Asian Market Update: China CPI remains above 2% on higher food prices; World Bank cuts East Asia growth; Yen hits new 18-month high
***Economic Data***
- (CN) CHINA MAR CPI Y/Y: 2.3% V 2.4%E
- (CN) CHINA MAR PPI Y/Y: -4.3% V -4.6%E; 49th consecutive month of decline
- (CN) China Passenger Car Association (PCA): China Mar vehicle sales y/y: +7.8% y/y at 1.92M units
- (JP) JAPAN FEB MACHINE ORDERS M/M: -9.2% V -12.0%E; Y/Y: -0.7% V -2.4%E
- (AU) AUSTRALIA FEB HOME LOANS M/M: 1.5% V 2.0%E
- (NZ) NEW ZEALAND MAR RETAIL CREDIT CARD SPENDING M/M: 0.1% V 0.3%E; TOTAL: 0.4% V -0.1% PRIOR
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.9%, S&P/ASX -0.2%, Kospi -0.1%, Shanghai Composite +1.8%, Hang Seng +0.5%, Jun S&P500 -0.1% at 2,039
***Commodities/Fixed Income***
- Jun gold +0.8% at $1,235/oz, May crude oil +0.5% at $39.90/brl, May copper +0.5% at $2.10/lb
- SLV: iShares Silver Trust ETF daily holdings rise to 10,455 tonnes from 10,411 tonnes prior; Highest since Dec 2014
- GLD: SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 817.8 tonnes
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4649 V 6.4733 PRIOR; strongest Yuan setting since Apr 1st
- (IQ) Iraq's crude oil output in March rose to 4.55M bpd from 4.46M bpd in Feb; Record high
***Market Focal Points/FX***
- Asian equity markets are mixed, as China benefited from bullish calls out of Morgan Stanley and local broker Guotai Junan Securities, while Nikkei225 was led lower by new 18-month high in the Yen. Investors have also shrugged the mixed China inflation data which fell short of consensus but still matched multi-month highs of 2.3% in CPI - strength that was once again primarily the function of higher food prices. In commodities, WTI popped above the $40 level for the first time in 2 weeks, and gold also rallied on weaker USD. USD/JPY fell as low as 107.60 amid growing impatience with Abenomics, down some 70pips from the highs. AUD/USD and NZD/USD traded in about a 30pip range above 0.7530 and 0.6790 respectively.
- China March CPI was above 2% for the 2nd straight month, but missed consensus by a decimal, as m/m level fell -0.4% v +1.6% prior. Non-food CPI remained at 1.0%, while the food component spiked up even more to 7.6% v 7.3% prior. Note that going into the report, NDRC said pork prices are expected to remain high but will not rise sharply this year. China PPI inflation data were also revealing, printing the smallest decline in 14 months and also rising on m/m basis for the first time since Jan 2014. After the release, ANZ economists said the latest inflation figures should result in less aggressive monetary easing by PBoC as deflationary pressure wanes. Likewise, UBS said easing momentum has peaked in the near term, taking into account ongoing rebound in property sales and prices. More positive rhetoric also came from an official with China State Council Development Research Center, anticipating the economic growth to bottom later this year, though former PBOC adviser Yu Yongding kept up his proactive policy recommendations with a call for a 15% devaluation in CNY and more fiscal stimulus.
- Separately, the World Bank affirmed China 2016 GDP target at 6.7% but still forecast a gradual slowdown, stating the recent improvement in data does not necessary signify a rebound. World Bank also cut its outlook for developing East Asia Pacific 2016 GDP to 6.3% from 6.4% and 2017 GDP to 6.2% from 6.3%. Recall late last month, ADB also cut its developing Asia 2016 GDP to 5.7% from 6.0% and sets 2017 at 5.7%.
- Institutional investors have been turning increasingly bearish on Japan since the January swoon - BlackRock has reportedly joined Citigroup, Credit Suisse, and AMP Capital in expressing doubts over Abenomics. Reports citing a survey by Merrill Lynch showing overweight positions on Japanese stocks also fell for a third straight month in March as investors sold a net of ¥5T since 2nd week of Jan - the longest bearish streak since 1998. Recent splintering within the BOJ was also underscored by some critical comments from the retired BOJ member Shirai, who said there was little room to cut negative rates further and that buying more assets could only be effective for another couple years. Recall Shirai had been one of the more dovish members last year, but dissented to the decision to go negative on excess reserves. Japan cabinet has also maintained its defensive tone on the adverse moves in FX, as govt spokesman Suga reiterated that recent FX moves are one-sided and speculative, adding that policymakers are closely watching FX market and will take steps as needed to rein in excessive volatility.
***Equities***
US equities / ADRs:
- FB: Expected to announce a $1B investment in live video feed sharing technology this week - UK press
- YHOO: Daily Mail thought to be in talks with private equity firms about making a joint bid for Yahoo - financial press
Notable movers on news:
- AAD.AU: Number of buyout firms said to have expressed interest and working on potential offers for Ardent Leisure Group - Australian press; +4.4%
- ANZ.AU: Follow Up: Thought to have hired Goldman Sachs for its sale of China bank stake - Australian press; +0.3%
- MQA.AU: Said to have hired Nomura to find a buyer for its 26% stake in Thames Water; Auction may result in about £3B for Macquarie - UK press; -0.8%
- BHP.AU: CEO Mackenzie: No plans to spinoff petroleum business; commodities may be close bottom - Australian press; -3.1%
- DOW.AU: CFO Kevin Fletcher has passed away; Names Deputy CFO Michael Ferguson acting CFO; -3.4%
- AWC.AU: UBS Cuts AWC.AU to Neutral from Buy; -5.5%