US upside from Trump fiscal stimulus

 Asia Mid-Session Market Update: World Bank cuts global growth forecasts but sees US upside from Trump fiscal stimulus

US Session Highlights

- (US) NOV JOLTS JOB OPENINGS: 5.52M V 5.50ME

- (MX) Mexico Central Bank reportedly sold $2B last week to support the peso - press

- (US) Richmond Fed's Lacker (hawk, non-voter) to retire Oct 1, 2017 - press

- (US) Intelligence officials reportedly presented Pres-elect Trump with allegations that Russian operatives have compromising personal and financial information about him - CNN

 

US markets on close: Dow -0.2%, S&P500 flat, Nasdaq +0.4%

- Best Sector in S&P500: Healthcare

- Worst Sector in S&P500: Utilities

- Biggest gainers: ILMN +16.6%, BSX +6.4%, ZBH +6.2%, FCX +5.9%, ALK +5.2%

- Biggest losers: WMB -10.7%, ENDP -6.7%, VTR -3.6%, CF -3.1%, VRSN -3.1%

- At the close: VIX 11.5 (-0.1pts); Treasuries: 2-yr 1.19% (flat), 10-yr 2.38% (flat), 30-yr 2.97% (flat)

 

US movers afterhours

- ICHR: Reports prelim Q4 R$131M v $118Me, FY16 R$405M v $392Me (2 est); +15.5% afterhours

- AKAO: Baker Bros. Advisors LP discloses passive 13.1% stake - 13G filing; +8.0% afterhours

- MRK: FDA accepts Supplemental Biologics License Application for KEYTRUDA (pembrolizumab) in combination with Chemotherapy for first-line treatment of Metastatic Non-Squamous Non-Small Cell Lung Cancer; +3.0% afterhours

- UAL: Reports Dec load factor 83.1%, +0.1ppt y/y; Raises Q4 consolidated passenger unit revenue -1.75% to 1.25% (prior -4% to -3%) y/y; +2.8% afterhours

- SYK: Guides FY16 at high end of $5.75-5.80 v 5.78e, R$11.3B v 11.3Be (prior low end $5.75-5.80, rev +6.0-6.5%) - ahead of JP Morgan conf; +1.0% afterhours

- VECO: Reports prelim Q4 $0.04-0.10 v $0.00e, $91-95M v $91.4Me; Files $200M offering of Convertible Senior Notes due 2023; -3.0% afterhours

 

Politics
- (US) Intelligence officials reportedly presented Pres-elect Trump with allegations that Russian operatives claim to have compromising personal and financial information about him - CNN

 

Asia Key economic data:

- (AU) AUSTRALIA SEPT-NOV SKILLED VACANCIES Q/Q: 2.2% V 4.9% PRIOR

- (NZ) NEW ZEALAND DEC ANZ JOB ADVERTISEMENTS M/M: 1.6% V 3.1% PRIOR; Y/Y: +19% y/y, strongest annual growth since late 2011

- (JP) JAPAN DEC OFFICIAL RESERVE ASSETS: $1.22T v $1.22T PRIOR

- (KR) South Korea Dec Unemployment Rate: 3.4% v 3.6%e (lowest since Oct 2015)

 

Asia Session Notable Observations, Speakers and Press

- Asia equity markets trading mixed, with Hang Seng and Shanghai Composite diverging as a leader and a laggard respectively. Despite the rally in miners on rising metals prices, Australia's ASX200 was flat.

- USD majors also holding narrow ranges in the absence of key economic data and flat US yields. USD/JPY was most volatile in a 60pip range but remaining well contained within the month-long 115-118.60 band as traders await transfer of power in the US and greater visibility for initial policies under the new govt.

- DoubleLine's Gundlach forecast 2-3 rate hikes this year and noted that 3% breach on the 10-year yield would be critical; Earlier, Janus's Gross noted 2.6% as the key threshold that will herald a protracted bear bond market.

- World Bank's Global Economic Prospects report lowers 2017 and 2018 global GDP targets by 0.1pts to 2.7% and 2.9% respectively; Advanced economies target GDP was also cut by 0.1% to 1.8% for both years, Euro area by 0.1pts to 1.5% and 1.4%, while US were maintained at 2.2% and 2.1%. WB warned about protectionist retaliation from Trump's tariff proposals, but also noted the possibility of fiscal stimulus in the US "could lead to stronger-than-expected activity in the near term and thus represent a substantial upside risk to the outlook", providing a "significant boost to the global economy."

