PBOC conducts liquidity operations ahead of Lunar New Year holiday

Asia Market Update: Asian equity markets trade generally lower ahead of the expected signing of the US/China phase 1 deal on Jan 15th; PBOC conducts liquidity operations ahead of Lunar New Year holiday [as speculated].

 

General Trend:

- US President Trump is expected to participate in the signing ceremony for the phase 1 US/China trade deal at 11:30 AM ET on Wed (Jan 15th). The ceremony is expected to be held at the White House

- Shanghai Composite and Hang Seng underperform into the expected signing of phase 1 trade deal; Some press outlets have focused on what happens to the tariffs on China that are still in effect

- Financials and property shares decline in Shanghai and Hong Kong as PBOC left its MLF rate unchanged

- Australian equities outperform, gainers include Consumer Discretionary and Energy firms

- Decliners in Japan include the trade-sensitive Marine/Transportation index

- Japanese video game company Square Enix drops over 4% on delay of release dates

- LG Chemical said to have been unable to reach an agreement to sell its LCD glass substrate business to Corning (local press)

- Malaysia Airlines suspended 737 Max orders that were expected in 2020, noted the lack of clarity on when authorities will allow the plane to return to service

- Indonesia exports rose in Dec (first rise since 2018)

- US companies expected to report earnings later today include Bank of America, BlackRock, Goldman Sachs, PNC, UnitedHealth

 

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opened 0.0%

- (NZ) New Zealand Dec Food Prices m/m: -0.2% v -0.7% prior

- RSG.AU To sell Ravenswood mine to consortium that includes EMR Capital and Golden Energy and Resources for up to A$300M

- (AU) Australia sells A$400M v A$400M indicated in 2.75% April 2024 bonds, avg yield 0.8481% v 0.7492% prior, bid to cover 6.54x v 3.54x prior

Japan

- Nikkei 225 opened -0.4%

- (JP) Bank of Japan (BOJ) Gov Kuroda: Economy is on moderate expanding trend; CPI to gradually rise to target; reiterates will not hesitate to take additional easing steps if risks grow and momentum towards CPI target is lost

- 4502.JP FDA grants orphan drug designation to Baxalta for treatment of Hemophilia B

- (JP) US, EU and Japan agreed that existing World Trade Organization (WTO) rules were insufficient to tackle market distortions from subsidies

- 9684.JP Square Enix delays some video game release dates

- (JP) Japan MoF sells ¥1.9T v ¥1.9T prior in 0.1% coupon 5-year JGB: avg yield: -0.087% v -0.083% prior, bid to cover: 4.48x v 4.00x prior (highest btc since August)

- (JP) Bank of Japan (BOJ) Regional Economic Report: cuts assessment of 3 of 9 regions, maintains 6 unchanged

Korea

- Kospi opened -0.4%

- (KR) South Korea Dec Export Price Index M/M: +0.8% v -2.2% prior; Y/Y: -3.1% v -6.5% prior

- 000270.KR Workers tentatively agree to revised wage offer to raise basic monthly wage by KRW40K and give bonuses worth 1.5 months wages plus cash of KRW3.2M per worker

- (KR) South Korea Dec Unemployment Rate: 3.8% v 3.6%e; Add 516K jobs v 331K prior

- (KR) South Korea Finance Min Hong: Rise in jobs is 'very encouraging' - comments after Dec employment data

China/Hong Kong

- Hang Seng opened 0.0%; Shanghai Composite opened -0.1%

- (CN) China PBoC Open Market Operation (OMO): Injects CNY100B via 14-day reverse repos v skips prior; Net injection CNY100B v drain CNY0B prior

- (CN) CHINA PBOC CONDUCTS CNY300B V CNY300B PRIOR IN 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) OPERATIONS AT 3.25% V 3.25% PRIOR; NET INJECTION CNY300B V CNY14B PRIOR

- (CN) US China phase 1 trade deal to be signed at 11:30 ET Wednesday, Jan 15th

- (CN) China Premier Li: China will smooth out monetary policy transmission mechanisms, give full play to multiple tools including the RRR to lower the financing costs of enterprises, especially manufacturing, private, small and micro businesses - Xinhua

- (CN) Reportedly US officials have no plans to cut China duties further now; will verify China deal adherence of 'Phase 1' before considering further reduction of existing tariffs – press

- (CN) China PBOC sets Yuan Reference Rate: 6.8845 v 6.8954 prior

- (HK) Hong Kong to announce more measures to tackle "deep seated issues"

North America

- (CN) US Treasury Sec Mnuchin: There are no side agreements in phase 1 China trade deal; structural reforms under phase 2 trade deal could lead to additional Chinese purchases - Fox

- (US) Sec of Defense Esper: US, Japan and South Korea to maintain joint military drills; US aims to counter China's destabilizing behavior in the area - press conf with Japan Defense Min Taro

- (CN) US Treasury Sec Mnuchin: Will review tariffs on China after phase 2 trade deal is signed; China has made strong commitments it will not manipulate its currency

Europe

- ASM.NL Reports prelim Q4 Rev 'slightly exceeded high end of €310-330M guidance', reports prelim Q4 order intake €370M (prior guidance range €290-310M)

 

Levels as of 12:15ET

- Hang Seng -0.8%; Shanghai Composite -0.7%; Kospi -0.5%; Nikkei225 -0.6%; ASX 200 +0.5%

- Equity Futures: S&P500 -0.2%; Nasdaq100 -0.3%, Dax -0.5%; FTSE100 -0.2%

- EUR 1.1134-1.1125; JPY 110.02-109.81; AUD 0.6905-0.6892; NZD 0.6616-0.6604

- Commodity Futures: Gold +0.5% at $1,552/oz; Crude Oil -0.3% at $58.05/brl; Copper -0.7% at $2.85/lb