Asian Market Update: China Services PMI recovers despite soft employment component; Japan govt officials clash over state of economy as Yen continues
***Economic Data***
- (CN) CHINA MAR CAIXIN PMI SERVICES: 52.2 V 51.2 PRIOR; Composite: 51.3 v 49.4 prior; 11-month high
- (HK) HONG KONG MAR COMPOSITE PMI: 45.5 V 46.4 PRIOR; 13th straight contraction; 7-month low
- (NZ) NEW ZEALAND MAR QV HOUSE PRICES Y/Y: 11.4% V 11.6% PRIOR
- (UK) MAR BRC SHOP PRICE INDEX Y/Y: -1.7% V -2.0% PRIOR; 35TH STRAIGHT DECLINE
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +0.2%, S&P/ASX +0.7%, Kospi +0.4%, Shanghai Composite +0.1%, Hang Seng +0.4%, Jun S&P500 +0.5% at 2,049
***Commodities/Fixed Income***
- Apr gold +0.1% at $1,231/oz, May crude oil +2.7% at $36.85/brl, May copper +0.2% at $2.15/lb
- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: +2.1% v -2.9% prior; biggest increase in 4 months
- (US) Weekly API Oil Inventories: Crude: -4.3M v +2.6M prior; first draw in 7 weeks
- GLD: SPDR Gold Trust ETF daily holdings fall 0.3 tonnes to 815.4 tonnes; 5th straight decline; lowest since Mar 19th
- SLV: iShares Silver Trust ETF daily holdings rise to 10,411 tonnes from 10,378 tonnes prior; Highest since Dec 2014
- (EC) Ecuador President: Latin America oil producers to meet on Apr 8th to discuss an oil output freeze - financial press
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4754 V 6.4663 PRIOR; 2nd straight weaker setting
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥450B in 5-10yr JGBs
- (AU) Australia MoF (AOFM) sells A$900M in 4.25% 2026 Bonds; avg yield: 2.435%; bid-to-cover: 2.56x
***Market Focal Points/FX***
- Asian equity markets are modestly higher despite broader selling on Wall St, with more benign China data and a rebound in oil helping to slow the recent skid. Australia is outperforming, led by the energy sector, while the rally in Tokyo is slightly more subdued amid continued volatility in the Yen. Overnight, USD/JPY hit a 17-month low below 110 on risk aversion, retreat in US Treasury yields, and speculation that Japan's monetary officials may wait until the end of the month to deliver more easing or get a better sense of whether USD can get a lift from improved earnings. The pair traded in a 110.20-60 range in the Asian session. In other USD majors, AUD/USD whipped around in the 0.7530-70 range, with most pronounced strength coming after China services PMI. NZD/USD traded in a 20pip bank around 0.68, consolidating the gains made after a strong dairy trade auction announced in early US hours.
- China Services PMI rose by a point to 52.2 and Composite PMI hit an 11-month high, returning to expansion territory. Markit did note that despite stronger expansion, companies took a cautious approach to staff numbers with the first fall in service sector employment since August 2013. Data findings were also tempered by only a slight rate of backlog depletion, and firms were also unable to pass on higher input costs. Caixin economist remarked that the govt still needs to push forward with "supplyside reform" to encourage the development of emerging industries.
- Also of note in China, former PBoC researcher Yu called for another round of infrastructure investment to boost demand given the economy's sound fiscal state, with "proactive fiscal policy and accommodative monetary policy" intended to secure sustainable growth. Fitch warned that while China hard landing is unlikely, there is some skepticism about govt's ability to avoid a slowdown. In Hong Kong, composite PMI contracted for the 13th straight month and also hit a 7-month low due to "weak market conditions and fewer new orders leading firms to reduce their purchasing activity sharply." HK staff numbers were also said to fall at the "fastest recorded since August 2015."
- With about a month to go to expected decision on 2nd round of consumption tax hike, Japan govt officials are debating just how bad the current conditions are to justify postponing the increase. PM Abe has recently suggested that the govt will raise the tax rate unless there is a Lehman-type event, and today LDP lawmaker Yamamoto remarked that consumption is at its worst level since the Lehman crisis. Govt spokesperson Suga replied that he does not see the current situation to be quite so dire. In the mean time, a research note out of JPMorgan suggested there is little chance of Japan intervening to curb Yen strength.
- Energy markets were also volatile in electronic trade after API inventories showed the first draw in 7 weeks. Also of note, Ecuador President said Latin America oil producers will meet on Apr 8th to discuss an oil output freeze. Recall overnight, Kuwait Opec Governor also suggested that there is likely to be an initial deal to freeze output at April 17th production meeting.
***Equities***
US equities / ADRs:
- PLCM: Merger talks with Mitel Networks reportedly in advanced stages - press; +10.5% afterhours
- WYNN: Reports prelim Q1 adj EBITDA $292-308M v $323M y/y; Rev $987-1.007B v $1.01Be; -1.6% afterhours
- CREE: Reports prelim Q3 $0.13-0.15 v $0.24e, R$367M v $420Me; -18.9% afterhours
- AGN: Pfizer and Allergan reportedly to terminate their merger agreement on Wednesday morning - financial press
Notable movers by sector:
- Consumer discretionary: Wasu Media Holding Co 000156.CN -1.6% (FY15 result)
- Consumer staples: Sugi Holdings Co 7649.JP -0.9% (FY15/16 result)
- Financials: Sunac China Holdings 1918.HK +4.8% (March result); China Vanke Co 2202.HK +0.3% (March result); Evergrande Real Estate Group 3333.HK -1.8% (March result)
- Industrials: BBMG Corp 2009.HK +7.0% (strategic cooperation); Broadspectrum BRS.AU +2.0% (Ferrovial increases final offer)
- Materials: China Resource Cement 1313.HK -1.2% (guidance); Newcrest Mining NCM.AU -0.2% (guidance); Saracen Mineral Holdings SAR.AU +1.7% (raises production forecast)
- Healthcare: Celltrion Inc 068270.KR -5.7% (FDA's approval of Pfizer's Inflectra)