- China press citing local economists warning about rising prospects of a trade war under US President Trump, noting his "harsh" stance on China trade and his selection of trade officials. Disruption of Apple supply chain or cancellation of Boeing orders were mentioned as some of the initial steps China could take in retaliation to US tariffs.

China:

- (CN) China Securities Times citing analysts: Trade friction between China and the US may be hard to avoid; the risk of a trade war is increasing after Donald Trump's election victory

- (CN) China MOF to increase debt swap bond sales this year - Chinese press

- (CN) China to allow local govts to sell debt-swap bonds using unfinished quota from 2016 - Chinese press

- (CN) UBS China economist Wang Tao: Dec PPI increase was driven by price increase of raw materials in the ferrous metal, oil processing and chemical industries - Chinese press

Japan:

- (JP) Bank of Japan (BoJ) Exec Dir Amamiya: Markets have digested yield curve control (YCC) in an orderly manner; YCC and negative rates have had considerable effects

- (JP) NHK poll shows that most Japanese see ties with the US getting worse under Trump

Australia:

- (AU) CBA: There is upside potential for Australia growth; Sees GDP rising from 2% at 2016-end to 3% in 2017 - press

- (AU) Deutsche Bank raises S&P/ASX200 target for 2017 to 6,000 from 5,600 - Australian press

 

Asian Equity Indices/Futures (00:00ET)

- Nikkei +0.3%, Hang Seng +0.6%, Shanghai Composite -0.6%, ASX200 +0.1%, Kospi +1.5%

- Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.1%, FTSE100 -0.1%

 

FX ranges/Commodities/Fixed Income (00:00ET)

- EUR 1.0535-1.0565; JPY 115.65-116.25; AUD 0.7350-0.7380; NZD 0.6970-0.7000

- Feb Gold +0.2% at 1,188/oz; Feb Crude Oil +0.3% at $50.97/brl; Mar Copper +0.4% at $2.62/lb

- (US) Weekly API Oil Inventories: Crude: +1.5M v -7.4M prior

- JGB: (JP) Japan MoF sells ¥723B in 0.6% (0.6% prior) 30-yr bonds; Avg yield: 0.745% v 0.617% prior; Bid to cover: 3.33x v 2.85x prior

- (CN) China MoF sells 5-yr bonds at 2.88% v 2.90%e

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9235 V 6.9234 PRIOR

- (CN) PBOC to inject combined CNY120B in 7-day and 28-day reverse repos v CNY120B prior

- (AU) Australia MoF sells A$1.0B v A$1.0B indicated in 2.75% 2027 bonds; Avg yield 2.797%; bid-to-cover 3.01x

 

Asia equities/Notables/movers by sector

- Consumer discretionary: China Southern Airlines Co 1055.HK -2.5% (to push mixed-ownership reform)

- Consumer staples: Bellamy's Australia BAL.AU -26.2% (guidance)

- Financials: Future Land Development Holdings 1030.HK -1.1% (profit alert); CITIC Securities 6030.HK +1.4%, Haitong Securities 6837.HK +1.4%, Poly Property Group Co 119.HK +6.7% (Dec result); Westpac Banking Corp WBC.AU -1.2% (Shaw and Partners cuts to hold)

- Industrials: BBMG Corp 2009.HK +3.3% (profit alert); China State Construction Holdings H-Shares 3311.HK +6.1% (2016 result)

- Technology: Toshiba Corporation 6502.JP +4.2% (lenders to maintain financing); Hon Hai Precision Industries 2317.TW -0.1% (Dec result); Taiwan Semiconductor Manufacturing Co 2330.TW -0.8% (Dec result)

- Materials: EVA Precision Industrial Holdings 838.HK +1.2% (profit warning); Saracen Mineral Holdings SAR.AU +2.7% (Q2 result), Ramelius Resources RMS.AU -5.6% (Q2 result); Fortescue FMG.AU +4.2%, Rio Tinto RIO.AU +4.1%, BHP Billiton BHP.AU +3.0% (Iron ore price rises); China Steel Corp 2002.TW +1.8% (Dec result)