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StreetAccount Summary - Asian Market Recap: Nikkei +0.31%, Hang Seng +0.82%, Shanghai Composite +0.09% as of 04:10 ET

Apr 18 ,2024

• Synopsis:

  • Asian equites finished higher almost everywhere Thursday as early uncertainty reversed. South Korea led the gainers as battery and steel stocks surged on China tariff reports. Hong Kong was also strong along with Singapore. Modest gains for Australia, India and Southeast Asia. Mainland China ended flat while New Zealand's NZX 50 was the only declining index in the region. US futures point to a stronger opening, Europe higher in the first hour of trade. US dollar lower, AUD stronger while yen and yuan remain unchanged. Treasury yields higher at the short end, lower at the long end. Crude blends now lower having been higher earlier. Precious and industrial metals supported.

  • Asia stocks rebounded in Thursday trade despite a shaky start as currencies rallied a little and bond yields dropped from recent highs. Reports US, Japan and South Korea central banks would 'closely consult' over forex markets, and supportive comments from the PBOC on the yuan, was enough to steady regional currencies with a modest fall in the US dollar overnight also helping. Also intraday, US and European futures reversed a negative trend and turned positive, while a calming of Middle East tensions also aided sentiment. Nevertheless, concerns over the China economy remain just as a barrage of headlines over US tariffs on Chinese goods were posted, with protectionist comments over steel, aluminium, shipbuilding, EVs, solar technology et al from Washington overnight rattling nerves and giving South Korean battery makers and steel stocks a significant boost.

  • In other developments, Australian headline employment unexpectedly shrank but jobless rose by less than forecast. BOJ's Noguchi said he wanted monetary policy to remain ultra loose, allowing the yen to weaken from an intraday low. TSMC beat estimates in its quarterly results and gave a better-than-expected outlook statement.

  • A US safety agency has upgraded its probe into braking problems in Honda Motor (7267.JP) vehicles. Nippon Steel's (5401.JP) chances of acquiring US Steel received a blow when President Biden said the company should remain an American company. Histeel (071090.KS) among the South Korea steelmakers to gain Thursday following calls from President Biden to increase steel and aluminium tariffs on Chinese producers; stock more than 25% higher. LG Electronics (066570.KS) plans to raise up to $1B in three- and five-year dollar bonds. TSMC (2330.TT) quarterly revenue and profits beat expectations as Nvidia and AMD drove orders for AI accelerator chips.

• Digest:

  • Biden calls for higher tariffs on Chinese steel:

    • Reuters cited comments by President Biden in Pittsburgh calling for sharp increases in US tariffs on Chinese metal products as part of a package of policies to court steelworker support ahead of the presidential elections. Biden aides said Biden was proposing to raise tariffs on Chinese steel and aluminum to 25% from current 7.5% under Section 301 of the US trade law. A US official said the proposal would apply to more than $1B worth of metals. New levies would add to the 25% Section 232 national security tariffs on steel and aluminum products and product-specific anti-dumping and anti-subsidy duties that often reach into the triple-digits. Biden administration also pressuring Mexico to prohibit China from selling its metal products to the US indirectly, and also launching an investigation into Chinese trade practices across the shipbuilding, maritime and logistics sectors, which could lead to more tariffs. While Biden said this was not a trade war, article noted USTR told Congress there was need for "decisive" action to protect EVs from subsidized Chinese competition, and the administration would also restore some solar tariffs. White House economic adviser Bernstein told CNBC that proposed metal tariffs would not affect US inflation (Reuters).

  • Australian employment shrinks, but data still indicative of tight labor market:

    • Australian March headline employment shrunk 6.6K against expectations of a 10.0K increase following February's outsized 117.6K gain that was put down to one-off factors. Unemployment rate came in at 3.8%, up on February's 3.7% but lower than consensus 3.9% and RBA's H1 forecast of 4.2%. Full-time employment rose 27.9K, offset by 34.5K fall in part-time employment. ABS noted March employment flows returned to more usual pattern though figures still indicative of labor market tightness with participation rate and employment-population ratio close to record highs, and underemployment rate ticking lower again. Monthly hours worked also rose for a second following stretch of declines in late 2023. Data considered unlikely to prompt RBA to change its assessment of a relatively tight labor market, underlining ongoing concerns over elevated unit labor cost growth with productivity weak. Early takeaways noted labor market loosening but at a too gradual pace to justify RBA softening its neutral-to-mildly hawkish bias at next month's meeting.

  • BOJ's Noguchi wanted short-term rates to stay negative, supports broader normalization path:

    • In a speech, board member Noguchi explained the March policy changes where he opposed a simultaneous removal of YCC and negative rates based on the need for careful assessment of whether the virtuous wage/price cycle had solidified as well as the risk of discontinuity in financial conditions. Noguchi elaborated that he wanted to leave short-term rates negative while continuing with JGB purchases, arguing for the need to indirectly maintain suppression of long-term yields, and acquiesced to the decisions under his interpretation that short-term rates would remain around zero. On inflation dynamics, remains unconvinced that wage hikes are feeding through to service prices, which are currently largely driven by the dining sector reflecting higher food prices. Still, Noguchi accepted the broader normalization process and discussed the outlook. On the pace of future rate hikes, stressed the BOJ's expected path would be so gradual, rendering it incomparable to recent moves by other central banks, reflecting the time required to confirm trend inflation reaches 2%. On r-star, noted prevailing views that long-term equilibrium rate should be higher than target inflation, but suggested Japan's level could even be negative based on structural surplus in current account and savings. Remarks on balance sheet run-off were generally receptive, acknowledging the March decisions can be construed as a step in that direction.

