>>> Aidan Update

Asia Market Update: US extends steel & aluminum tariff exemptions; ANZ results boost Aussie banks; RBA leaves rate on hold

General Trend:
-Market participation in Asia remains limited given holidays in China, HK, South Korea, Singapore and Taiwan
-Earnings in focus: Hitachi rises after guiding FY19 results higher y/y; Sony, Honda decline after issuing outlook
- Australian financials ANZ Bank and ASX rise after earnings reports
-US President Trump delays decision on steel and aluminum tariffs for the EU, Canada and Mexico; decision now expected by June 1st; initial market reaction limited
- RBA sees 2018 and 2019 GDP growth to avg a bit above 3% v 2.4% in 2017; affirms CPI seen a bit above 2% in 2018
- Little initial bond market reaction to RBA statement; traders are looking ahead to the central bank’s upcoming quarterly statement on monetary policy (Friday, May 4th)
- In April, Australia’s combined capitals report first annual decline in dwelling values since late 2012, led by Sydney (Corelogic)
- Japan April Manufacturing PMI revised higher; sales to overseas clients however increased at a ‘markedly slower rate’, says IHS/Markit
-South Korea exports in April decline for first time since 2016, some cite difficult comparisons; exports to the US -1.8% y/y
-New Zealand March building permits rise on apartment projects
-New Zealand government announces a ‘Amazon tax’
-Apple expected to report Q2 results after US equity close on Tuesday May 1st
-US Treasury Sec Mnuchin confirms US trade delegation to hold talks in China on Thursday and Friday (May 3-4th)

***Headlines/Economic Data***
Japan
-Nikkei 225 opened -0.1%; closed +0.2%
-TOPIX Marine Transportation index +1.5%, Iron & Steel +1.3%, Real Estate +1.2%, Retail trade +0.5%; Electric Appliances -0.6%
-Mega-banks trade generally lower
- Start Today, [+15%], 3092.JP Reports FY17/18 Net ¥20.2B v ¥17.0B y/y, Op ¥32.7B v ¥26.3B y/y, Rev ¥98.4B v ¥76.4B y/y To buy back up to 3.21% of shares for ¥25.0B
- (JP) Japan Apr Final PMI Manufacturing: 53.8 v 53.3 prelim

Korea
-Kospi opened closed for holiday
- (KR) North Korea nuclear test said to still be operational - Korean press
- (KR) SOUTH KOREA APR TRADE BALANCE: $6.6B V $8.5BE; Exports y/y: -1.5% v 3.3%e (1st decline in 18-months); Imports y/y: +14.5% v 16.0%e
- (US) Exempts South Korea, Argentina, Brazil and Australia from steel and aluminum tariffs

China/Hong Kong
-Hang Seng opened closed for holiday, Shanghai Composite closed for holiday
-(HK) Macau Apr Gaming Rev MOP25.7B v MOP24Be, y/y: 27.6% v 20.2%e (21st consecutive month of growth)
- (US) Treasury Sec Mnuchin: US delegation to hold trade talks in China on Thursday and Friday
- (HK) Hong Kong pre-owned home prices up for 2 consecutive years - SCMP
- SkyBridge Capital and HNA Capital confirm mutual agreement not to pursue transaction
-(CN) China Dalian Commodity Exchange (DCE) will open iron ore futures trading to foreign capital in May 4th

Australia/New Zealand
-ASX 200 opened +0.1%, closed %
-ASX 200 Financials index +1.4%, REIT +0.9%, Resources +0.6%, Energy +0.6%, Telecom +0.6%
-(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (18th straight pause in the current easing cycle)
- (AU) Fitch: Australia big four banks A$1.3T mortgage books can withstand an Ireland-style correction in property prices but the lenders' ability to deal with second-order impacts remains uncertain - AFR
- ANZ.AU Reports H1 (A$) Adj Cash profit 3.49B (un-adj 2.88B) v 3.6Be; Net interest income 7.35B v 7.46B y/y
- (AU) Australian Dairy Farmers lobby group has refused to back calls by the Australian Competition and Consumer Commission for a mandatory code of conduct for milk processors – AFR
- CBA.AU APRA applies A$1.0B add on to minimum capital requirement
- (AU) Australia Apr AIG Performance of Manufacturing Index: 58.3 v 63.1 prior
- FCG.NZ Reports Mar NZ Milk collection 143M kgms, -3% y/y; Dairy exports 11.0K MT, +4% y/y
- (NZ) New Zealand Mar Building Permits m/m: 14.7% v 6.4% prior
- (NZ) New Zealand Government: To tax low-value goods from abroad, effective Oct 20th

Other Asia
-(SG) Singapore PM Lee: Good chance 2018 GDP will exceed 2.5%

North America
-US equity markets ended lower: Dow -0.6%, S&P500 -0.8%, Nasdaq -0.8%, Russell 2000 -0.9%
-S&P500 Health Care -1.5%, Industrials -1.3%
- (US) Treasury Sec Mnuchin: Does not expect to see a lot of inflation

Europe
- (US) President Trump to postpone steel and aluminum tariff exemption decision for EU, Canada and Mexico until June 1st; finalizes deal to exempt South Korea on steel
- (UK) House of Lords votes 335-244 to restrict possibility of PM May choosing a no deal Brexit; Gives the Parliament extra powers over EU exit deal
-(EU) EU responds to US announcement extending EU's exemption from US tariffs on steel and aluminium imports to June 1st:The US decision prolongs market uncertainty, which is already affecting business decisions. The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security.

