Asian Mid-session Update: GBP spikes as Labour, Lib Dems flail in UK elections; Soft China trade components lift expectations for more easing
***Economic Data***
- (CN) CHINA APR TRADE BALANCE: $34.1B V $39.6BE
- (HK) Hong Kong Apr Foreign Reserves: $343.2B v $332.2B prior
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +0.3%, S&P/ASX +0.7%, Kospi flat, Shanghai Composite +1.4%, Hang Seng +0.9%, Jun S&P500 +0.1% at 2,086
***Commodities/Fixed Income***
- Jun gold +0.1% at $1,183/oz, Jun crude oil -0.1% at $58.86/brl, May copper flat at $2.93/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 2.7 tonnes to 739.1 tonnes
- (AU) Australia MoF (AOFM) sells A$1.5B in 1.75% 2020 Bonds; avg yield: 2.4114%; bid-to-cover: 2.32x
- JGB: (JP) Japan MoF sells ¥500B in 0.1% 10-year CPI-linked Bonds; Bid-to-cover ratio: 2.65x v 2.97x prior
- (US) Weekly Fed Balance Sheet Total Assets for week ending May 6th: $4.47T v $4.53T prior; Reserve Bank Credit: $4.43T v $4.44T prior; M1: -$4.7B v -$5.4B prior; M2: -$27.4B v -$1.7B prior; M1 y/y change: 8.9% v 9.1% w/w; M2 y/y change: 6.2% v 6.2% w/w
***Market Focal Points/FX***
- The trading sessions leading into the US non-farm payrolls are known for their subdued volatility, however this was hardly the case in today's Asian hours. In FX space, GBP saw particularly outsized gains on solid performance by ruling Conservatives and disappointing polls for opposition Labour and coalition member Liberal Democrats. Just after 4am GMT, Conservative Party picked up 14 seats and lost 5, while Labour lost 43 against +12 gained and LD lost 22 seats with none gained. Pro-independence Scottish National Party (SNP) results were especially impressive, picking up 46 seats. Note that 326 seats are needed for a majority, and Conservatives will still likely need to find a governing partner. GBP/USD spiked up some 150pips on the initial exit polls in early trade and added to those gains throughout the session, testing $1.55 level late in the session - a 2-month high. EUR/GBP collapsed 150pips as well to fall below £0.7240 - a 1-week low.
- Shanghai and Hong Kong led regional indices to the upside, with most pronounced gains coming after disappointing China trade data that lifted expectations for additional PBoC policy easing. Trade surplus was shy of expectations, exports fell for 2nd straight month by -6.2% v +1.6% expected, and imports fell for the 6th straight month by over 16% - much worse than 12% decline forecast. Shipments to US were up 3%, but exports to EU and Japan were down double digits. China press reports that Shenzhen-Hong Kong stock connect was approved was also notable for the H-shares which have previously attracted mainland inflows on cheaper valuations.
- Trading in Australia was also volatile, as AUD/USD fell as much as 50pips below $0.7870 on soft China trade numbers. Earlier, RBA quarterly policy statement lowered expectations for both GDP and inflation and warned that GDP would remain below trend for longer than anticipated. For 2015, GDP target was revised from 2.25-3.25% to 2.5% and for 2016 it was cut from 3.0-4.0% to 2.75-3.75%. 2015 CPI targets were little changed, but those of 2016 and 2017 H1 were all lowered by 0.25%. In Australia corporates, Macquarie posted strong FY results, beating net profit forecasts on nearly 300bps rise in ROE and raising its final dividend by 27%.
- Bank of Japan meeting minutes from Apr 7th offered little new, particularly in the wake of the more recent Apr 30th decision that saw BOJ push back its expectations of achieving 2% inflation target. Minutes did show some members showing concern that annual CPI could turn slightly negative if energy prices remain pressured. USD/JPY pair rose about 30pips, but failed to retest the key ¥120 handle.
***Equities***
US equities / ADRs:
- OUTR: Reports Q1 $2.23 v $1.67e, R$608.6M v $594Me; +5.6% afterhours
- MOH: Reports Q1 $0.71 v $0.50e, R$3.2B v $3.21Be; +3.9% afterhours
- NUAN: Reports Q2 $0.30 v $0.24e, R$475M v $482Me; Adds $500M to buyback plan (10% of market cap), +3.0% afterhours
- CBS: Reports Q1 $0.78 v $0.75e, R$3.50B v $3.50Be; +1.0% afterhours
- CERN: Reports Q1 $0.32 v $0.45e, R$996M v $1.09Be; -0.1% afterhours
- NVDA: Reports Q1 $0.33 v $0.26e, R$1.15B v $1.16Be; Raises dividend 15% to $0.0975; -2.0% afterhours
- MNST: Reports Q1 $0.62 (adj) v $0.68e, R$627M (adj) v $610Me; Planning for Long-Term Strategic Alignment with The Coca-Cola Company; -4.5% afterhours
- SFM: Reports Q1 $0.25 v $0.27e, R$857.5M v $870Me; -9.0% afterhours
Notable movers by sector:
- Consumer discretionary: Unicharm 8113.JP +1.3% (Q1 results); FAW Car CO 000800.CN -7.3% (YTD production and sales)
- Financials: Macquarie Group MQG.AU +4.9% (FY14/15 results); Suncorp Group SUN.AU +0.3% (Q3 results); Haitong Securities 6837.HK +2.7% (April results); CITIC Securities 6030.HK +4.1% (April results); Hutchison Whampoa 13.HK +1.9% (to sell stake in 3UK and O2UK); GF Securities Co 000776.CN +1.0% (April results)
- Industrials: Geely Automobile 175.HK +0.5% (April results)
- Technology: Nintendo Co 7974.JP +7.7% (FY14/15 results)