Asian Market Update: Sentiment turns cautious going into FOMC and BOJ decisions this week
***Economic Data***
- (JP) JAPAN MAR PPI SERVICES Y/Y: 0.2% V 0.2%E
- (TH) Thailand Mar Custom Trade Balance: $3.0B v $2.8Be
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -0.5%, S&P/ASX closed, Kospi -0.1%, Shanghai Composite -0.8%, Hang Seng -0.6%, Jun S&P500 -0.2% at 2,082
***Commodities/Fixed Income***
- Jun gold +0.4% at $1,235/oz, May crude oil -1.5% at $43.09/brl, May copper -0.2% at $2.26/lb
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5120 V 6.4898 PRIOR; 3rd straight weaker setting; weakest Yuan setting since Mar 28th
- (CN) PBOC to inject CNY180B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets are somewhat cautious going into the critical final week of the month. As US earnings season ramps up to include more consumer discretionary and industrials heavyweights on top of what has been a fairly disappointing parade of tech results, investors are also cautious with high-profile FOMC and BOJ decisions on tap. While the Fed is merely expected to offer minor tweaks to acknowledge more benign economic data and appease the increasingly vocal minority of committee hawks, there is a real chance that the BOJ will add to policy easing. China concerns also remain on the forefront, particularly as worries about overextended credit conditions are starting to heat up. In FX majors, USD/JPY opened above 111.80 but retreated to 111.00 on risk-off flows. AUD/USD and NZD/USD were contained to 25-pip ranges above 0.7690 and 0.6840 respectively. GBP/USD opened up over 50pips above 1.4460 as US Pres Obama weighed in on the Brexit debate firmly on the side of continued integration. Lastly, Yuan fix was set weaker yet again, and offshore CNY moved to its lowest level in 4 weeks.
- Shanghai Composite was one of the worst performers among the key regional indices as PBoC Dep Gov Chen Yulu directed attention specifically to the rising credit risks faced by financials, adding the downward pressure on economy could once again impact financial stability. On a similar note, a high-profile feature in today's FT suggested that China's total debt has risen to a record 237% of GDP in Q1. This widely tops 148% figure entering 2008 as a precursor to the global financial crisis and the accompanying swoon in emerging markets.
- Japan govt has until last week maintained that a supplementary budget to deal with the aftermath of last weekend's earthquake will not be necessary, since there were still funds available in the regular budget. However, today local press reports speculated that PM Abe will in fact unveil an extra budget focusing on earthquake reconstruction to the current session of Parliament, with estimated amount seen at ¥300B. A separate press report also noted that BOJ officials are calling for the govt to do more to support and spur economic growth via fiscal spending. Investors anticipate high chance of more easing at this week's BOJ meeting, especially since the central bank will update its projections for growth for the near term.
***Equities***
US equities / ADRs:
- RHHBY: Novartis said to sell its 33% stake in Roche with estimated value of $13.8B - Swiss press
- GE: Iraq Oil Ministry claims to have signed a long-term "strategic framework agreement" containing several projects increase national power resources - financial press
- NYT: Said to plan layoffs in the hundreds in H2 of this year - NY Post
- TUMI: Germany's Cartel Office approves Samsonite merger; No assurance that merger will be completed with Tumi; currently expects that closing will occur in H2
Notable movers on news:
- 7011.JP Mitsubishi Corp: Cuts FY16/17 guidance Net ¥66B from ¥90B; Rev ¥4.05T from ¥4.1T; +0.5%
- 3988.HK Bank of China: Proposes Spin-off and Separate Listing of BOC Aviation on HK main board - filing; -0.6%
- 3407.JP Asahi kasei: Targets op profit of about ¥180B by FY18 v ¥164B latest forecast for FY15/16 - financial press citing mid-term outlook plan; -1.4%
- 814.HK Beijing Jingkelong Company Limited: Reports Q1 Net CNY38.8M v CNY45.3M y/y, Rev CNY3.51B v CNY3.33B y/y; -1.6%
- 7211.JP Mitsubishi Motor: Expected to miss govt imposed fuel data filing deadline of Apr 27th - Japan press; May omit FY16/17 guidance when it reports FY15/16 this week due to uncertainty about the impact of misleading fuel economy data -5.4%