***Levels as of 02:00ET***
- Hang Seng closed; Shanghai Composite closed; Kospi closed
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax -0.2%; FTSE100 +0.3%
- EUR 1.2084-1.2067; JPY 109.40-109.24; AUD 0.7546-0.7527;NZD 0.7041-0.7031
- Jun Gold -0.5% at $1,312/oz; Jun Crude Oil +0.2% at $68.69/brl; Jul Copper -0.9% at $3.05/lb

>>> US Close Dow -0,61% S&P -0,82% Nasdaq -0,75% Russell -0,92%


Closing Market Summary: Disappointing Start to the Week

Stocks got off to a decent start on Monday, but ended the session on a lower note. The major averages finished at their worst marks of the day due to a sharp bout of selling in the final minutes; the S&P 500 and the Nasdaq settled with losses of 0.8% apiece, while the Dow dropped 0.6%.

Losses were broad-based on Monday, with all 11 S&P sectors finishing in negative territory. Telecom services was the worst-performing group, losing 2.7%, following news that Sprint (S 5.61, -0.89) and T-Mobile US (TMUS 60.51, -4.01) have agreed to an all-stock merger; the deal is aimed at creating a larger carrier to better compete with wireless giants AT&T (T 32.70, -0.34) and Verizon (VZ 49.35, -2.22). Sprint and T-Mobile US shares dropped 13.7% and 6.2%, respectively, while Verizon shares lost 4.3% and shares of AT&T slid 1.0%.

As for the other sectors, losses ranged from less than 0.1% to 1.6%. The industrials (-1.4%), materials (-1.3%), and health care (-1.6%) sectors showed relative weakness, while the consumer discretionary (-0.4%), technology (-0.5%), energy (unch), real estate (-0.4%), and utilities (-0.3%) groups showed relative strength. 

Within the consumer discretionary space, shares of McDonald's (MCD 167.44, +9.14) rallied 5.8%, hitting a three-month high, after the fast food giant reported better-than-expected earnings and revenues for the first quarter. Meanwhile, in the tech sector, Apple (AAPL 165.26, +2.94) shares jumped 1.8%, rebounding from a nearly three-month low.

The energy group finished just a tick beneath its flat line, helped by an increase in the price of crude oil; West Texas Intermediate crude futures jumped 0.7% to $68.53 per barrel, challenging the more than three-year high they hit last week. Tensions in the oil-rich Middle East heightened on Monday -- helping to underpin the price of crude oil for fear that an actual conflict would slow production -- after Israeli Prime Minister Benjamin Netanyahu accused Iran of lying about not having a nuclear weapons development program.

Elsewhere, the consumer staples sector finished slightly ahead of the broader market, losing 0.6%, as shares of its largest component by market cap -- Walmart (WMT 88.46, +1.17) -- rallied 1.3% after the company announced that it will be selling its UK subsidiary Asda Group to Sainsbury's; however, Walmart will retain a 42% stake in the merged business.

U.S. Treasuries moved mostly higher on Monday, flattening the yield curve along the way; the yield on the benchmark 10-yr Treasury note slid two basis points to 2.94%, while the 2-yr yield finished flat at 2.48%. Meanwhile, the U.S. Dollar Index jumped 0.4% to 91.64, hitting its highest level since early January.

Reviewing Monday's economic data, which included Personal Income, Personal Spending, and PCE Prices for March, the Chicago PMI for April, and March Pending Home Sales:

  • Personal income climbed 0.3% in March (consensus +0.4%) following a revised increase of 0.3% in February (from 0.4%). Meanwhile, personal spending rose 0.4% in March (consensus +0.4%) following a revised flat reading in February (from 0.2%). The PCE Price Index was flat in March (Briefing.com consensus 0.0%), and the core PCE Price Index, which excludes food and energy, increased 0.2% (consensus +0.2%). Year-over-year, the core PCE Price Index is up 1.9%, versus 1.6% in the last reading.
    • The key takeaway from the report is that it shows consumer inflation in the reaches of the Federal Reserve's inflation target, which will give the Federal Reserve some data-based ammunition to keep raising the fed funds rate (but not at the May FOMC meeting).
  • Chicago PMI for April hit 57.6 (consensus 58.0), up from 57.4 in March.
  • Pending Home Sales increased 0.4% in March (consensus +1.5%). Today's reading follows a revised 2.8% increase in February (from +3.1%).

On Tuesday, investors will receive the ISM Index for April (consensus 58.5), Construction Spending for March, and April auto and truck sales.

  • Nasdaq Composite: +2.4% YTD
  • Russell 2000: +0.4% YTD
  • S&P 500: -1.0% YTD
  • Dow Jones Industrial Average: -2.3% YTD