Asian Market Update: Japan initial Q1 GDP shows improved growth on rising consumption; AUD retreats as wage prices hit 18-month lows
***Economic Data***
- (CN) CHINA APR PROPERTY PRICES M/M: FALL IN 5 OUT OF 70 CITIES VS FALL IN 8 PRIOR; Y/Y: FALL IN 23 OUT OF 70 CITIES V FALL IN 29 PRIOR
- (JP) JAPAN Q1 PRELIMINARY GDP Q/Q: 0.4% V 0.1%E (1-year high); ANNUALIZED GDP: 1.7% V 0.3%E
- (AU) AUSTRALIA Q1 WAGE PRICE INDEX Q/Q: 0.4% (18-year low) V 0.5%E; Y/Y: 2.1% (multi-year low) V 2.2%E
- (AU) AUSTRALIA APR WESTPAC LEADING INDEX M/M: +0.2% V -0.1% PRIOR
- (NZ) NEW ZEALAND Q1 PPI INPUT Q/Q: -1.0% V -1.2% PRIOR (2nd straight decline); PPI OUTPUT Q/Q: -0.2% V -0.8% PRIOR (2nd straight decline)
- (CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.6%, S&P/ASX -0.5%, Kospi -0.6%, Shanghai Composite -1.7%, Hang Seng -1.7%, Jun S&P500 flat at 2,044
***Commodities/Fixed Income***
- June gold -0.1% at $1,276/oz, June crude oil +0.3% at $48.46/brl, Jul copper -0.9% at $2.07/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 4.8 tonnes to 855.9 tonnes; 9th straight increase; highest since Nov 2013
- (US) Weekly API Oil Inventories: Crude: -1.1M v +3.4M prior; first draw in 3 weeks
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥450B in 5-10yr JGBs
- (CN) PBOC SETS YUAN MID POINT AT 6.5216 V 6.5200 PRIOR
- (CN) PBOC to inject CNY70B in 7-day reverse repos
- (CN) China MoF sells 2-yr bonds at 2.5051%; Sells 7-yr bonds at 2.9741%
- (AU) Australia MoF (AOFM) sells A$900M in 4.75% 20 Bonds; avg yield: 2.3416%; bid-to-cover: 1.94x
***Market Focal Points/FX***
- Asia equities are favoring the downside, tracking larger losses in US markets where improved building permits and in-line CPI added to worries the FOMC rate hikes are back on the radar. Remarks from Fed's Kaplan, Lockhart, and Williams in the US session also went on to signal that the upcoming meetings are live for another rate hike. In Asia, Japan's Q1 preliminary GDP was a positive surprise after last quarter's contraction, helping the economy avoid a technical recession thanks to improved consumption segment. China housing prices maintained their trend of recovery. In FX majors, USD/JPY was volatile around the GDP release, initially falling below 108.80 and then rising above 109.20. AUD/USD was down about 50pips on soft wage inflation, falling to 0.7280. NZD/USD was down about 30pips below $0.6790, with added weakness coming on another decline in Q1 PPI.
- Japan Q1 prelim GDP came in at a 1-year high on sequential basis, with a some telling signs in the components. Exports rose 0.6% after a -0.8% drop in Q4, and consumption was a 3-quarter high of +0.5%, above +0.2%e and up from -0.9% in Q4. On the downside, recovery in CAPEX was notoriously absent, as non-residential investment was -1.4% v -0.8%e - the biggest decline since Q2 2015. Japan Econ Min Ishihara said the economy continues moderate recovery trend with a notable rebound in consumption, though slowing growth in China and emerging market volatility bear close watching. PM Abe's advisor Hamada recommended that the govt holds off on the sales tax hike plans but also warned that an intervention on currency could impact US/Japan ties.
- China April property prices retained their upward trend, as nearly all of top 70 cities saw sequential increase. Overall, m/m prices were up for the 12th straight month and y/y up for 7th straight month at 2.0% and 12.4% respectively. Elsewhere, the NEA saw April power consumption growth slow to 1.9% y/y from 5.6% prior, and a high-profile editorial in Chinese press called for more policy support to stimulate growth in private investment.
***Equities***
US equities / ADRs:
- ANDE: Philip Falcone's HC2 said to have offered a $37/shr cash bid for Andersons, for $1B total valuation - press; +28.1% afterhours
- AGIO: Establishes new collaboration with Celgene in metabolic immuno-oncology and amend certain rights from 2010 agreement; +3.4% afterhours
- VIPS: Reports Q1 $0.16 v $0.16e, R$1.89B v $1.87Be; -11.5% afterhours
Notable movers by sector:
- Consumer discretionary: China Eastern Airlines 670.HK -1.8% (Apr result); Car Inc 699.HK -1.7% (Q1 result); Intime Department Store Group 1833.HK -3.0% (asset-light arrangement)
- Financials: Macau Legend Development 1680.HK -1.0% (Q1 result); IOOF Holdings IFL.AU -5.8% (guidance)
- Industrials: Xinyi Glass Holding Co 868.HK +1.0% (proposes spin-off and separate listing of unit); Hitachi 6501.JP +2.1% (mid-term targets)
- Materials: Galaxy Resources GXY.AU +9.1% (final offtake agreement)