Deeper then expected Australia Q3 contraction renews speculation over need of more stimulus

US Session Highlights

- (US) OCT TRADE BALANCE: -$42.6B V -$42.0BE

- (US) Q3 FINAL NONFARM PRODUCTIVITY: 3.1% V 3.3%E; LABOR COSTS: 0.7% V 0.3%E

- (US) OCT FACTORY ORDERS: 2.7% V 2.6%E (sharpest one-month gain since June 2015)

- (US) OCT FINAL DURABLE GOODS ORDERS: 4.6% V 3.4%E; DURABLES EX TRANSPORTATION: 0.8% V 0.5%E

 

US markets on close: Dow +0.2%, S&P500 +0.3%, Nasdaq +0.5%

- Best Sector in S&P500: Financials

- Worst Sector in S&P500: Utilities

- Biggest gainers: ADSK +7.2%, NFLX +4.5%, BWA +4.5%, KMX +4.2%, UAL +4.0%

- Biggest losers: CMG -7.6%, IPG -3.0%, NKE -2.5%, ISRG -2.4%, HUM -2.2%

- At the close: VIX 11.8 (-0.4pts); Treasuries: 2-yr 1.12% (flat), 10-yr 2.40% (+1bps), 30-yr 3.08% (+2bps)

 

US movers afterhours

- ANTH: Reports Blisibimod BRIGHT-SC IgA Nephropathy continues to demonstrate positive trends in the week 48 analysis; +15.7% afterhours

- PLAY: Reports Q3 $0.25 v $0.13e, R$228.7M v $217Me; +12.5% afterhours

- WDC: Raises Q2 $2.10-2.15 v $1.78e, R$4.75B v $4.71Be, Non-GAAP gross margin 36% (prior $1.85-1.95, R$4.71B, gross margin 35%) - investor day; +4.8% afterhours

- POWL: Reports Q4 $0.54 v $0.03e, R$129.8M v $120Me (only 1 est.); +1.8% afterhours

- HQY: Reports Q3 $0.10 v $0.12e, R$43.4M v $43.3Me; -4.4% afterhours

- AVAV: Reports Q2 -$0.18 v $0.00e, R$50.1M v $52.4Me; -9.9% afterhours

 

Politics

- (FR) According to BVA poll, nationalist Le Pen would get 24-26% of votes in 1st round of Presidential election voting v Conservative Fillon 23-29%; In expected head-to-head race, Fillon would beat Le Pen with 67% of votes to her 33% - press

- (US) President-elect Trump formally appoints retired Marine general James 'Mad-Dog' Mattis for Secretary of Defense

 

Asia Session Notable Observations, Speakers and Press

- Volatility compressed across asset classes with exception of Aussie dollar, bonds, and indices. Much weaker than expected contraction in Q3 GDP of -0.5% (first contraction in 5 years) V -0.1%E and Y/Y: 1.8% V 2.2%E (lowest annual pace since 2008) has given a snapshot of a more troubling transition away from mining to other sectors down under. Among key components, Capital Formation contracted for the 12th straight quarter at -2.7%, while consumption (over 50% of economy) saw much weaker growth of +0.3% v +0.8% prior. The disappointing growth figure is especially precarious given that the govt is reluctant to implement more aggressive fiscal stimulus as it seeks to preserve its AAA rating going into Dec-Jan release of MYEFO budget, while the RBA has been rather neutral and could still write off the Q3 print as a one-off anomaly. AUD/USD fell about 50pips on the release below 0.7420, 3-year and 10-year bond yields were down 3bps and 5bps respectively, while S&P/ASX200 outperformed regional indices on differing expectations of monetary or fiscal response.

- Economists ranged in their expectations of policy response: AMP notes pressure is on RBA to ease as fiscal measures likely to be limited, UBS and Barclays see RBA looking forward to improved 2017, while Citigroup notes that because the decline is much deeper than expected, the case for fiscal stimulus is more pronounced

China:

- (CN) According to analysts with Standard Chartered, PBOC could raise interest rate offered in reverse repurchase operations to contain yuan depreciation pressures

- (CN) Goldman Sachs sees China 2017 GDP growth at 6.5%; Sees 2016 GDP at 6.7% - China Daily

- (CN) China state researcher Wang Yiming expects 2017 growth to be stable - Chinese press

- (CN) Fitch: Not expecting a hard landing in China

Japan:

- (JP) BoJ Deputy Gov Iwata: To continue expanding monetary base; Inappropriate to think BOJ not focused on quantity of easing; Will not hesitate to take additional easing steps if needed; Firms are more cautious about raising prices than last year.

 

Asia Key economic data:

- (AU) AUSTRALIA Q3 GDP Q/Q: -0.5% (first contraction in 5 years) V -0.1%E; Y/Y: 1.8% V 2.2%E (lowest annual pace since 2008)

- (AU) AUSTRALIA NOV AIG PERFORMANCE OF CONSTRUCTION INDEX: 46.6 V 45.9 PRIOR (2nd straight month of contraction)

 

Asian Equity Indices/Futures (00:00ET)

- Nikkei +0.6%, Hang Seng +0.3%, Shanghai Composite +0.2%, ASX200 +0.9%, Kospi flat

- Equity Futures: S&P e-mini flat, Dax -0.1%, FTSE100 flat

 

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

- EUR 1.0710-1.0725; JPY 113.95-114.30; AUD 0.7475-0.7415; NZD 0.7100-0.7125

- Feb Gold -0.1% at 1,169/oz; Jan Crude Oil -0.7% at $50.59/brl; Mar Copper -0.2% at $2.66/lb

- (US) Weekly API Oil Inventories: Crude: -2.2M v -0.7M prior; 3rd consecutive draw

- (JP) BOJ offers to buy ¥400B in 1-3 yr JGBs; ¥420B in 3-5yr JGBs; ¥410B in 5-10 yr JGBs

- (AU) Australia Finance Ministry (AOFM) sells A$900M in 1.75% 2020 bonds; avg yield 2.095%; bid-to-cover 4.29x

- (KR) South Korea sells KRW1.7T in 2-year monetary stabilization bonds (MSB); avg yield 1.72% v 1.61% prior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8808 V 6.8575 PRIOR; biggest margin of weakness since Nov 11th

 

Asia equities/Notables/movers by sector

- Consumer discretionary: Huayi Brothers Media Corp 300027.CN +2.3% (terminate asset restructuring plan)

- Financials: CITIC Securities 6030.HK +0.4% (Nov result)

- Industrials: Great Wall Motor 2333.HK +3.6% (Nov result); Guangzhou Automobile Group 2238.HK -1.8% (Nov result); Hanjin Shipping Co 117930.KR -4.2% (SM Group to withdraw bid); GrainCorp GNC.AU +2.2% (Macquarie raised to outperform);

- Technology: HTC Corp 2498.TW -2.9% (Nov result)

- Materials: Sandfire Resources SFR.AU -0.8% (JPMorgan cuts to neutral)

- Energy: China Longyuan Power Group 916.HK +2.5% (Nov result); Idemitsu Kosan 5019.JP +1.7%, Showa Shell 5002.JP +0.9% (tie-up speculation); Origin Energy ORG.AU -2.7% (Citi cuts to neutral)

- Telecom: TPG Telecom TPM.AU +7.4% (affirms guidance); Softbank 9984.JP +.7% (Trump/Masa announcement US investment); Coolpad Group 2369.HK -13.8% (transfer to brick and mortar sales format)