China trade surplus eases to 9-month lows

Asia Mid-Session Market Update: China trade surplus eases to 9-month lows; BOK on hold with an eye on recovery in H2

US Session Highlights

- (US) INITIAL JOBLESS CLAIMS: 247K V 255KE; CONTINUING CLAIMS: 2.087M V 2.09ME

- (US) DEC IMPORT PRICE INDEX M/M: 0.4% V 0.7%E; Y/Y: 1.8% V 1.8%E

- (US) Fed's Harker (hawk, voter): reiterates support for three 'modest' hikes in 2017 - comments in Pennsylvania

- (US) Fed's Lockhart (non-voter): cyclical portion of the recovery has largely played out; the economy is in a place where it can withstand gradual rate hikes - Q&A

- (US) Fed's Evans: US neutral rate is likely around 3%; balance sheet to be addressed when hikes are well underway

 

US markets on close: Dow -0.3%, S&P500 -0.3%, Nasdaq -0.2%

- Best Sector in S&P500: Utilities

- Worst Sector in S&P500: Industrials

- Biggest gainers: TIF +3.6%, AA +3.4%, ABC +2.9%, DISCA +2.6%, LLY +2.5%

- Biggest losers: CINF -6.7%, HES -4.8%, FCX -3.8%, PNC -2.8%, XEC -2.6%

- At the close: VIX 11.5 (+0.3pts); Treasuries: 2-yr 1.19% (+2bps), 10-yr 2.36% (-1bps), 30-yr 2.96% (flat)

 

US movers afterhours

- P: Guides Q4 'to exceed' R$362-374M v $372Me, adj EBITDA -$51M to -$39M; surpasses 4.3M paid subscription customers; plans to cut US employee base by 7% by end of Q1; +7.8% afterhours

- NVLS: Announces corporate restructuring that affects 25 employees; CEO Congleton to step down; effective Jan 15th; +3.2% afterhours

- AAP: Cramer speculates as potential takeover target - CNBC's "Mad Money"; +1.5% afterhours

- APC: Announces sale of Eagleford Shale assets for $2.3B; +0.1% afterhours

- TWO: Files to sell $250M conv unsecured 2022 notes through Credit Suisse; -1.3% afterhours

- HMST: Guides Q4 $0.07-0.09 v $0.49e; Guides FY16 $2.34-2.36 v $2.73e; -3.1% afterhours

 

Politics

- (US) House Speaker Ryan: Don't have a date to replace Obamacare provisions, but it will definitely be in the first 100 days - CNN Town Hall

 

Asia Key economic data:

- (CN) CHINA DEC TRADE BALANCE (USD TERMS): $40.8B V $47.6BE (9-month low)

- (CN) CHINA DEC TRADE BALANCE (CNY-TERMS): 275B V 344.5BE (9-month low)

- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED

- (JP) Japan Dec M2 Money Stock Y/Y: 4.0% v 4.1%e; M3 Money Stock Y/Y: 3.4% v 3.5%e

- (NZ) NEW ZEALAND DEC CARD SPENDING M/M: -0.1% V +1.0%E; TOTAL M/M: 0.0% V -0.3% PRIOR

- (SG) SINGAPORE NOV RETAIL SALES M/M: 0.5% V 0.2%E; Y/Y: 1.1% V 1.7%E

- (PE) PERU CENTRAL BANK LEAVES REFERENCE RATE UNCHANGED AT 4.25%

 

Asia Session Notable Observations, Speakers and Press

- Asian equity indices are mixed once again in the final session of the week; Nikkei225 is among the top performers thanks to weaker JPY, as USD/JPY is up for the first time in 5 trading sessions; S&P/ASX200 is under pressure, weighed down by the mining names in the wake of disappointing China trade data; Australia's energy is faring better on oil price recovery, though gold miners are down with precious metal falling about $10 back below $1,200.

- USD majors also mixed - USD/JPY is off the lows with about a 50pip rise above ¥115 and AUD/USD falling over 20pips below $0.7480.

