Asian Mid-session Update: PBoC pulls the rate cut trigger again after soft trade and underwhelming CPI data
***Economic Data***
- (CN) PBOC CUTS 1-YEAR BENCHMARK RATES BY 25 BPS, EFFECTIVE MAY 11
- (CN) CHINA APR CPI Y/Y: 1.5% V 1.6%E; 4-month high
- (CN) CHINA APR PPI Y/Y: -4.6% V -4.5%E; (38th straight month of decline)
- (AU) AUSTRALIA APR NAB BUSINESS CONFIDENCE: 3 V 3 PRIOR; CONDITIONS: 4 V 6 PRIOR
- (NZ) NEW ZEALAND APR TOTAL CARD SPENDING M/M: -1.1% V +1.2% PRIOR; RETAIL SPENDING M/M: -0.7% V +0.5%E (1st decline in 9 months)
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +1.3%, S&P/ASX +0.2%, Kospi +0.9%, Shanghai Composite +1.1%, Hang Seng +0.7%, Jun S&P500 flat at 2,108
***Commodities/Fixed Income***
- Jun gold flat at $1,184/oz, Jun crude oil -0.1% at $59.33/brl, May copper -0.7% at $2.91/lb
- (JP) BOJ offers to buy ¥375B in 1-3yr JGBs, ¥375B in 3-5yr JGBs, ¥240B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr
- GLD: SPDR Gold Trust ETF daily holdings fall 10.8 tonnes to 728.3 tonnes; lowest since Jan 16th - update
***Market Focal Points/FX***
- Nikkei225 and Shanghai Composite are leading the charge in the far east to open up the new trading week. The former - Nikkei225 - is benefiting from weaker Yen amid overall risk-on mode after the Wall St rally on Friday, even though the non-farm payrolls data were largely in line and the initial USD/JPY reaction was to the downside. In early Monday trade, USD/JPY is up about 20pips above 119.90. Shanghai Composite meanwhile has added to a 2%+ rebound on Friday with another 1.1% rise after the weekend move by the PBoC to cut key rates for the 2nd time this year. The easing - a 25bp cut in deposit and lending rates to 2.25% and 5.10% respectively - was widely telegraphed by analysts following last week's downbeat trade numbers, though PBoC also noted it will continued to "promote real interest rates back towards reasonable levels" in response to the economy facing downward pressure. Meanwhile, economists with ANZ and Nomura anticipate further key rates moves by the PBoC amid powerful headwinds to the economy.
- Also out of China over the weekend and just ahead of the central bank easing, April CPI inflation rose by a decimal to a 4-month high of 1.5% but still missed expectations. YTD CPI of 1.3% was also underwhelming, as it remains well below the official 2015 target of 3.0%. Food CPI was once again much higher at 2.7% vs 0.9% for non-food, although Stats Bureau researcher said the "supply of meat and fresh vegetables has been stable, so there are no expectations of a sharp jump in food prices in the near term."
- In other USD majors, the greenback was particularly firm against NZD in early going. NZD/USD fell about 100pips below $0.74, as both ANZ and First NZ Capital forecast RBNZ cutting cash rates by 50bps this year. ANZ pointed to "high NZD, dairy income squeeze, inevitability of a prudential response toward housing and continued low core inflation reads" in calling for lower OCR. AUD/USD also fell by about 50pips in early going below 0.7880 as traders await Australia's annual budget that will be unveiled late on Tuesday. PM Abbott said it will not be especially dramatic but rather "measured, responsible and fair".
- EUR/USD is consolidating some of its recent gains, falling about 80pips below $1.1140. Greece remained in the headlines ahead of Monday meeting with European creditors, as PM Tsipras called for "clear confirmation of the progress that has been made" in expressing optimism that a breakthru at today's talks can be achieved. Earlier, Dep Foreign Min Tsakalotos (debt negotiation team) also said "the deal is very close and will be reached in the coming period."
***Equities***
US equities / ADRs:
- BIDU: Three director-level employees are under internal investigation for possible corruption - Chinese press
- CHTR: Said to be in early talks with banks to arrange $25-30B in debt financing to pursue a friendly merger with TWC - financial press
- SYT: Monsanto has not given up proposed takeover bid - financial press
- ZU: Alibaba raises its stake to 9.3%; Not aiming to acquire the company - press
Notable movers by sector:
- Consumer discretionary: Skyworth Digital 751.HK +0.6% (April results)
- Financials: Evergrande Real Estate Group 3333.HK -2.4% (April results); Agile Property 3383. HK +3.4% (April results); Dalian Wanda Commercial Properties 3699.HK +1.6% (April results); Poly Real Estate Group 600048.CN +1.8% (April results); China Vanke 000002.CN +1.3%, Industrial and Commercial Bank of China 1398.HK +0.3%, Bank of China 3988.HK +0.8%, China Construction Bank 939.HK +1.0% (PBoC cuts interest rate by 25bps over the weekend)
- Industrials: Incitec Pivot IPL.AU -3.1% (H1 results)
- Technology: Sharp Corp 6753.JP -24.0% (speculation on capital structure); Toshiba Corporation 6502.JP -16.6% (withdraw FY14/15 guidance)
- Materials: PanAust PNA.AU +6.9% (recommends GRAM increased offer)