Asian Market Update: RBA minutes voice growing concern with elevated AUD; BOK on hold but lowers GDP, inflation outlook
***Economic Data***
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.50%; AS EXPECTED
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.8 v 112.0 prior
- (NZ) NEW ZEALAND MAR PERFORMANCE OF SERVICES INDEX: 54.8 v 56.7 PRIOR; 16-month low
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +3.4%, S&P/ASX +1.0%, Kospi flat, Shanghai Composite +0.1%, Hang Seng +0.6%, Jun S&P500 flat at 2,088
***Commodities/Fixed Income***
- June gold flat at $1,235/oz, June crude oil -0.5% at $41.00/brl, May copper -0.2% at $2.16/lb
- JGB: (JP) Japan MoF sells ¥2.19T in 0.1% (0.1% prior) 5-year JGBs; Avg yield: -0.226% v -0.142% prior; Bid-to-cover: 4.36x v 3.59x prior
- (CN) PBOC SETS YUAN MID POINT AT 6.4700 V 6.4787 PRIOR; strongest Yuan setting since Apr 13th; 2nd straight firmer setting
***Market Focal Points/FX***
- Asian equity markets are generally higher, led by a snap-back rally in Tokyo after yesterday's outsized declines. Despite the setback in oil production negotiations over the weekend, sentiment recovered quickly in the US hours and has carried over to the far east. Energy was also the leading sector in Australia after yesterday's selling, even as WTI June contract tested the downside of $41/brl. In FX, USD/JPY traded up about 40pips to 109.20, AUD/USD hit 10-month lows above 0.7780, and NZD/USD rose above 0.70 for the first time since June of 2015.
- In China, MOFCOM spokesperson said the global glut in steel was the result of decline of demand, also warning about the perils of protectionism. Shen was optimistic that China can sustain the FDI growth rate of Q1 through 2016. Also of note on the mainland, Xinhua speculated that the PBoC could shift to a more prudent monetary policy stance this year, presumably backtracking from a "slight easing bias" that recently lifted expectations of more policy easing.
- Australia central bank's meeting minutes for April played somewhat dovishly, with a particular focus on the impact of rising AUD. RBA said low inflation offers room for further easing, growth among trading partners was below average, and wage pressures remain low. On FX, RBA said that rising AUD could complicate economic rebalancing and keep inflation low, adding that the services sector - the new focal point of economy - is also sensitive to exchange rates. Among key miners, Rio Tinto's Q1 global iron ore production rose 13% y/y to 84M tons. RIO aso affirmed its FY16 global iron ore shipments at 350Mt but cut Pilbara production to 330-340Mt.
- Comments from BOJ Gov Kuroda coincided with most pronounced USD/JPY run in the session as it hit a high of 109.20. Most notably, Kuroda mentioned -0.4% rate as the level where he saw negative interest rates potentially going, warning that inflation trend may be affected if excessive Yen appreciation continues. Fin Min Aso also spoke, reiterating his support for the sales tax hike in the absence of an economic shock. Aso also downplayed calls for policy stimulus from this weekend's earthquake, noting that the current budget funds can still be used before discussion of an extra budget.
- BOK left rates on hold at 1.50% as expected by a wide majority of analysts. The decision was once again not unanimous with 1 board member calling for a rate cut. BOK Gov Lee did announce a 2016 GDP and inflation forecast cut to 2.8% from 3.0% and to 1.2% from 1.4% respectively. The policy statement was somewhat more upbeat however, forecasting domestic recovery continuing and consumption improving, with risks to the downside anticipated to abate somewhat in H2 of this year.
- Boston Fed President Rosengren offered a fairly hawkish outlook for US policy this year, stating that the Fed funds rate may rise faster than markets currently expect. He noted that March jobs data portends higher GDP rate, with growth running slightly over potential. He also said that jobless rate would drift down and that the core inflation rate is much closer to the 2% target, noting there is a cost if US monetary policy is not aggressive enough.
***Equities***
US equities / ADRs:
- HRTX: Provides update on FDA review of SUSTOL: FDA has indicated that there are no substantive deficiencies in the NDA; +16.3% afterhours
- BMI: Reports Q1 $0.55 v $0.44e, R$100.6M v $94.3Me (2 est); +5.9% afterhours
- AKS Raises base prices for all stainless steel products; +0.6% afterhours
- IBM: Reports Q1 $2.35 v $2.07e, R$18.7B v $18.3Be; -5.1% afterhours
- NFLX: Reports Q1 $0.06 v $0.03e, R$1.96B v $1.97Be; -7.8 % afterhours
- ILMN: Reports prelim Q1 R$572M v $598Me; Cuts FY16 Rev guidance; -18.5% afterhours
- YUM: China Sovereign Wealth Fund (CIC) thought to be seeking control of Yum unit in a deal worth $7.0-8.0B - financial press
- YHOO: Expects a decline in revenue for its core Search and Display Ads business units in 2016, which has scared potential investors - NY Post
Notable movers by sector:
- Industrials: Guangzhou Automobile Group 2238.HK +3.2% (guidance); Air China 753.HK -1.3% (Mar result); Chongqing Changan Automobile Co 000625.CN -0.5% (FY15 result)
- Materials: Rio Tinto RIO.AU +3.5% (Q1 result); Marubeni Corp 8002.JP +2.1% (cuts guidance)
- Energy: Oil Search OSH.AU +5.2% (Q1 result)
- Telecom: China Unicom 762.HK -0.9% (guidance)