>>> Asian Update

Asian Market Update: Stocks sink and oil plummets as Doha talks yield no production freeze

***Economic Data***
- (CN) CHINA MAR PROPERTY PRICES M/M: FALL IN 8 OUT OF 70 CITIES VS 15 PRIOR; Y/Y: FALL IN 29 OUT OF 70 CITIES V 37 PRIOR
- (AU) AUSTRALIA MAR NEW MOTOR VEHICLE SALES M/M: +2.2% V 0.0% PRIOR; Y/Y: 4.2% V 2.5% PRIOR
- (NZ) NEW ZEALAND Q1 CPI Q/Q: 0.2% V 0.1%E; Y/Y: 0.4% V 0.4%E
- (SG) SINGAPORE MAR ELECTRONIC EXPORTS Y/Y: -9.1% V 0.7% PRIOR; NON-OIL DOMESTIC EXPORTS M/M: -15.6% V -12.3%E; Y/Y: 0.2% V +3.3%E
- (UK) UK APR RIGHTMOVE HOUSE PRICES M/M: 1.3% V 1.3% PRIOR; Y/Y: 7.3% V 7.6% PRIOR

***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -3.1%, S&P/ASX -0.3%, Kospi -0.5%, Shanghai Composite -1.3%, Hang Seng -1.2%, Jun S&P500 -0.6% at 2,063

***Commodities/Fixed Income***
- Jun gold +0.2% at $1,236/oz, May crude oil -4.4% at $39.90/brl, May copper -0.3% at $2.15/lb
- SLV: iShares Silver Trust ETF daily holdings fall to 10,366 tonnes from 10,396 tonnes prior
- GLD: SPDR Gold Trust ETF daily holdings rise 5.7 tonnes to 812.5 tonnes; first rise since Apr 6th
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.4787 V 6.4908 PRIOR; strongest Yuan setting since Apr 13th
- (CN) PBOC to inject CNY30B in 7-day reverse repos

***Market Focal Points/FX***
- Asian equity markets are down across the board as the high-profile OPEC meeting in Doha failed to produce oil output freeze the hopes for which had contributed to the recent energy rally. Oil prices opened down by about 5% below $40 in June WTI, while Brent was down over 4% around $41/brl. Risk aversion from lower oil prices also spilled over into equities and FX, with renewed concerns for higher-cost producers and also regarding exposure to the energy space among financials. Australia's energy names were the hardest hit, US futures were down about 0.5%, and USD/JPY sank some 70pips below ¥108, dragging down the Nikkei by over 3% with an added headwind from weekend seismic activity. AUD/USD fell about 80pips to 0.7640, though NZD/USD was supported by higher than expected CPI levels around 0.6920.

- Tensions between Iran and Saudi Arabia were largely seen as the culprit in the inconclusive Doha talks - the former refusing to even send its representatives as it seeks to ramp up production after years of being hamstrung by Western sanctions, and the latter demanding full OPEC participation. Russian Energy Min Novak said there was a draft under discussion centered around freezing output at January level until October, but new demands surfaced on Sunday. Qatar oil minister said negotiators will now need more time to consult, and any action on production levels is unlikely to be taken for months.

- China property sector continued its rebound - across the top 70 cities, prices rose 1.1% m/m v 0.6% prior and 4.9% vs 3.6% prior. These were 4th and 5th consecutive months of higher prices respectively. China Fin Min Lou also spoke, calling for US to increase public investment as global economy requires support. Separately, the govt unveiled more detail on steps to assist the 1.8M workers faced with unemployment due to capacity reductions which will include career counseling, early retirement and help in starting businesses.

- Japan PM Abe spokes about intentions to use various tools for earthquake disaster relief. Two earthquakes of magnitude 6.5 and 7.3 hit Japan over the weekend, killing over 40people and shutting down production at facilities run by Toyota, Honda, and other manufacturing giants. According to one estimate, the impact of the earthquake on Japan GDP could be as high as 1-2%.

- Brazil President Rousseff did not survive the impeachment vote in the lower house of Parliament. The ruling party has conceded defeat, though Rousseff announced she plans to contest the decision using legal means. The impeachment process now moves to the Senate, where the first vote is expected in 15 days.

