BOJ lowers inflation targets

Asian Mid-session Update: BOJ lowers inflation targets, extends low-rate funding scheme; New Zealand CPI falls to 2-year lows

Economic Data

- (AU) AUSTRALIA JAN WESTPAC CONSUMER CONFIDENCE INDEX: 93.2 V 91.1 PRIOR; M/M: +2.4% V -5.7% PRIOR

- (NZ) NEW ZEALAND Q4 CPI Q/Q: -0.2% (2-year low) V 0.0%E; Y/Y: 0.8% (6-quarter low) V 0.9%E

- (MY) MALAYSIA DEC CPI Y/Y: 2.7% V 2.8%E

Index Snapshot (as of 03:30 GMT)

- Nikkei225 -0.8%, S&P/ASX +1.3%, Kospi -0.2%, Shanghai Composite +2.2%, Hang Seng +1.2%, Mar S&P500 flat at 2,016

Commodities/Fixed Income

- Feb gold +0.2% at $1,296, Mar crude oil +1.0% at $46.94/brl, Mar Copper -0.4% at $2.58/lb

- GLD: SPDR Gold Trust ETF daily holdings rise 11.3 tonnes to 742.2 tonnes; highest since Oct 29th

- (CN) China Ministry of Finance (MOF) sells 7-yr bonds at 3.3579%

- (CN) PBoC sets yuan mid point at 6.1268 v 6.1226 prior setting (weakest Yuan setting since Jan 9th)

- (AU) Australia MoF (AOFM) sells A$700M in 4.5% bonds due 2033, avg yield 2.9281%, bid-to-cover: 1.879x

Market Focal Points/Key Themes/FX

- USD/JPY hit its lows below ¥117.70 in the wake of the BOJ decision, falling by as much as 100pips from session highs and also sending Tokyo stocks down by nearly 1% in spite of an equity rally elsewhere in Asia. As anticipated, the BOJ maintained its key policy stance of ¥80T annual monetary base increase, while also extending its low-rate funding scheme by a year and boosting provision to each institution from ¥1T to ¥2T. Moreover, BOJ maintained its overall economic assessment but upgraded its view on industrial output to state it has bottomed. On inflation, BOJ lowered FY14/15 and FY15/16 projections by 0.3pts and 0.7% respectively to 0.9% and 1.0%; On GDP, BOJ lowered the current year target to -0.5% from +0.5% but raised its forecasts for the next two years. Despite inflation downgrade - primarily attributed to lower oil prices - the BOJ maintained its commitment to achieving its 2% target.

- Shanghai Composite is up for the 2nd straight day, now erasing about half of the sharp decline on Monday attributed securities brokers' margin account jitters. China Premier Li pledged to maintain a "prudent" monetary policy, noting economic fundamentals have not changed despite the 2014 GDP falling to 24-year lows. ANZ economist pointed to improvement in services sector, adding 7% GDP is likely to be tolerated as authorities rebalance the economy. State Information Center researcher Xu also said PBoC may adopt a more transparent model of conducting policy. Looking ahead to 2015, MOFCOM warned external challenges present a headwind to China on the trade front.

- NZD/USD fell to a 2-week lows below 0.7630 after Q4 CPI fell q/q for the first time in 2 years. ASB economists have also given up on expectations for further RBNZ policy tightening late in 2015, while Fin Min English noted wage increases would likely be smaller than expected. Australia Westpac Consumer Confidence rebounded from a 2-year low, even though resident economist reiterated RBA would likely cut rates next month. BHP was up about 2% after quarterly production report that expressed some added focus on cost containment, even though iron ore output rose 16% y/y and production guidance for the metal - along with copper, crude, and coal - were maintained.

- President Obama's State of the Union address delivered more broad strokes on the Democratic agenda, most notably calling for continued diplomacy in Iran, more strikes on ISIS, and fair trade practices in the far east. Domestically, Obama called for free education in community colleges along with reduction in student loans, better countermeasures on cybersecurity, affordable child care, and continued focus on climate change.

Equities

US markets:

- NFLX: Reports Q4 $0.72 adj v $0.44e, R$1.48B v $1.49Be; +16.0% afterhours

- WWD: Reports Q1 $0.66 v $0.47e, R$487.6M v $451Me; +12.4% afterhours

- CREE: Reports Q2 $0.33 v $0.22e, R$413.2M v $419Me; +6.0% afterhours

- NSP: Starboard Value discloses 13.2% stake; urges management to consider selling the company - 13D filing; +5.9% afterhours

- SMCI: Reports Q2 $0.65 v $0.47e, R$503M v $468Me; +5.1% afterhours

- DAN: To be added to S&P400 index after the close of trading on Jan 22nd; +3.2% afterhours

- AMD: Reports Q4 $0.00 v $0.01e, R$1.24B v $1.24Be; flat afterhours

- AR: Announces initial 2015 capital budget of $1.8B, -41% y/y; -0.5% afterhours

- IBKR: Reports Q4 $0.12 v $0.05e, R$229.9M v $262Me; -1.2% afterhours

- CA: Reports Q3 $0.67 v $0.60e, R$1.09B v $1.10Be; -1.4% afterhours

- NSLP: Guides FY15 EBITDA margin at 21-25%; production at 3,750-3,950 bpd; -1.5% afterhours

- IBM: Reports Q4 $5.81 (adj) v $5.41e, R$24.1B v $24.7Be; Guides FY15 $15.75-16.50 v $16.49e [*Note: in Oct, withdrew long term roadmap goal for 2015 EPS to rise to "at least $20"] - conf call slides; -1.9% afterhours

Notable movers by sector:

- Consumer Discretionary: Liaoning Shidai Wanheng 600241.CN +10.0% (plans acquisition); Guangdong Alpha Animation and Culture 002292.CN +4.3% (proposes special dividend); Jiangling Motors Corp 000550.CN +3.3% (FY14 results)

- Financials: Shenzhen World Union Properties Consultancy 002285.CN +7.2% (FY14 guidance); Sinotex Investment & Development 600061.CN +3.2% (Essence Securities reports 2014 results)

- Materials: BHP Billiton BHP.AU +1.8% (Q2 production results); Alacer Gold AQG.AU -2.4% (Q4 production results); Western Areas WSA.AU +3.2% (H1 production results); Saracen Mineral Holdings SAR.AU +14.1% (Q2 production results)

- Industrials: Keda Group 600986.CN +10.1% (announces acquisitions); CNR 601299.CN +4.1%, CSR 601766.CN +4.5% (combined company reports Jan-Oct results); BYD Corp 1211.HK +2.5% (issues FY15 EV taxis target); Boral Ltd BLD.AU +1.9% (to sell hardwood timber business); Furukawa Electric 5801.JP -2.6% (press speculation on 9-month results)

- Technology: Sharp 6753.JP -2.2% (to take pay cut); TDK Corp 6762.JP -2.8% (press speculation on 9-month results)