Australia 2015 trade deficit hits record high

Asian Market Update: China, Japan services PMIs recover; Australia 2015 trade deficit hits record high

Economic Data

- (CN) CHINA JAN CAIXIN PMI SERVICES: 52.4 V 50.2 PRIOR; 6-month high

- (HK) HONG KONG JAN PMI: 46.1 V 46.4 PRIOR (11th straight contraction)

- (JP) JAPAN JAN NIKKEI SERVICES PMI: 52.4 V 51.5 PRIOR (5-month high); COMPOSITE PMI: 52.6 V 52.2 PRIOR

- (AU) AUSTRALIA DEC TRADE BALANCE (A$): -3.54B V -2.45BE; 20th month of deficit; largest deficit in 6 months; 2015 deficit of A$32.7B, biggest on record

- (AU) AUSTRALIA DEC BUILDING APPROVALS M/M: 9.2% V 4.5%E; Y/Y: -2.5% V -7.2%E

- (AU) AUSTRALIA JAN AIG PERF OF SERVICES INDEX: 48.4 V 46.3 PRIOR; 4th month of contraction

- (NZ) NEW ZEALAND Q4 UNEMPLOYMENT RATE: 5.3% (7-year low) V 6.1%E; EMPLOYMENT CHANGE Q/Q: 0.9% V 0.8%E; Y/Y: 1.3% V 1.1%E

Index Snapshot (as of 04:30 GMT)

- Nikkei225 -3.0%, S&P/ASX -2.3%, Kospi -0.9%, Shanghai Composite -1.2%, Hang Seng -2.5%, Mar S&P500 -0.3% at 1,892

Commodities/Fixed Income

- Apr gold flat at $1,127/oz, Mar crude oil -0.3% at $29.78/brl, Mar copper +0.1% at $2.06/lb

- (US) API Petroleum Inventories: Crude: +3.8M v +11.4M prior; 3rd straight week of build

- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: -7.4% v -1.4% prior; largest decline in 2 1/2 months; 3rd straight decline

- SLV: iShares Silver Trust ETF daily holdings fall from 9,626 tonnes from 9,622 tonnes; multi-year low

- GLD: SPDR Gold Trust ETF daily holdings rise 4.2 tonnes to 685.6 tonnes; highest since Nov 3rd

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5521 V 6.5510 PRIOR; 18th straight firmer setting relative to Close

- (CN) PBoC to inject CNY40B in 14-day reverse repos and CNY60B in 28-day reverse repos

- (JP) BOJ offers to buy ¥450B in 5-10yr JGBs, ¥260B in 10-25yr JGBs and ¥180B in JGBs with maturity over 25-yr

- (AU) Australia MoF (AOFM) sells A$900M in 2027 Bonds; avg yield: 2.6156%; bid-to-cover: 2.44x

Market Focal Points/FX

Asian equity markets are shrugging a more benign set of Services PMI figures from China while tracking another outsized selloff on Wall St. Decline in the energy markets remains one of the key culprits, as Mar crude fell some 6% in US regular trading and then added to losses in electronic session after another build in API inventories. Sugar high from last week's BOJ easing to negative interest rates has also worn off and USD/JPY returned below ¥120, falling by some 60pips in Asia to 119.40s as investors fret over sustainability of BOJ Kuroda's policies. A Nikkei report today noted that JGB sales to retail investors will be cancelled next month on expectation of negative yields extending to longer-dated maturities. In other USD majors, AUD/USD was down some 30pips near 0.70 after soft Australia trade numbers. NZD got a lift from RBNZ Gov Wheeler denting expectations of more easing and strong jobs data, rising over 40pips above 0.6540 while erasing the declines after another negative Fonterra auction price print in US hours.

