Energy sector rallies as Brent crude oil tops $50

Asian Market Update: Energy sector rallies as Brent crude oil tops $50; Australia CAPEX for Q1 misses, outlook for next year improved

 

Economic Data

- (AU) AUSTRALIA Q1 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: -5.2% V -3.5%E

- (JP) JAPAN APR PPI SERVICES Y/Y: 0.2% V 0.2%E

- (KR) South Korea May Consumer Confidence: 99 v 101 prior

 

Index Snapshot (as of 04:30 GMT)

- Nikkei225 +0.4%, S&P/ASX +0.7%, Kospi -0.1%, Shanghai Composite -1.0%, Hang Seng -0.2%, Jun S&P500 -0.2% at 2,083

 

Commodities/Fixed Income

- June gold +0.4% at $1,230/oz, July crude oil +0.8% at $49.93/brl, Jul copper +0.3% at $2.11/lb

- Brent Crude futures test $50/bbl for the first time since Nov

- USD/CNY: (CN) SWIFT: CNY use in international transactions 1.82% of total in Apr v 1.88% prior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5552 V 6.5693 PRIOR

- (CN) PBOC to inject CNY75B in 7-day reverse repos

- (JP) Japan investors bought net ¥684B in foreign bonds v ¥B in prior week; Foreign investors bought net ¥40.4B in Japan stocks v bought ¥71.7B in Japan stocks in prior week

 

Market Focal Points/FX

- Asian equity markets are mixed, with continued rise in oil prices benefiting Australian energy names at the expense of China transport sector. Brent Crude prices topped $50/brl mark for the first time since last November, and WTI is tracking just below that technically important level. FX majors were also somewhat volatile - USD/JPY sold off about 80pips to 109.40 in early Tokyo trade with no significant fundamental catalyst. AUD/USD initially fell to 0.7160 before a bounce above 0.7210 after a mixed Australia CAPEX report. NZD/USD sold off over 50pips below $0.67 in the wake of Fonterra's latest milk price forecasts, but then recovered to $0.6720 following New Zealand's annual budget release.

- China Transport Ministry put out its Apr railway cargo volume showing a 4.5% decline y/y, which is smaller relative to 9.4% drop during Q1. Commerce Ministry said it was prepared to take steps to ensure fair treatment at the WTO, while an economist with Deutsche Bank warned about China's "worryingly high" debt levels.

- Australia CAPEX was the most notable economic event for the session. Although Q1 decline was wider than expected, thanks in no small part to -7.9% decline in the Building and structures CAPEX component, Stats Bureau also raised its 2nd est for CAPEX for FY16/17 to A$89.2B (-14.6% y/y) from A$82.6B. FY15/16 forecast was also revised slightly higher to $126.8B (-15.3% y/y) vs A$124.0B prior estimate.

- NZD/USD moved sharply lower in early Asia session after Fonterra announced it was maintaining the FY15/16 milk price forecast of NZ$3.90 and also initiated FY16/17 target at NZ$4.25. That level was seen lower than NZ$4.60-80 analyst range, as Co management noted "high NZD/USD exchange rate, supply volumes from other major dairying regions, current global inventory levels, and the economic outlook of major dairy importers" among risks to its outlook. Chairman Wilson added the company still expects prices to improve over the season as production is reduced. Later in the session, New Zealand annual budget forecast surplus to gradually rise from NZ$0.7B this year to NZ$6.7B in FY19/20 as GDP lifts from 2.6% this year to 3.2% in FY17/18. Finance Ministry flagged special concern over the risks related to Brexit, fearing that key exports like lamb and dairy will be impacted by unshackled UK economy.

 

Equities

US equities/ADRs:

- LGF: Reports Q4 +$0.27 (adj) v -$0.02e, R$791.2M v $741Me; +14.0%

- PVH: Reports Q1 $1.50 v $1.40e, R$1.92B v $1.89Be; +7.2% afterhours

- WSM: Reports Q1 $0.53 v $0.50e, R$1.10B v $1.08Be; +3.7% afterhours

- NYRT: New York REIT to Combine with The JBG Companies To Create $8.4 Billion New York City and Washington, D.C. REIT; +1.9% afterhours

- HPQ: Reports Q2 $0.41 v $0.39e, R$11.6B v $11.7Be; +1.4% afterhours

- GES: Reports Q1 -$0.23 v -$0.19e, R$449M v $463Me; -0.9% afterhours

- BLOX: Reports Q3 $0.06 v $0.05e, R$82M v $81.5Me; announces $150M buyback (14% of market cap); -2.9% afterhours

- PLKI: Reports Q1 $0.58 v $0.63e, R$82.2M v $84.4Me; -5.3% afterhours

- NTAP: Reports Q4 $0.55 v $0.57e, R$1.38B v $1.41Be; raises dividend by 5% to $0.19 from $0.18 (indicated yield 2.98%); -7.4% afterhours

Notable movers by sector:

- Industrials: Takata Corp.7312.JP +4.8% (update on Actions and Objectives, said to seek cash infusion); Mitsubishi Motors 7211.JP +5.5% (FY15/16 result); Qube Logistics QUB.AU +0.6% (update on Asciano transaction)

- Financials: Suncorp SUN.AU -4.3% (cut at UBS and Credit Suisse)

- Energy: Origin ORG.AU +3.7%, Woodside Petroleum WPL.AU +2.0% (Brent crude above $50)