Asian Market Update: China inflation continues to stabilize; Japan cabinet officials step up verbal rhetoric on FX
***Economic Data***
- (CN) CHINA APR CPI Y/Y: 2.3% V 2.3%E (matching its highest level since July 2014)
- (CN) CHINA APR PPI Y/Y: -3.4% V -3.7%E; 50th consecutive month of decline
- (NZ) NEW ZEALAND APR RETAIL CREDIT CARD SPENDING M/M: 0.9% (biggest increase since Sept) V 0.5%E; TOTAL: 1.5% V 0.5% PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 113.9 v 113.9 prior
- (NZ) New Zealand Apr ANZ Truckometer Heavy M/M: -2.4% v +3.3% prior
- (UK) APR BRC LFL SALES Y/Y: -0.9% V +0.5%E (2nd consecutive decline)
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +1.5%, S&P/ASX +0.3%, Kospi +0.3%, Shanghai Composite +0.2%, Hang Seng -0.2%, Jun S&P500 +0.1% at 2,057
***Commodities/Fixed Income***
- June gold +0.1% at $1,267/oz, June crude oil flat at $43.44/brl, Jul copper +0.3% at $2.11/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.0 tonnes to 836.9 tonnes; highest since Dec 2013
- JGB: (JP) Japan MoF sells ¥2.18T in 10-year 0.1% JGBs; Avg yield: -0.096% (record low) v -0.069% prior; bid to cover: 3.44x v 3.89x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5233 V 6.5105 PRIOR; weakest setting since Mar 4th
- (CN) PBOC to inject CNY70B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$150M in 1.25% 2040 Indexed Bonds; Avg yield 1.005%; bid-to-cover: 3.59
- (HK) Hong Kong may offer inflation bonds beginning May 31st - HK press
***Market Focal Points/FX***
- Asian equity markets are finally seeing some risk-on flows come in after 4 straight losing sessions, with the latest China inflation figures bolstering the case for price recovery along with reports of govt support of the trade sector. Safe-haven yen also remains under pressure as overextended long positioning is unwound as govt officials step up their verbal campaign to stall JPY advance. Nikkei225 is the top performing index as USD/JPY rose 50pips from the lows above 108.80. In other FX majors, AUD/USD rose some 30pips above 0.7330, NZD/USD retreated 40pips below $0.6740 on Fin Min English comments, and EUR/USD traded in a 20pip range below $1.14.
- China April CPI was in line with consensus at 2.3%, matching its highest level since mid-2014. Food CPI remained elevated at 7.4% v 7.6% prior and non-food component remained underwhelming at 1.1% v 1.0% prior. On sequential basis, m/m declined at a slower pace of -0.2% v -0.4% prior. Wholesale or PPI inflation measures was once again more notable, printing its 50th straight month of y/y decline but at the smallest margin in 16 months. M/M PPI also rose for 2nd straight month at +0.7% v +0.5% prior. Analysts noted that recovery in the property market has spurred demand for commodities, resulting in the inflection in PPI data. Also of note in China, there were reports overnight that the State Council has issued guidelines to facilitate recovery of trade after recent soft figures, offering tax breaks and incentives from lenders to industries active in the trade sector.
- In Japan, Fin Min Aso noted that rapid FX moves, such as 2-yen spike vs USD in past 5 days, are undesirable. In the past, Japan govt officials have been vague about what they consider as "rapid" Fx volatility. Econ Min Ishihara also stated that the govt is closely monitoring market moves, calling for a combination of monetary easing and fiscal stimulus to tackle slow progress on inflation. Over the past week, USD/JPY pair is now up over 300pips from the lows of just over 105.50.
- Despite the rally in AUD after China inflation data, NZD/USD has tracked somewhat lower. NZ Fin Min English said that RBNZ Financial Stability Report coming out tomorrow may feature further macroprudential measures on housing. Property inflation has been the primary factor in keeping RBNZ at bay from deeper easing, and that announcement could eliminate a major hurdle to another RBNZ rate cut.
***Equities***
US equities / ADRs:
- STMP: Reports Q1 $1.72 v $1.07e, R$81.8M v $69.7Me; Raises FY16 guidance; +17.7% afterhours
- HTZ: Reports Q1 -$0.12 v -$0.03e, R$2.31B v $2.35Be; +2.2% afterhours
- RAX: Reports Q1 $0.34 v $0.22e, R$518M v $519Me; -7.7% afterhours
- BLOX: Cuts Q3 R$81-82M v $92.3Me (prior $91-93M); -13.0% afterhours
- GPS: Reports Apr SSS -7% v +0.5%e; Guides Q1 $0.31-0.32 v $0.44e, R$3.44B v $3.53Be; considering store closures; -13.5% afterhours
- SCTY: Reports Q1 -$2.56 v -$2.30e, R$122.6M v $105Me; -20.4% afterhours
Notable movers by sector:
- Consumer discretionary: Yamada Denki 9831.JP +5.1% (FY15/16 result)
- Consumer staples: CJ CheilJedang Corp 097950.KR +2.5% (Q1 result); NH Foods 2282.JP +5.4% (FY15/16 result)
- Financials: Gemdale Corp 600383.CN +0.1%(Apr result); Sumitomo Corp 8053.JP -2.1% (FY15/16 result)
- Industrials: Takata Corp 7312.JP -6.8% (cuts guidance); Mitsubishi Heavy Industries 7011.JP -2.1% (Fy15/16 result); Incitec Pivot IPL.AU +10.8% (H1 result)
- Technology: HTC Corp 2498.TW +3.2% (Q1 result); Advanced Semiconductor Engineering 2311.TW +1.0% (Apr result); Mesoblast MSB.AU -1.9% (Q3 result)
- Materials: LIXIL Group Corp 5938.JP +3.4% (FY15/16 result)