Asahi poll shows Japan Cabinet approval rating at 54%, +4ppts

Asia Mid-Session Market Update: Rio Tinto posts mixed Q4 output results; Floating CNY exchange rate remains a consideration; Markets brace for UK PM May's address and outline for hard Brexit

 

Key economic data:

- (JP) JAPAN NOV FINAL INDUSTRIAL PRODUCTION M/M: 1.5% V 1.5% PRELIM; Y/Y: 4.6% V 4.6% PRELIM

- (AU) AUSTRALIA NOV HOME LOANS M/M: 0.9% V 0.3%E

- (AU) AUSTRALIA DEC NEW MOTOR VEHICLE SALES M/M: 0.3% V -0.7% PRIOR; Y/Y: 0.2% V -1.1% PRIOR

- (NZ) New Zealand Nov REINZ median home price y/y: +11.0% v +13.2% prior; Home sales y/y: -10.7% v -6.0% prior

- (NZ) New Zealand Q4 Business Confidence: 28 (10-quarter high) v 26 prior; Capacity Utilization 92.7% v 92.5% prior - NZIER business survey

- (HK) Macau Q4 VIP GGR +13.0% y/y (1st growth since Q1 2014) v +8% for mass market

- (SG) SINGAPORE DEC NON-OIL DOMESTIC EXPORTS M/M: 1.0% V -5.5%E; Y/Y: 9.4% V +5.8%E

 

Politics

- (UK) PM May to announce a 12-point plan for Brexit; To state that leaving EU's single market and customs union is among the 12 negotiating priorities - UK press

- (JP) Asahi poll shows Japan Cabinet approval rating at 54%, +4ppts

 

Asia Session Notable Observations, Speakers and Press

- Asia equity indices trading mixed, with Australia and Japan underperforming and Hong Kong leading. In Australia, energy and mining names weighed down the broader index, while Nikkei225 was hurt by firmer Yen. In Hong Kong, property developers and financials stood out among gainers.

- In FX, USD/JPY fell to its lowest level since December below 113.60. USD also traded heavy against EUR and GBP, with EUR/USD and GBP/USD rising about 50pips toward 1.0650 and 1.2090 respectively. Cable is off its overnight lows below 1.20, even though traders are positioning for a more resolute "hard Brexit" outline by PM May in today's speech. Earlier Telegraph press report suggest May will announce a 12-point plan for Brexit, stating UK is leaving EU's single market and customs union and will not settle for "partial membership of the UK in EU."

- Rio Tinto Q4 production report was also mixed - iron ore output met expectations while copper production was just shy of last year's outlook. Rio also affirmed its FY17 iron ore shipments, stating the company has had a strong operational performance.

- Elsewhere in Australia, Home Loans data were the only notable calendar highlight as it soundly beat expectations. Analysts indicate the improvement in "investor activity reflects ongoing strength in price growth and auction results," and would make it more difficult for RBA to advocate for more easing. Likewise, RBA board member Harper said Australia will avoid recession, but still called for lower rate of AUD to help further lift the economy.

- In China, PBoC injected the largest amount of reverse repos in a year while also setting Yuan midpoint weaker for the first time in 4 sessions. Another China researcher spoke favorably of allowing CNY to float freely thanks to China's large trade surplus and foreign reserves, while a separate researcher forecast economy likely to hit bottom in 2017 thanks to improving manufacturing sentiment.

- Earlier in European session, IMF updated its economic forecasts for the next 2 years, maintaining 2017 and 2018 global GDP target at 3.4% and 3.6%, but also raising its view on Advanced, Eurozone, and US economies.

China:

- (CN) China President Xi: China 2016 GDP seen at 6.7% v 6.5-7.0% official target range - Chinese press

- (CN) China state researcher Wang Yiming: China economy likely to hit bottom in 2017 - China Daily

- (CN) Former PBoC advisor Yu Yongding: China should not be afraid to float CNY - Chinese press

Japan:

- (JP) Japan Chief Cabinet Sec Suga: no date set for PM Abe meeting with Trump

- (JP) Japan Fin Min Aso: Trump statements contents are changing; Japan will respond to Trump administration without confusion

Australia:

- (AU) RBA's Harper: Australia will avoid recession; Economy not out of the woods, though outlook is not desperate

- (AU) Australia PM Turnbull: Discussed TPP with US President-elect Trump directly - Australian press

- (AU) ANZ: CPI data next week toshow inflation stabilizing and disinflation pressures abating - Australian press

 

Asian Equity Indices/Futures (00:00ET)

- Nikkei -0.9%, Hang Seng +0.4%, Shanghai Composite -0.8%, ASX200 -0.9%, Kospi +0.5%

- Equity Futures: S&P500 -0.32%; Nasdaq -0.2%, Dax flat, FTSE100 -0.1%

 

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

- EUR 1.0600-1.0650; JPY 113.70-114.30; AUD 0.7465-0.7505; NZD 0.7095-0.7135; GBP 1.2015-1.2085

- Feb Gold +0.9% at 1,207/oz; Feb Crude Oil +0.1% at $52.43/brl; Mar Copper -1.2% at $2.62/lb

- JGB: (JP) Japan's MoF sells ¥1.0T in 0.6% (0.6% prior) 20-year JGBs; Avg yield: 0.589% v 0.645% prior; bid-to-cover: 3.54x v 3.35x prior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8992 V 6.8874 PRIOR; first weaker setting in 4 sessions; biggest margin of weakness since Jan 9th

- (CN) PBOC to inject combined CNY330B (biggest cash injection in a year) in 7-day and 28-day reverse repos v CNY230B prior

 

Asia equities/Notables/movers

- Consumer discretionary: China Southern Airlines Co 1055.HK +0.9%, Air China 753.HK +0.4% (Dec result); SA SA International Holdings 178.HK -4.1% (Q3 result); Japan Tobacco 2914.JP

-1.3% (lower GBP); Kao Corp 4452.JP -0.1% (FY16 result speculation)

- Consumer staples: COFCO Meat Holdings 1610.HK +6.8% (profit alert); Mengniu Dairy 2319.HK -2.5% (credit Suisse cut); Sakata Seed Corp 1377.JP -3.2% (H1 result)

- Financials: Chinese Estates Holdings 127.HK -1.5% (post dividend); BT Investment Management BTT.AU -5.0% (Exec resigns)

- Industrials: Air China 753.HK +0.4% (Dec result); Harmonic Drive Systems Inc 6324.JP +1.8% (Goldman Sachs sees order growth positive); Cathay Pacific Airways 293.HK +3.0% (to cut hedging plan in half)

- Technology: iSentia ISD.AU -3.3% (Smallco Investment no longer a significant holder)

- Materials: Regis Resources RRL.AU +5.7%, Newcrest Mining NCM.AU +1.9% (gold rises); Fortescue Metals Group FMG.AU -3.4% (new CFO); China Sanjiang Fine Chemicals Co 2198.HK +12.9% (FY16 result); Rio Tinto RIO.AU -1.0% (Q4 result)

- Energy: OCI Co 010060.KR +7.9% (Goldman Sachs raised rating)