2018Feb

FC: ASIAN CLOSING REPORT : THURSDAY – 1ST – MARCH – 2018 March 01, 2018 at 05:32AM

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Asian cash equity markets were mostly lower (NIKKEI -1.8 %, S&P/ASX -0.7 %, SHANGHAI COMPOSITE +0.2 %) following sharp declines on Wall Street yesterday, while markets in South Korea were closed today for Independence Movement Day. Investors were also digesting a flurry of data out of the APAC region. China’s Caixin manufacturing PMI rose to 51.6 (f/c 51.3). Meanwhile, Australian private capex unexpectedly fell 0.2% (f/c +0.9%) q/q in Q4, which saw the Aussie Dollar plunge to session lows across the board. Japanese capital spending climbed 4.3% (f/c +3.0%) y/y and excluding software rose 4.7% (f/c +2.7%) y/y, while the final February manufacturing PMI saw a slight rise to 54.1. We also saw remarks from BoJ board member Kataoka, who warned against a premature exit from easy policy, he said Japan is still quite some distance from considering a shift from easy policy, adding a premature move from easy policy could push Japan back into deflation. Speaking in Japanese parliament, BoJ Governor Kuroda said prices and wages remain weak despite a solid real economy, adding persistent deflationary mindset among the public is partly behind weak prices and wages. Kuroda stated inflation expectations are exiting from a weak phrase due to the output gap improving. Meanwhile, Japanese PM Abe said BoJ Governor Kuroda has conducted the correct monetary policy although 2% inflation is not yet achieved, adding he expects the BoJ to carry out monetary policy to hit 2% price goal.

Key Headlines:

* Japan Capital Spending Data (Q4)

Y/Y +4.3% versus +3.0% expected, previous +4.2%

Ex. Software Y/Y +4.7% versus +2.7% expected, previous +4.3%

* Australia Private Capital Expenditure Q/Q (Q4) -0.2% versus +0.9% expected, previous +1.0%

* Japan Nikkei Manufacturing PMI (Feb F) 54.1, previous 54.0

* The PBoC set the yuan mid-point at 6.3352 against the Dollar

The PBoC injected 100 Bln yuan via 7-day reverse repos

The PBoC injected 30 Bln yuan via 28-day reverse repos

The PBoC injected 20 Bln yuan via 63-day reverse repos

* BoJ Governor Kuroda said prices and wages remain weak despite a solid real economy, adding persistent deflationary mindset among the public is partly behind weak prices and wages. Kuroda stated inflation expectations are exiting from a weak phrase due to the output gap improving.

* BoJ Board Member Kataoka said the BoJ must further promote powerful easing to show strong commitment to achieving price goal. He said Japan is still quite some distance from considering a shift from easy policy, adding a shift that is premature from easy policy could push Japan back into deflation. Kuroda stated a hike in sales tax in 2019 may apply downward pressure price, adding they must be vigilant to risk US monetary policy normalisation could weigh on growth globally and the Japanese economy. He mentioned the chance of achieving 2% inflation during fiscal 2019 is low, adding the current policy framework has yet to prompt firms to increase prices and heighten inflation expectations. Kataoka said pushing down yields of 10-years or longer will boost housing investment, capex and maximise the impact of fiscal policy. Lastly, he said coordination on policy between the BoJ and government is crucial to heighten inflation expectations.

* China Caixin Manufacturing PMI (Feb) 51.6 versus 51.3 expected, previous 51.5

* Japan seasonally adjusted consumer confidence index dropped to 44.3 in February from 44.7 in January.

* Japan PM Abe said BoJ Governor Kuroda has conducted the correct monetary policy although 2% inflation is not yet achieved, adding he expects the BoJ to carry out monetary policy to hit 2% price goal.

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