- China trade data saw mixed-negative results - both USD and CNY terms trade balance surplus slowed to 9-month low, but currency played a part in components; In USD terms, Exports fell more than expected at -6.1% v -4.0%e and imports were in line around +3%; In CNY, Exports were slightly better than expected at +0.6% v -0.1%e and Imports were even stronger at +10.8% v +4.2%e. China Customs officials noted there were uncertainties in trading conditions in 2016, and 2017 will retain big downward pressure on China's economy amid the threat of rising protectionism.

- Bank of Korea kept rates on hold for the 8th straight time at 1.25%; In a unanimous desision, BOK also cut its 2017 GDP and CPI forecasts from 2.8% to 2.5% and from 1.9% to 1.8% respectively, but forecast a gradual rise in inflation. Gov Lee remarked that expectations of an improvement in H2 kept the BOK from considering another rate cut.

China:

- (CN) China Customs spokesman: China economy still faces big downward pressure in 2017

- (CN) China Ambassador to US, Cui: China determined to build stronger and stable relationship with US

- (CN) China NDRC official: to continue cutting steel and coal overcapacity - financial press

- (CN) Former SAFE official Guan Tao: Yuan move last week was not due to the PBOC intervention - Shanghai Securities News

- (CN) China State-owned Assets Supervision and Administration Commission (SASAC) chief Xiao Yaqing: Targets SOE profit of 3-6% in 2017; To boost controls of debt risks at SOEs - Chinese press

Japan:

- (JP) BOJ Quarterly Public Opinion of Household Sentiment: Maintains view of 2% inflation in both 1-year and 5-year time frames

 

Asian Equity Indices/Futures (00:30ET)

- Nikkei +0.7%, Hang Seng +0.4%, Shanghai Composite -0.3%, ASX200 -0.8%, Kospi -0.5%

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

 

FX ranges/Commodities/Fixed Income (00:30ET)

- EUR 1.0600-1.0620; JPY 114.55-115.20; AUD 0.7475-0.7510; NZD 0.7090-0.7125

- Feb Gold -0.5% at 1,192/oz; Feb Crude Oil +0.1% at $53.05/brl; Mar Copper -0.3% at $2.66/lb

- (AU) Australia Finance Ministry (AOFM) sells A$600M in 1.75% 2020 bonds; avg yield 2.052%; bid-to-cover 5.35x - USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8909 V 6.9141 PRIOR; 2nd straight firmer setting

- (CN) PBOC to inject combined CNY70B in 7-day and 28-day reverse repos v CNY110B prior; Injects net CNY100B this week v drained CNY595B prior

 

Asia equities/Notables/movers by sector

- Consumer staples: Bellamy's Australia BAL.AU -7.5% (momentum)

- Financials: Seven & I Holdings 3382.JP +8.8% (Q3 result); BT Investment Management BTT.AU -2.1% (Dec result); China Galaxy Securities Co 6881.HK +0.4%, China Resources Land 1109.HK +0.6% (Dec result); China Vanke Co 000002.CN +7.1%, 2202.HK +5.6% (China Resources sell stake); Seibu Holdings 9024.JP -4.8% (Cerberus sells voting rights stake)

- Industrials: Great Wall Motor 2333.HK +3.0% (prelim FY16 result); Takata Corp 7312.JP +16.5% (settlement speculation)

- Technology: Nintendo Co. 7974.JP -1.8% (game banned in China, to launch new platform); Samsung Electronics 005930.KR -3.3% (group exec Lee questioned); Taiwan Semiconductor Manufacturing Co 2330.TW -1.6% (guidance)

- Materials: Citic Resources 1205.HK +2.9% (profit alert); Yunnan Chihong Zinc & Germanium Co 600497.CN -2.5% (prelim result); Western Areas WSA.AU -17.8%, Sumitomo Metal Mining 5713.JP -5.1%, Independence Group IGO.AU -9.3% (Indonesia allows some exports of nickel ore, bauxite); Whitehaven Coal WHC.AU +3.0% (CLSA raised to outperform)

- Energy: Sinopec 386.HK +3.6% (Credit Suisse upgrades)