Asian Market Update: Speculation over more BOJ easing on the rise
***Economic Data***
- (JP) JAPAN APR PRELIMINARY PMI MANUFACTURING: 48.0 V 49.5E (2nd consecutive contraction; Biggest decline in 3 years)
- (JP) Japan Feb Tertiary Industry Index M/M: -0.1% v -0.5%e
- (TW) Taiwan Mar Unemployment rate Y/Y: 3.9% v 3.9%e
- (US) NORTH AMERICA MAR SEMI BOOK/BILL RATIO: 1.15 V 1.05 PRIOR; 3rd straight month above parity
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.1%, S&P/ASX -0.5%, Kospi -0.5%, Shanghai Composite -0.6%, Hang Seng -1.0%, Jun S&P500 flat at 2,083
***Commodities/Fixed Income***
- June gold flat at $1,250/oz, June crude oil +1.1% at $43.67/brl, May copper -0.4% at $2.24/lb
- (CN) China MoF sells 30-yr bonds at yield 3.52%
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.4898 V 6.4803 PRIOR; 2nd straight weaker setting; weakest setting in a week
- (CN) PBOC to inject CNY240B in 7-day reverse repos; Injects net CNY680B this week v injected CNY70B prior
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥220B in 10-25yr JGBs and ¥180B in JGBs with maturity over 25-yr
- (AU) Australia MoF (AOFM) sells A$800M in 1.75% 2020 Bonds; avg yield: 2.157%; bid-to-cover: 5.14x
***Market Focal Points/FX***
- Asian equity markets are tilting lower in the final session of the week, as profit-taking interspersed with disappointing US afterhours earnings reports from tech and consumer bellwether names Alphabet, Microsoft, Visa, and Starbucks. US equity futures and commodities are little changed, while FX majors saw the most pronounced volatility late in the session in the USD/JPY pair as it spiked up some 80pips to 110.20. AUD/USD and NZD/USD traded in roughly 40pip ranges above 0.7740 and 0.69 respectively.
- USD/JPY spiked up about 80pips in the final 90 minutes of Tokyo trade after reports surfaced noting that BOJ officials are considering lending to banks at negative rates. This stoked speculation that the BOJ will implement further easing measures when it meets next week and updates its projections for growth and inflation. Economic data out of Japan released today would certainly justify a more proactive approach, as preliminary manufacturing PMI for April plunged to a 3-year low. Output, New Orders, export orders, and input prices all decreased at a faster rate, implying lower global demand and persistent deflationary pressures. Resident economist pointed to "fastest fall in international demand since December 2012, and following the two earthquakes on the island of Kyushu (one of Japans key manufacturing regions)." Separately, Fin Min Aso said it was still too early to estimate just how much impact last week's earthquake had on economy.
- In China, the PBoC has weakened the Yuan for the 2nd straight day after previously strengthening the currency for 3 consecutive sessions. Open market operations also remained aggressive, as PBoC's net injection for the week was nearly 10x that of last week. Despite the more aggressive measures, China Commerce Ministry researcher remarked that Q1 GDP - even at a 7-year low - shows that a severe downturn has been avoided with recovery of the property sector playing a key role. Also of note, local press indicated that Q1 urban unemployment remained just above 4%, with some 3.2M new urban jobs created in the quarter.
***Equities***
US equities / ADRs:
- AMD: Reports Q1 -$0.12 v -$0.13e, R$832M v $818Me; +21.4% afterhours
- CTMX: CytomX and AbbVie announce strategic collaboration for Probody Drug Conjugates; CTMX to receive $30M upfront payment and eligible for additional $470M; +7.8% afterhours
- SKX: Reports Q1 $0.63 v $0.53e, R$979M v $890Me; +7.5% afterhours
- SHLD: To close stores to accelerate transformation and return to profitability; Closing 68 Kmart stores and 10 Sears stores; +6.3% afterhours
- HBI: Reports Q1 $0.26 v $0.22e, R$1.22B v $1.22Be; +5.5% afterhours
- NSC: Reports Q1 $1.29 v $0.98e, R$2.4B v $2.40Be; +3.5% afterhours
- SLB: Reports Q1 $0.40 v $0.41e, R$6.52B v $6.79Be; -1.2% afterhours
- SBUX: Reports Q2 $0.39 v $0.39e, R$4.99B v $5.02Be; -4.0% afterhours
- V: Reports Q2 $0.68e v $0.66e, R$3.63B v $3.57Be; -4.5% afterhours
- MSFT: Reports Q3 $0.62 v $0.63e, R$22.1B (adj) v $21.6Be; Guides Q4 Rev by segment: Productivity $6.5-6.7B, Personal Computing $8.7-9.0B, Intelligent Cloud $6.5-6.7B (implies $21.7-22.4B v $22.7Be); -5.1% afterhours
- GOOGL: Reports Q1 $7.50 (adj) v $7.90e, R$20.3B (including $3.79B of TAC) v $20.4Be; -6.1% afterhours
Notable movers by sector:
- Consumer discretionary: BAIC Motor Corp 1958.HK -3.1% (Q1 result); China Eastern Airlines 670.HK +0.2% (strategic cooperation with Ctrip); CyberAgent Inc 4751.JP +3.0% (H1 result)
- Financials: AIA Group 1299.HK +1.4% (Q1 result); KB Financial Group Inc 105560.KR +1.3% (Q1 result)
- Industrials: China Communications Construction 1800.HK -4.6% (Q1 result); Daelim Industrial Co 000210.KR -5.3% (Q1 result); Mitsubishi Motors7211.JP -13.2% (fuel test information)
- Technology: Toshiba Corporation 6502.JP +1.1% (Westinghouse goodwill write down); Sony Corp 6758.JP -2.9% (revises guidance)
- Materials: Yanzhou Coal Mining Co. 1171.HK -3.5% (Q1 result); Posco 005490.KR +1.0% (Q1 result); Resolute Mining RSG.AU +1.8% (Q1 result)
- Energy: APA Group APA.AU -2.7% (rejects ACCC's conclusion); Santos :STO.AU -0.7% (Q1 result)
- Telecom: China Unicom 762.HK -2.4% (Q1 result)