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Thursday March 20, 2014 - 07:07:01 GMT
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| | Email Asian Market Update: Equities slump as Yellen zings expectations of low rates by pinning a 6-month tag on "considerable period" between the end of QE and higher rates - Source TradeT

***Economic Data*** - (NZ) NEW ZEALAND Q4 GDP Q/Q: 0.9% V 0.9%E; Y/Y: 3.1% V 3.1%E - (AU) AUSTRALIA FEB RBA FX TRANSACTIONS MARKET (A$): 369M V 362M PRIOR - (JP) Japan investors bought 143.1B in foreign bonds last week (1st net purchase in 3 weeks) vs sold net 618.5B in prior week; Foreign Investors sold net 1.1T in Japan stocks v bought net 383.8B in prior week Market Snapshot (as of 03:30 GMT): - Nikkei225 -0.5%, S&P/ASX -0.9%, Kospi -0.8%, Shanghai Composite +0.4%, Hang Seng -0.8%, Jun S&P500 -0.2% at 1,848, Apr gold -0.7% at $1,332, May crude oil +0.2% at $99.40/brl ***Highlights/Observations/Insights*** - Asian markets are lower nearly across the board, tracking the post-Fed selloff in US indices. Fed chair Janet Yellen, who came into her new role as renown dove, spooked investors when, during Q/A, she estimated the "considerable period" of low rates at the end of QE as a mere 6 months, potentially placing the first rate hike some time in Q2 of 2015. Fixed income markets had been looking well into H2 of next year for the first move in the fed funds. Predictably, the yield-curve narrowed with a spike on the short end, USD rallied dramatically, gold/silver sold off, and equities fell into the close. S&P emini futures are pointing to more weakness on Thursday, down 6 handles or 0.3% around 1,846. - Outside of the ripple from the first Yellen conference, the Fed also removed its 6.5% unemployment threshold in favor of more "qualitative" guidance that would include outlook for inflation among other factors. The Fed statement also announced that the committee "judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions", which eschews the recent spate of soft NFP prints and diminishes other weak economic datapoints as a function of the cold weather. Updated staff projections from the Fed came down on the mid-point for GDP estimates by 0.1pt in all three years surveyed (2014-16), but also forecasted lower projections for unemployment by a wider margin in that time frame. Despite the more hawkish than expected statement and the Yellen slip, a press report citing a survey of 17 primary dealers saw a substantial majority continue to expect the first rate hike in H2 of 2015. - Shanghai Composite is the only market in the green, receiving a boost from a press report that China State Council will accelerate construction projects and other measures to help stabilize economic growth as soon as possible. A call to action comes in the wake of another troubling forecast from China Academy of Social Sciences (CASS) researcher estimating 2016-20 GDP rates could fall as low as 6.2%. Trading in both onshore and offshore Yuan was once again volatile, helped by the dollar boost from the Fed, with both CNY and CNH falling through that critical 6.20 handle where analysts estimate the trigger of target redemption forward (TRF) contracts which, in turn, could accelerate the wave of corporate debt restructuring. - In Tokyo, Japan Automobile Manufacturers Association (JAMA) announced that new vehicle sales in FY14/15 will fall about 15% to 4.75M as higher sales tax goes into effect on April 1st. This is the first time that sales would dip below 5M units in 3 years, which is said to be the threshold deemed essential for maintaining domestic production levels. In turn, that could tighten the labor market in the auto industry, detracting from the progress made by the unions on boosting base wages for carmaker employees. An analyst with Fitch was more upbeat, noting the rise in consumption tax will not kill the economic recovery. Also of note, Nikkei225 is down on the day, decoupling from broad weakness in the Yen that typically spurs a more bullish action in Japan. - New Zealand Q4 GDP was in line with consensus but down on sequential basis, with q/q increase of 0.9% falling from downwardly revised 1.2% (initial Q3 was 1.4%). Consumption expenditure and exports components strengthened, while govt spending and Capex slowed dramatically. ***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 - (CN) PBoc to drain CNY26B in 28-day repos (10th consecutive drain); Drains net CNY48B this week v drained CNY40B prior (6th week of drain) >- (CN) PBoC sets yuan mid point at 6.1460 v 6.1351 prior setting (weakest Yuan setting since Nov 6th) - (CN) USD/CNY: Offshore Yuan (USD/CNH) falls thru 6.20 level (weakest since Apr 2013) - USD-bullish action after the FOMC was largely consolidated in the Asia session. EUR/USD traded around its 1-week lows near $1.3830, USD/JPY got up as high as 102.60 before pulling back to 102.20, and GBP/USD hit 5-week lows below 1.6540. AUD and NZD sustained relatively largely losses, falling 0.3% and 0.4% against USD respectively in Asia, with added NZD weakness coming after Q4 GDP. AUD/USD fell as low as $0.90 - off by some 120pips from pre-FOMC levels, while NZD/USD low of 0.8520 is down 110pips. Gold fell as low as $1,327 but since rallied to $1,334. ***Equities*** US markets: - MLHR: Reports Q3 $0.34(adj) v $0.34e, R$455.9M v $460Me; +5.5% afterhours - JBL: Reports Q2 $0.10 v $0.11e, R$3.57B v $3.75Be; +3.5% afterhours - KODK: Reports Q4 net loss $63M v loss 402M y/y; Rev $607M v $739M y/y (no ests); +2.4% y/y - CTAS: Reports Q3 $0.69 v $0.70e, R$1.13B v $1.14Be; +0.7% afterhours - GES: Reports Q4 $0.83 v $0.80e, R$768.4M v $773Me; Raises quarterly dividend 12.5% to $0.225/shr from $0.20/shr; -6.2% afterhours Notable movers by sector: - Consumer Discretionary: Liaoning Shidai Wanheng 600241.CN -1.3% (FY13 results); VODone Ltd 82.HK -3.5% (FY13 results); Myer Holdings MYR.AU -5.1% (H1 results) - Financials: Financial Street Holdings 000402.CN +2.4% (FY13 results); Wuzhou International Holdings 1369.HK +5.2% (FY13 results) - Materials: Minfeng Special Paper 600235.CN -1.0% (FY13 results); Panoramic Resources PAN.AU -5.9% (shareholder cuts stake) - Industrials: BYD Corp 1211.HK -8.0% (FY13 results); Shenzhen Expressway 548.HK -2.0% (prelim FY13 results); Toyota Motor Corp 7203.JP -0.6% (to pay $1.2B to resolve criminal probe) - Technology: Tencent Holdings 700.HK +0.5% (Q4 results); Automated Systems Holdings 771.HK -16.4% (profit warning); Brambles Limited BXB.AU -1.6% (update on discussions with Goodpack) - Utilities: Sungrow Power Supply 300274.CN +2.7% (FY13 results); TEPCP 9501.JP -4.2% (Fukushima update) - Source


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