Asian Market Update: Japan draws closer to corporate tax cut



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Article content Asian Market Update: Japan draws closer to corporate tax cut

25.06.2014 07:23 Wednesday
***Notable Economic Data***
- (AU) AUSTRALIA MAY SKILLED VACANCIES M/M: -1.3% (3rd month of decline) V -1.3% PRIOR
- (JP) JAPAN MAY CORPORATE SERVICE PRICE INDEX Y/Y: 3.6% (10th consecutive rise; fastest pace since Jan 1991) V 3.3%E

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.4%, S&P/ASX -0.6%, Kospi -0.5%, Shanghai Composite -0.4%, Hang Seng +0.2%, Sept S&P500 -0.1% at 1,942

***Fixed Income/Commodities/Currencies***
- Aug gold -0.5% at $1,315/oz, Aug crude oil +0.6% at $106.71/brl, Jul copper -0.2% at $3.15/lb

- (AU) Australia 10-yr govt bond yields falling to below 3.6%, lowest in a year
- (JP) BOJ offers to buy ¥300B in 1-3yr JGB, ¥200B in 3-5yr JGB and ¥400B in 5-10yr JGB as well as ¥450B in CP
- SLV: iShares Silver Trust ETF daily holdings fall to 10,148 tonnes from 10,181 tonnes prior (lowest since Feb 19th)
- (US) API PETROLEUM INVENTORIES: CRUDE: +4M (largest build since April 15th) v -1Me, GASOLINE: +2.2M v +1Me, DISTILLATE: -0.25M v +1Me

- Trading in USD majors is extremely thin. EUR/USD in 10pip range above $1.36, USD/JPY is down 10pips below ¥101.90, and AUD/USD is off by 15pips from the open as low as $0.9355.

***Market Focal Points/Key Themes***
- Japan press reporting PM Abe specifically targets the first reduction in corporate tax rate to 29% after the govt tax panel offered support for his corporate levy component agenda revealed by the "3rd Arrow" statement. Overnight, Abe's address indicated he is looking to cut corporate tax to below 30% in phases over the next several years beginning next April.

- Aug WTI oil and shares of US refiners went on a wild ride in electronic/extended session after the WSJ report that the Obama administration has cleared the way for initial exports of unrefined US oil following a 40-year ban. Report noted Federal officials have informed two energy firms they can legally export a particular kind of ultra-light oil, and Sen Murkowski said the Dept of Commerce allowing some condensate exports is a good first step. Subsequent report from US Commerce Department spokesperson indicated there has been no change in policy on oil exports, with existing statutes providing restrictions and allowances on crude exports. Aug contract initially spiked to $107.50 before retreating to $106.70 on the developments.

- San Fran Fed Pres Williams: US is about 2 years away from full employment, economy is moving closer to normal, and nothing will stop the Fed from increasing interest rates when required. Williams, among the more dovish Fed presidents, is not a voting member on the FOMC.

- Late in the US session, report in financial press stating Ukraine President Poroshenko is considering ending the week-long ceasefire in eastern Ukraine early after pro-Russia separatists shot down another military helicopter, killing 9 people.

US markets:
- IMS: To Acquire Cegedim's Information Solutions and CRM Businesses for $520M in cash; affirms guidance; +5.3% afterhours
- BMY: Present phase III first-line melanoma study of Nivolumab; demonstrates superior overall survival compared to Dacarbazine; study stopped early; +1.9% afterhours
- BBY: Said to be considering options for Chinese business, including sales or partnership - financial press; +0.4% afterhours
- AKS: Raises stainless steel prices; +0.1% afterhours
- VMI: Lowers 2014 guidance to $9.35-9.65 v $10.40e (prior $10.00-10.50); Guides Q2 $2.35-2.40 v $2.80e; -4.8% afterhours

Notable movers by sector:
- Consumer Discretionary: Treasury Wine Estates TWE.AU +4.1% (may receive bid)
- Consumer staples: Labixiaoxin Snacks Group 1262.HK -20.0% (speculation company inflated sales Rev.)
- Financials: China South City Holdings 1668.HK +7.0% (strategic alliance with Tencent)
- Materials: Tongling Nonferrous Metals Group 000630.CN -3.4% (death of Chairman)
- Industrials: Lend Lease Group LLC.AU -3.1% (FY14 guidance)
- Technology: FIH Mobile 2038.HK -4.4% (H1 guidance); Beijing Bewinner Communications 002148.CN +2.5% (new game to China market)