  • US, Japan, South Korea officials discuss FX:

    • US Treasury Department released a joint statement with Japan and South Korea following the first meeting of the Trilateral Leaders' Summit with most of the attention on FX discussions. Officials agreed to continue close consultation on FX developments in line with existing G20 commitments, while acknowledging serious concerns of Japan and South Korea about the recent sharp depreciation of their respective currencies. Nikkei cited some analysts interpreting US acknowledgement of concerns as a step closer to FX intervention. Reuters reported Japan Finance Minister Suzuki held a bilateral meeting with Treasury Secretary Yellen, relaying Japan's stance that it is desirable for FX rates to move stably, reflecting fundamentals, and that Japan will respond to excessive currency moves," which Suzuki thought was "well understood." Both Suzuki and FX policy chief Kanda continued to refrain from commenting directly about FX intervention. Bloomberg noted some thoughts that a USD/JPY rate of 160 is on the horizon in the absence of intervention.

  • Yuan depreciation debate continues as strategists see further weakness:

    • Market still no closer to ascertaining China authorities' stance on yuan with offshore RMB recouping recent drop to five month low against dollar. Decline came after PBOC seemed to loosen its defense of the yuan Tuesday with weaker fixing of the daily midpoint. However, monetary authorities have since followed up with two stronger fixings as central banks across Asia grapple with dollar's strength. PBOC report on Thursday reiterated pledge to resolutely correct procyclical behavior of yuan while maintaining basic stability and preventing risk of overshooting. Situation underscores China's bind where downside pressure on RMB is building but authorities remain mindful of not exacerbating outflow pressures. Macquarie strategists forecasting USDCNH rising to 7.30 this quarter (vs current 7.2460), viewing Tuesday's fix and that on 22-Mar as indication PBOC has become more open to depreciation. Strategists see further downside for yuan from any broadening or strengthening of US tariffs. Recall Trump has threatened tariffs of up to 60% while Biden administration is eyeing additional trade actions beyond Chinese steel and aluminum.

  • Notable Gainers:

    • +6.3% 009540.KS (HD Korea Shipbuilding & Offshore Engineering Co.): reports Jan-Mar new orders $10.02B vs year-ago $8.50B

    • +3.0% 002008.CH (Han's Laser Technology Industry Group): reports FY revenue CNY14.09B vs FactSet CNY13.79B, EBIT CNY823.1M vs FactSet CNY565.3M

    • +3.0% 8876.JP (Relo Group): Hikari Tsushin discloses 5.13% stake

    • +0.4% 4185.JP (JSR Corp): Japan Investment Corporation completes acquisition of JSR Corp 175.3M shares for 84.4% voting rights

  • Notable Decliners:

    • -8.3% 3323.HK (China National Building Material): guides Q1 net income attributable (CNY1.30B) vs year-ago (CNY526M)

    • -3.1% 4901.JP (FUJIFILM): guides FY operating income ¥277.00B vs prior guidance ¥290.00B and FactSet ¥285.78B; launches new medium-term management plan "VISION2030"

    • -2.6% 002049.CH (Unigroup Guoxin Microelectronics): reports FY net income attributable CNY2.53B vs FactSet CNY2.75B [2 estimates]

    • -0.7% 8001.JP (ITOCHU): ITOCHU, JWP reportedly to acquire Bigmotor for around ¥60B

    • -0.5% 1928.HK (Sands China): Las Vegas Sands reports Q1 revenue $2.96B vs FactSet $2.94B, adjusted EBITDA $1.21B vs FactSet $1.17B

• Data:

  • Economic:

    • Australia March

      • Employment (6.6K) m/m vs consensus +10.0K and revised +117.6K in January

      • Unemployment rate 3.8% vs consensus 3.9% and 3.7% in February

      • Participation rate 66.6% vs consensus 66.7% and 66.7% in February

  • Markets:

    • Nikkei: 117.90 or +0.31% to 38079.70

    • Hang Seng: 134.03 or +0.82% to 16385.87

    • Shanghai Composite: 2.84 or +0.09% to 3074.22

    • Shenzhen Composite: (1.83) or (0.11%) to 1698.92

    • ASX200: 36.50 or +0.48% to 7642.10

    • KOSPI: 50.52 or +1.95% to 2634.70

    • SENSEX: 173.97 or +0.24% to 73117.65

  • Currencies:

    • $-¥: (0.11) or (0.07%) to 154.2730

    • $-KRW: (7.07) or (0.51%) to 1373.0400

    • A$-$: +0.00 or +0.17% to 0.6446

    • $-INR: (0.12) or (0.14%) to 83.5196

    • $-CNY: (0.00) or (0.01%) to 7.2385