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Monday March 10, 2014 - 05:55:58 GMT
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| | Email Asian Market Update: Soft China CPI and surprise trade deficit weigh on sentiment - Source

- (CN) CHINA FEB TRADE BALANCE: -$23.0B V +$14.5BE (first trade deficit in 11 months; largest deficit in 2 years; 2nd largest deficit on record) >- (CN) CHINA FEB CONSUMER PRICE INDEX (CPI) Y/Y: 2.0% V 2.1%E (13-month low); M/M: 0.5% v 1.0% prior - (CN) CHINA FEB PRODUCER PRICE INDEX (PPI) Y/Y: -2.0% V -1.9%E (24th month of decline; Biggest decline in 7 months) - (JP) JAPAN Q4 FINAL GDP Q/Q: 0.2% V 0.2%E; NOMINAL GDP Q/Q: 0.3% V 0.4%E; GDP ANNUALIZED Q/Q: 0.7% V 0.9%E >- (JP) JAPAN JAN CURRENT ACCOUNT BALANCE: -1.59T (record high defict for 3rd straight month) V -1.41TE; ADJ CURRENT ACCOUNT: -588.3B V -549BE; TRADE BALANCE BOP BASIS: -2.35T V -2.59TE - (JP) JAPAN FEB BANK LENDING INCL TRUSTS Y/Y: 2.2% V 2.4%E; BANK LENDING EX-TRUSTS Y/Y: 2.4% V 2.5% PRIOR - (NZ) NEW ZEALAND Q4 MANUFACTURING ACTIVITY VOLUME Q/Q: 5.7% (biggest gain in 19 years) V 1.3% PRIOR; MANUFACTURING ACTIVITY Q/Q: 6.3% V 6.2% PRIOR (biggest gain in 6years) Market Snapshot (as of 03:30 GMT): - Nikkei225 -1.0%, S&P/ASX -0.9%, Kospi -0.8%, Shanghai Composite -1.4%, Hang Seng -1.4%, Mar S&P500 -0.3% at 1,872, Apr gold -0.3% at $1,333, Apr crude oil -0.1% at $102.45/brl ***Highlights/Observations/Insights*** - Soft weekend economic data from China have once again put a dent in the seemingly resilient economic sentiment from last week. February terms of trade saw its first contraction in nearly a year and also the biggest deficit in 2 years, as exports surprisingly fell 18.1%. Shipments to US, EU, and Japan were all down double digits despite the expectations of rising demand from improving economic conditions in those markets. Stats bureau was quick to attribute the deficit to the distortions caused by the timing around the Lunar New Year, so the jury on the China trade as a gauge of global demand may still be out until March figures. Meanwhile, China CPI also came in surprisingly tame, with annual CPI hitting a 13-month low of 2.0%. Local press has surmised the February data may force the govt into a fiscal stability policy, and several analysts also hinted that weak economy may persuade the increasingly-hawkish PBoC to decelerate its mopping up of excess liquidity to forestall the risk of deflation. - Japan revised its Q4 GDP to a final figure of 0.2% from 0.3% q/q and 0.7% on annualized basis vs 1.0% prelim. Corporate CAPEX component saw its biggest change in the revision, slowing to 0.8% q/q growth vs 1.3% initially reported and raising further questions over the efficacy of Abenomics and its glaring need of "3rd arrow" structural reform. HSBC economist interviewed after the release of the final Q4 GDP also expressed concern about Japan's rising trade deficits, potentially forcing the BOJ into action sooner than expected. BOJ concludes its 2-day meeting with a formal statement on monetary policy tomorrow. While no change is expected, traders will tune in for Gov Kuroda's accompanying statement for insight into the latest disappointing round of data. Note that Japan's current account and balance of payments trade also hit record deficit levels. - Situation in the Crimean peninsula remained tense over the weekend, with reports of another takeover of an airport by unidentified troops. Russian Pres Putin held talks with Chancellor Merkel on Sunday, reiterating the belief that the referendum vote planned for Crimea next Sunday is based on international law and "aimed at guaranteeing the legitimate interests of the peninsula's population," just as Merkel maintained that the vote violates Ukraine constitution and will not be recognized by western powers. US President Obama is welcoming Ukraine PM Yatsenyuk to the White House on Wednesday to help add legitimacy to the new govt in the eyes of the skeptical eastern region, while the US Defense Dept has ordered a dozen F-16 fighter jets and 300 US service personnel to Poland to take part in military exercises amid the apparent escalating tensions with Moscow. - May copper contract was exceptionally volatile in the early part of electronic trade, briefly falling by over 2.5% below $3.00/lb before recovering much of its lost ground. Copper and iron ore have come under pressure on Friday as well following confirmation of a China corporate default, and sellers re-emerged in the Asia session after the soft China trade components showing large sequential losses in copper shipments. ***Fixed Income/Commodities/Currencies*** - (JP) BOJ offers to buy 250B in 1-3yr JGB, 250B in 3-5yr JGB and 400B in 5-10yr JGB - USD/CNY: (CN) PBoC sets yuan mid point at 6.1312 v 6.1201 prior setting (weakest Yuan setting since Dec 3rd) - (KR) South Korea sells 5-yr govt at 3.215% - GLD: SPDR Gold Trust ETF daily holdings rise 1.5 tonnes to 805.2 tonnes (3-week high) - Yen pairs are under modest pressure given the overall risk aversion in the equity markets after the soft China data, which is also weighing on the AUD currency. AUD/USD fell about 30pips below $0.9040 and USD/JPY briefly tested below the 103 handle, down about 25pips from Friday close. NZD remains resilient and trading flat around $0.8460, as investors brace for RBNZ to become the first central bank from a major developed economy to raise interest rates. ***Equities*** US markets: - URI: To acquire National Pump s for about $780M; Raises FY14 EBITDA to $2.55-2.65B from $2.45-2.55B prior forecast; Rev to $5.45-5.65B v $5.36Be (prior forecast $5.25-5.45B) - BA: Reportedly planning to inspect 787 Dreamliner aircraft wings of planes that have yet to be delivered to clients following a client complaint; May cause some delivery delays but will not impact FY14 revenue and delivery guidance - press; Malaysia Airlines Flight MH370 en route from Kuala Lumpur to Beijing missing and believed to be lost in the South China Sea; Japan Airlines-operated Dreamliner flight from Tokyo to San Francisco made emergency landing in Hawaii due to possible problem with hydraulic system - press Notable movers by sector: - Consumer Discretionary: Wuliangye Yibin 000858.CN -1.7% (prelim FY13 results); Skyworth Digital 751.HK -3.3% (Feb sales results) - Financials: Poly Real Estate Group 600048.CN -2.8% (Feb sales results) - Materials: Anhui Fangxing Science & Technology 600552.CN +0.8% (FY13 results); Fortescue Metals Group FMG.AU -7.8%, BHP Billiton BHP.AU -3.5%, Rio Tinto RIO.AU -5.1% (commodity futures trade down in China, after first debt default, as well as trade deficit in China) - Industrials: China Southern Airlines 1055.HK -3.9%, Air China 753.HK -1.8%, Cathay Pacific Airways 293.HK -1.6%, China Eastern Airlines 670.HK -1.9% (flight from Malaysia Airlines disappears in the South China Sea); China Rongsheng Heavy Industries Group 1101.HK -2.7% (FY13 results); Leighton Holdings LEI.AU +11.1% (receives proportional bid from Hochtief); Jiangsu WELLE Environmental 300190.CN +10.0% (FY13 results) - Technology: Tencent Holdings 700.HK -1.0% (acquires stake in - Source


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