.8 prior

- (NZ) NEW ZEALAND MAR TRADE BALANCE (NZD): 117M V 401ME; 3rd straight month of trade surplus; Annualized: -3.84B v -3.69Be (widest deficit in 7 years)

- (KR) SOUTH KOREA APR CONSUMER CONFIDENCE: 101 V 100 PRIOR

 

Index Snapshot (as of 04:00 GMT)

- Nikkei225 -0.6%, S&P/ASX +0.7%, Kospi -0.2%, Shanghai Composite flat, Hang Seng -0.3%, Jun S&P500 -0.3% at 2,083

 

Commodities/Fixed Income

- June gold +0.1% at $1,245/oz, June crude oil +1.1% at $44.51/brl, Jul copper -0.5% at $2.23/lb

- (US) Weekly API Oil Inventories: Crude: -1.1M v +3.1M prior; First draw in 3 weeks

- World Bank raises 2016 oil price forecast to $41/brl from $37/brl; Sees some easing in oversupply

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4837 V 6.4880 PRIOR; strongest setting since Apr 21st; 2nd straight firmer setting

- (CN) PBOC to inject CNY120B in 7-day reverse repos

- (CN) China MoF sells 3-yr bonds at 2.55%

- JGB: (JP) Japan MoF sells ¥2.11T in 0.1% 2-year JGBs; Avg yield: -0.254% (record low) v -0.183% prior; bid-to-cover 4.20x (multi-month low) v 4.34 prior

 

Market Focal Points/FX

- Asian equity markets are trading mixed though volumes are still on the light side on the eve of the critical BOJ policy decision and the anticipated ramp-up in hawkish rhetoric from the FOMC statement. Australia is outperforming, with the latest set of inflation data significantly raising the likelihood of renewed RBA policy easing. Tech-heavy Korea and Taiwan are underperforming however, tracking 1.1% drop in Nasdaq futures in the wake of extremely disappointing results from Apple as it missed on the top and bottom line while registering its first iPhone shipment decline on record. In FX, AUD/USD fell about 140pips to $0.7620 after a much lower CPI print than expected and NZD/USD was down over 30pips below 0.6870 in sympathy. USD/JPY is consolidating last week's gains for the 3rd straight session, even as expectations build for some sort of combination of additional BOJ easing, whether it be through lower negative rates, expanded asset purchases, or both.

- Australia's Q1 headline CPI hit a 7-year low q/q and 1-year low y/y, with a shockingly negative sequential print that raised fears of deflationary trends in the economy's adjustment away from mining. Gasoline price declines were most pronounces at -10%, though tourism sector was also fairly soft. Going into the decision, fixed income market probability of renewed easing next week was just above 10% - after the release, markers are now pricing in a near 50% chance. JPMorgan has shifted its neutral stance to anticipate 2 rate cuts this year, while RBA watcher Alan Mitchell suggested the latest figures give RBA "the perfect excuse to cut rates further" if it had been hesitant to do so in the past, pointing to the likely retreat from the recent price surge in iron ore and coal. Also of note down under, New Zealand trade remained in a surplus for the 3rd straight month but lower than expected. Shipments to China saw a decline of 4% y/y v prior month's rise of 1.8%, and exports to the US were down nearly 20%. Overall shipments of dairy fell 29% y/y - much worse than the 9% y/y rise in the prior month. RBNZ also holds a policy meeting tomorrow, though expectations are firmly in favor of a rate hold after last month's surprise cut.

- In China, March industrial profits continued to recover, growing 11.1% y/y. YTD growth was up 7.4%, also a marked improvement from 4.8% rise last month. China Stats Bureau noted faster profit rise on both sales growth and prices, but also warned that slowing demand, high inventories and financing difficulties are still impacting the industrial sector. Earlier, China Finance Ministry noted that combined profits of China non-financial SOEs in Q1 fell 13.8% y/y to CNY432B and Rev fell 3%.

- Stateside, Super Tuesday 2 featured primary contests in Connecticut, Delaware, Maryland, Pennsylvania, and Rhode Island. Donald Trump swept all 5 on the Republican side, referring to himself as the "presumptive nominee" to represent the party in November. Hillary Clinton only whiffed on Rhode Island, taking the other 4 states fairly comfortably. Despite speculation to the contrary earlier in US hours, Bernie Sanders vowed to stay in the race.

 

Equities

US equities/ADRs:

- EBAY: Reports Q1 $0.47 v $0.45e, R$2.14B v $2.08Be; +1.1% afterhours

- AYI: To be added to S&P500 and VSAT to enter S&P MidCap 400 effective after close of trading on Monday; +1.0% afterhours

- RHI: Reports Q1 $0.64 v $0.64e, R$1.30B v $1.30Be; +0.7% afterhours

- T: Reports Q1 $0.72 v $0.69e, R$40.5B v $40.5Be; -0.7% afterhours

- AFL: Reports Q1 $1.74 v $1.62e, R$5.45B v $5.29Be; -0.7% afterhours

- COF: Reports Q1 $1.84 v $1.90e, R$6.2B v $6.10Be; -1.6% afterhours

- CMG: Reports Q1 -$0.88 v -$1.06e, R$834.5M v $857Me; -4.6% afterhours

- AAPL: Reports Q2 $1.90 v $1.97e, R$50.6B v $52.2Be; increased share repurchase authorization by $35B (6% of market cap) to $175B; Raises dividend 10% to $0.57 (implied yield 2.2%); -7.9% afterhours

- BWLD: Reports Q1 $1.73 v $1.76e, R$508.3M v $532Me; -12.2% afterhours

- TWTR: Reports Q1 $0.15 v $0.10e, R$595M v $607Me; -13.5% afterhours

Notable movers by sector:

- Consumer discretionary: 361 Degrees International 1361.HK +3.4% (Q1 result); Gome Electrical Appliances Holdings 493.HK -3.8% (Q1 guidance); Galaxy Entertainment Group 27.HK -0.5% (Q1 result); Murray Goulburn MGC.AU +7.1% (guidance)

- Financials: Bank of China 3988.HK +0.3% (Q1 result); Industrial Securities Co 601377.CN -1.0% (Q1 result); Ping An Insurance 2318.HK +1.0% (Q1 result)

- Industrials: Hyundai Mobis 012330.KR +0.6% (Q1 result); Kia Motors Corporation 000270.KR +0.3% (Q1 result); Daihatsu Motor Co 7262.JP -1.5% (FY15/16 result); Kawasaki Heavy Industries 7012.JP +2.7 % (FY15/16 result); JFE Holdings 5411.JP -3.8% (FY15/16 result)

- Technology: LG Display Co 034220.KR -2.3% (Q1 result); Toshiba Corporation 6502.JP -1.1% (revises guidance)

- Materials: Metallurgical Corporation of China 1618.HK -0.8% (Q1 result); Anhui Conch Cement 914.HK -1.0% (Q1 result); Beadell Resources BDR.AU +0.7% (Q1 result); Saracen Mineral Holdings SAR.AU +2.7% (Q3 result); Shin-Etsu Chemical Co 4063.JP +3.6% (FY15/16 result)

- Energy: Tohoku Electric 9506.JP +4.8% (FY15/16 result); Beach Energy BPT.AU +1.5% (raises guidance)