BOJ shocks Nikkei and Yen pairs with unchanged policy

Asian Market Update: BOJ shocks Nikkei and Yen pairs with unchanged policy on both interest on reserves and QE

 

Economic Data

- (JP) BOJ MAINTAINS ANNUAL RISE IN MONETARY BASE AT ¥80T; AS EXPECTED

- (JP) BOJ LEAVES INTEREST ON EXCESS RESERVES (IOER) UNCHANGED AT -0.10%; AS EXPECTED; INTRODUCES ¥300B LENDING FACILITY FOR KUMAMOTO EARTHQUAKE RECOVERY WITH 0% INTEREST

- (JP) JAPAN MAR RETAIL SALES M/M: 1.4% V 0.5%E; RETAIL TRADE Y/Y: -1.1% V -1.4%E

- (JP) JAPAN MAR PRELIMINARY INDUSTRIAL PRODUCTION M/M: 3.6% V 2.8%E; Y/Y: +0.1% V -1.6%E

- (JP) JAPAN MAR JOBLESS RATE: 3.2% V 3.3%E

- (JP) JAPAN MAR OVERALL HOUSEHOLD SPENDING Y/Y: -5.3% V -4.1%E

- (JP) JAPAN APR TOKYO CPI Y/Y: -0.4% V -0.2%E; CPI EX FRESH FOOD Y/Y: -0.3% V -0.3%E

- (JP) JAPAN MAR NATIONAL CPI Y/Y: -0.1% V 0.0%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.3% V -0.2%E

- (AU) Australia Q1 Import Price Index Q/Q: -3.0% v -0.9%e; Export Price Index Q/Q:-4.7% v -1.5%e

- (BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC RATE UNCHANGED AT 14.25%; AS EXPECTED

 

Index Snapshot (as of 04:00 GMT)

- Nikkei225 -2.6%, S&P/ASX +0.6%, Kospi -0.6%, Shanghai Composite -0.7%, Hang Seng +0.5%, Jun S&P500 -0.6% at 2,077

 

Commodities/Fixed Income

- June gold flat at $1,250/oz, June crude oil -0.3% at $45.19/brl, Jul copper flat at $2.23/lb

- SLV: iShares Silver Trust ETF daily holdings rise to 10,437 tonnes from 10,411 tonnes prior

- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.4954 V 6.4837 PRIOR

- (CN) PBOC to inject CNY110B in 7-day reverse repos

- USD/CNY: (CN) SWIFT: CNY use in international transactions 1.88% of total in Mar v 1.76% prior

- (JP) Japan investors bought net ¥985B in foreign bonds v bought ¥843B in prior week; Foreign investors bought net ¥602B in Japan stocks v bought ¥539B in Japan stocks in prior week

 

Market Focal Points/FX

- Asian equity markets are mixed as investors digest the latest monetary policy updates from the FOMC and Japan, though the latter is having an unmistakably bearish impact in Tokyo. Expectations had been building for some sort of additional policy easing in Japan, and yet Kuroda stood pat on all counts - interest on excess reserves, QE, ETF buying, etc. Nikkei225 futures plunged by about 3% after the announcement, S&P500 futures were down 0.5%, and USD/JPY cratered over 200pips below the ¥109 handle. Other FX majors were less impacted - AUD/USD is up about 30pips from session lows around 0.7620, while NZD/USD has maintained the gains of about 100pips after the neutral RBNZ policy statement around 0.6940.

- Going into today's BOJ decision, the latest inflation figures in Japan dipped into negative on headline basis for March nationwide. Bigger than expected decline in household spending also seemed to justify a more accommodative stance, even though the retail sales prints showed higher than expected growth. In one poll, as many as 80% of surveyed analysts forecast a policy move, and a Nikkei QUICK survey also suggested that some 60% market participants were clamoring for additional easing in spite of growing opposition from the corporate sector. BOJ Gov Kuroda sided with the latter, holding fire on all of his arsenal options - keeping -0.1% rate on excess reserves, ¥80T annual monetary base expansion, and ETF buying program unchanged. In the accompanying Semi-annual Outlook Report, BOJ cut its FY16/17 Core CPI from 0.8% to 0.5%, FY17/18 Core CPI forecast from 1.8% to 1.7%, and initiated FY18/19 forecast of 1.9%. Moreover, BOJ once again pushed back its expectations of reaching 2% inflation target from H1 of FY17 to "within" FY17/18. Despite those revisions, BOJ reiterated its overall economic assessment that Japan continued moderate recovery trend, exports recovery had paused, and business investment was on a moderate rising trend. The only admission of slower growth was in assessment of consumption with a warning that weak developments were seen in some indicators. Likewise, the central bank only added ¥300B in zero rate lending facility to areas impacted by this month's earthquake. Traders now await Gov Kuroda's press conference at 06:30GMT to clarify the reasons behind the central bank's lack of action.