***Equities***
US equities / ADRs:
- YHOO: Verizon thought to move ahead with a prelim bid for Yahoo; Time Inc will not proceed with the bid, sees the challenges facing company as too great - financial press

Notable movers on news:
- TCL.AU: Reports Mar stat toll Rev A$451M, +13% y/y; Prop toll Rev A$473M, +14.9% y/y; +2.4%
- NCM.AU: Looking to divest Hidden Valley PNG mine - Australian; +2.0%
- RIO: CitiGroup Cuts RIO to Sell from Neutral; -1.2%
- 6502.JP: Cut about 14.5K jobs worldwide on Friday or about 30% more than planned - Japan press; -2.2%
- TM: Mitsubishi UFJ estimates the impact from production suspension due to earthquake to be about ¥30B in op profit for Q1 - financial press; -4.8%
- QAN.AU: Reports Mar Load Factor 78.0% v 79.1% y/y; Cuts Q4 domestic capacity growth to be negative y/y (2% prior); Cuts H2 domestic capacity to 0.5-1.0% (prior 2%); -11.2%
- AGO.AU: Announces restructuring plan if approved will reduce the principal amount it owes to its lenders, known as the term loan B lenders from $267M to $135M; -17.4%

>>> Spain's Caixa confirms plans to acquire remaining stake in Portugal's BPI fo

Spain's Caixa confirms plans to acquire remaining stake in Portugal's BPI for €1.113/shr, valued at €1.6B 
- Company to offer €1.113 (€1.329 from previous offer) per share for the stake in BPI that it doesn't already hold
- Cash offer dependent on acceptance topping 50% of BPI
- Expects to close deal by end of third quarter
- Sees BPI acquisition to hit fully-loaded core capital by between 97-146 bps depending on acceptance
- Estimates restructuring costs of around €250M
- Offer dependent on bank eliminating 20% shareholder rights limitation 

(CS) Equity Strat. : European equities: what has gone wrong?

We modestly reduce the size of our overweight in Continental European equities and reduce our year-end target for the Euro Stoxx 50 to 3,350 from 3,400. We increase our overweight of Germany, raise Spain to overweight and increase the underweight of France. We would still stress the domestic demand story. We slightly add to US equities using the proceeds from our Continental Europe downgrade and increase our S&P 500 year-end target to 2,150 from 2,050. Our most preferred region is now GEM.

* What has gone wrong and seems unlikely to improve: Euro strength (each 10% rise in the euro trade weighted takes c.8 percentage points off EPS growth), and we see the EURUSD rising to 1.15-1.20; European equities are a consensus long but we have seen only partial capitulation (17% of inflows since Dec 2014 have flowed out); internet disruptors account for 0.2% of market cap (compared with 6.3% in the US); the political risk is likely to rise (immigration, anti-euro parties' popularity).

* What has gone wrong, but is likely to improve: Continental Europe is leveraged to the global cycle, which is now showing signs of turning higher; GEM exposure in Europe is higher than that for Japan or US (and Chinese news flow improving) and this should help European equities; Europe has nearly double the market cap weighting in banks relative to the US, but banks appear a tactical buy. The sector adjusted P/E has fallen to be 6% below the US versus a 2% premium in January; once we adjust for the normalisation of the cycle, we think it should be on an c.11% premium.

* What remains supportive of an overweight: The equity risk premium is 8.3% (versus warranted of 8.0%) with German pension fund equity weightings of just 15%; relative performance correlates to growth differentials and implies that Continental Europe is discounting less than 0.5% GDP growth (compared with our view of 1.5%); we forecast EPS growth of c.3% this year (in line with consensus) and c.10% in 2017E (versus consensus of c.12%) on the back of a rise in asset turns, lower interest charge, and modest margin improvement. 
We increase our overweight of Germany, raise Spain to overweight and increase the underweight of France. We would still stress the domestic demand story (Geberit, Thomas Cook, Cap Gemini, Sap, Assa Abloy, Accenture and Lear are cheap on Credit Suisse HOLT® and Outperform-rated).

* We slightly add to US equities using the proceeds from our Continental Europe downgrade and increase our S&P 500 year-end target to 2,150 from 2,050. The US now scores top on both our earnings and economic momentum scorecards, but valuation (with P/E relative at an all-time high), a pick-up in global IP (which is bad for the US as it is a defensive market) and rising rates (causing the US to underperform 75% of the time) leave us underweight. Our most preferred region is now GEM following the increase of our overweight on April 2 (Add to GEM, downgrade Japan) and our upgrade on December 2.