China services PMI hit a 6-month high as economists noted that fast development of the services sector has to a large extent offset the impact of weakening manufacturing, indicating a better economic structure. Japan services PMI at a 5-month high was due to accelerating business activity driven by solid expansion in new orders, albeit with some expectation of a fall in international demand. Hong Kong PMI contracted for the 11th month, as economists said that "renewed job shedding along with steep reductions in purchasing activity and inventories suggests that companies expect that business conditions will not improve". Also of note in China, overnight PBoC loosened mortgage downpayment requirements on certain property purchases in smaller cities, and a local press report speculated about further govt policies to sell stockpiled homes

Down under, Australia's trade was in deficit for the 20th straight month, with overall 2015 deficit of A$32.7B as the biggest on record. Large 5% export decline for Dec was most striking, with 8-month lows in shipments to China and a 6-year low in exports of iron ore. Building approvals figures were better than expected, but AUD/USD was more shaken by trade figures as it fell to session lows on the release. NZD/USD fell 30 pips as low as 0.6410 in US hours on Fonterra auction results that showed the biggest decline in 2 1/2 months, but then recovered to 0.6440s as RBNZ Gov Wheeler noted it would not be inappropriate to cut rates just because of low oil prices. 7-year low unemployment rate was also helpful to stage a Kiwi comeback.

BOJ Gov Kuroda spoke extensively about last week's decision, stating that just because negative rates were adopted it does not mean the BOJ is out of ammunition to expand asset buying. Kuroda said he is still concerned that inflation expectations will weaken in medium term, but for now saw the economy recovering moderately. Kuroda also reiterated the BOJ is prepared to push further into negative rates if necessary.

Equities

US equities/ADRs:

- BOOT: Reports Q3 $0.45 v $0.44e, R$193.8M v $194Me; +16.3% afterhours

- WNC: Reports Q4 $0.51 adj v $0.41e, R$544M v $505Me; approves $100M share repurchase program (13.4% of market cap); +9.7% afterhours

- EW: Reports Q4 $0.63 v $0.59e, R$671M v $643Me; +5.6% afterhours

- MMM: Raises dividend 8% to $1.11 from $1.02 (yield 3.00%); authorizes $10B share repurchase program (10% of market cap); +1.0% afterhours

- GILD: Reports Q4 $3.32 v $2.99e, R$8.51B v $8.11B; Approves $12B buyback program (10% of market cap); increases dividend 10% for Q2 to $0.47 (2.28% yield) from $0.43; +0.8% afterhours

- YHOO: Reports Q4 $0.13 v $0.12e, R$1.00B v $949Me; Announces restructuring plans: to focus on exploration of separating off Alibaba stake; confirms to layoff 15% of workforce; Sees 2017 to have modest growth, 2018 accelerating growth; -1.2% afterhours

- CMG: Reports Q4 $2.17 v $1.85e, R$998M v $1.00Be; Discloses served with a broader subpoena in California on Jan 28th; -5.8% afterhours

- MTCH: Reports Q4 $0.24 adj v $0.19e, R$267.6M v $272Me; -7.7% afterhours

- ANGI: Barry Diller and his IACI expected to make another attempt at acquisition - NYPost

- MRVL: Starboard reportedly takes a 6.7% stake in the company - financial press

Notable movers by sector:

- Consumer discretionary: Shiseido Co 4911.JP -3.2% (investment); Fast Retailing Co 9983.JP -2.0% (Jan result)

- Financials: Poly Real Estate 600048.CN +1.6% (China to ease down payment); Ping An Insurance 2318.HK -3.8%, AIA Group 1299.HK -4.5% (China to limit purchase on Hong Kong insurance); Nomura Holdings 8604.JP -10.9 % (9-month result)

- Industrials: BYD Company 1211.HK -2.2% (non-public issue) Korean Air Lines Co 003490.KR +1.0% (FY15 result); IHI Corp 7013.JP -19.0% (9-month result)

- Technology: Lenovo 992.HK -3.7% (Q3 result); InnoLux Corp 3481.TW -2.5% (Q4 result); Denso Corp 6902.JP -6.2 % (9-month result)

- Materials: China National Building Material 3323.HK -6.0% (profit warning) Lotte Chemical Corp 011170.KR +2.4% (Q4 result); Sojitz 2768.JP -3.5% (9-month result)

- Energy: China Shenhua Energy Co 601088.CN -2.1% (impact from tariff changes); Datang International Power Generation 601991.CN -2.2% (asset impairments); Sinopec 386.HK -3.5%, CNOOC 883.HK -3.7% (lower oil price)

- Telecom: SK Telecom 017670.KR -4.9% (Q4 result)

- Utilities: China Datang Renewable Power Co 1798.HK -3.3% (profit alert)