- Earlier, NZD spiked up about 1 big figure on RBNZ decision to leave rates at 2.25%. Although this was expected, the majority in the hold camp was slight and fixed income markets actually priced in a 53% chance of another 25bp cut after last month's surprise move. In its statement, RBNZ did acknowledge that outlook for global growth has deteriorated over recent months, but also noted reduced volatility in financial markets, strong inward migration in New Zealand, and slight improvement in the dairy sector. Overall commentary was perceived as more neutral than expected, suggesting Gov Wheeler may not be in a rush to add to already "considerable quantitative easing."

- Samsung Electronics put out its final Q1 results that were largely in line with prelim forecasts earlier this month. Shares were down however, as Samsung warned DRAM capex would fall and overall 2016 demand in the smartphone space was weak.

 

Equities

US equities/ADRs:

- DLB: Reports Q2 $0.82 v $0.46e, R$274M v $265Me; +9.5% afterhours

- FB: Reports Q1 $0.77 v $0.63e, R$5.38B v $5.23Be; Announces Proposal for New Class of Stock (class C); +9.1% afterhours

- PPC: Reports Q1 GAAP $0.46 v $0.47e, R$1.96B v $1.98Be (2 est); +6.7% afterhours

- PYPL: Reports Q1 $0.37 v $0.35e, R$2.54B v $2.50Be; +2.1% afterhours

- MAR: Reports Q1 $0.87 v $0.84e, R$3.77B v $3.67Be; +1.8% afterhours

- TXN: Reports Q1 $0.65 v $0.62e, R$3.01B v $2.98Be; +1.0% afterhours

- CAKE: Reports Q1 $0.68 v $0.60e, R$554M v $556Me; +0.9% afterhours

- NE: Reports Q1 $0.31 (adj) v $0.34e, R$612M v $643Me; -0.7% afterhours

- FSLR: Reports Q1 GAAP $ v $0.91e, R$848M v $962Me; -3.1% afterhours

- ORLY: Reports Q1 $2.59 v $2.49e, R$2.1B v $2.06Be; -3.3% afterhours

- XLNX: Reports Q4 $0.54 v $0.52e, R$571M v $566Me; -3.4% afterhours

- RCII: Reports Q1 $0.48 v $0.40e, R$835.7M v $851Me; -4.2% afterhours

- PRXL: Reports Q3 $0.89 v $0.89e, R$527M v $523Me; -8.6% afterhours

Notable movers by sector:

- Consumer discretionary: Pacific Brands PBG.AU +23.4% (acquisition from Hanesbrands); Stockland SGP.AU -1.6% (Q3 result); Thorn Group TGA.AU -19.9% (write off goodwill)

- Financials: China Vanke Co 2202.HK -0.2% (Q1 result); China CITIC Bank 998.HK +0.2% (Q1 result)

- Industrials: Hyundai Engineering and Construction 000720.KR +1.7% (Q1 result); Broadspectrum BRS.AU +6.7% (affirms guidance); Nippon Yusen 9101.JP +1.7% (FY15/16 result); Toyota Industries Group 6201.JP +3.6% (FY15/16 result);

- Technology: Samsung Electronics 005930.KR -2.5% (Q1 final result); LG Innotek 011070.KR -4.1% (Q1 result); Denso Corp 6902.JP +0.2% (FY15/16 result); Mazda Motor Corp 7261.JP +4.8% (FY15/16 result); Komatsu 6301.JP +4.7% (FY15/16 result)

- Materials: Maanshan Iron & Steel 600808.CN -0.7% (Q1 result); Independence Group IGO.AU -10.3% (Q3 result)

- Energy: Beach Energy BPT.AU +0.3% (Q3 result); China Coal Energy 1898.HK -1.9% (Q1 result)

- Healthcare: Guangzhou Baiyunshan Pharmaceutical Holdings Co 874.HK +0.6% (Q1 result)

- Telecom: SK Telecom 017670.KR +3.4% (Q1 result)