Markets Cautiously Await Outcome Of US Trade Delegation To China

General Trend:

• Asian equity markets are generally lower, in line with US trading session; Participation limited by Japanese holiday
• Australia ASX 200 outperforms on gains in the consumer discretionary and resources sectors
• National Australia Bank (NAB) Q1 profits above ests; noted possible impact of higher short-term funding costs
• Amazon to launch new fulfillment center in Australia
• Hang Seng declines, smartphone maker Xiaomi confirms massive IPO
• Hang Seng Telecom index declines over 1%; US White House reportedly mulling restricting equipment sales by China telecom companies on national security risk grounds (press)
• Hong Kong gaming giant SJM rises over 2% after Q1 earnings
• China/US trade talks expected to begin today, continue on Friday
• Aussie rises after better than expected March Trade Balance and Building Approvals data; little impact seen on bond market
• Analysts continue to push back calls for RBA rate hike: CBA now sees hike in Feb 2019 v Nov 2018 prior
• RBA is expected to release its quarterly statement on monetary policy (SOMP) and forecasts on Friday, May 4th; Gov Lowe suggested no major changes expected
• China and Japan speculated to discuss reopening of currency swap line next week
• USD/JPY trades below ¥110.00 post FOMC
• Japan markets are closed on Friday for holiday
• UK April Services PMI due for release later today

Headlines/Economic Data

Japan

• Nikkei 225 closed for holiday
• Takeda Pharma, 4502.JP There is speculation that the company may receive ¥3.0T loan from a group of banks – Japanese Press
• (JP) Japan and China said to examine plan to revive bilateral currency swap agreement – Japanese Press

Korea

• Kospi opened +0.1%
• 005380.KR Hyundai/Kia Apr China Sales more than doubled y/y – press
• 028260.KR Elliott confirmed taking legal action against the former South Korean administration over its illegal intervention in the merger between Samsung C&T and Cheil Industries in 2015
• Shares of Kepco Plant [051600.KR] have declined by over 14% after Q1 earnings report
• (KR) Bank of Korea (BOK) Apr Minutes: One member noted that the current accomodative policy is desirable as both internal and external uncertainties arise (after the close)

China/Hong Kong

• Hang Seng opened -1%, Shanghai Composite -0.2%
• Hang Seng Property/Construction Index -1.8%, Info Tech -1.4%, Financials -1.4%, Materials -1.4%, Telecom -1.3%
• Esprit Holdings [330.HK] declines over 1%, plans to exit Australia and New Zealand
• (CN) China Environment Ministry: Three northern cities have been ordered to halt approvals related to new polluting projects for 6 months
• (CN) China PBoC Open Market Operation (OMO): Injects CNY50B in 7-day reverse repos v CNY200B prior; Net: drains CNY70B v nil prior
• PBoC: CNY156B in medium-term lending facilities (MLF) to mature in May
• (CN) China PBoC sets yuan reference rate at 6.3732 v 6.3670 prior
• (CN) China State Council: China will further improve its business environment by halving the time required to open a business and start construction projects – Xinhua
• (CN) Study by National Retail Federation (NRF) and the Consumer Technology Association (CTA) finds US tariffs and follow on retaliation by China would reduce US output by ~$3B and nearly 134,000 workers would lose jobs, most of whom are less-skilled workers
• (CN) Since mid-April the PBoC has on various occasions fixed the Yuan (CNY) midpoint weaker than consensus expectations, could suggest concern in China about competing countries in the emerging markets (EM) – financial press
• (RU) Russia doubled its capacity of pipeline exports to China recently as seaborne shipments to Europe have been falling, China on track to replace EU as Russia’s top oil customer
• (CN) PBOC announces rules on overseas securities investments by domestic companies: Overseas FX purchase not allowed under RQDII scheme
• (HK) HKMA Chief Chang: Local interest rates should rise along with USD rates; HK$/USD gap attracts carry trade activities
• (HK) Hong Kong HKD 3-month Hibor at 1.66550%, continues to trade at highest level since 2008

Australia/New Zealand

• ASX 200 opened +0.1%, closed +0.8%
• ASX 200 Resources index +1.4%, Telecom +0.9%,Utilities +0.8%, Consumer Discretionary +0.8%, Energy +0.7%, Financials +0.5%; REIT -0.1%
• (AU) AUSTRALIA MAR TRADE BALANCE (A$):1.53B V 865ME (3RD STRAIGHT SURPLUS)
• (NZ) New Zealand April ANZ Job Advertisements M/M: -2.1% v 0.9% prior
• (AU) Australia Apr AIG Performance of Services Index: 55.2 v 56.9 prior
• (AU) Australia Apr CBA PMI Services: 55.2 v 55.6 prior; Composite: 55.3 v 55.4 prior
• (AU) AUSTRALIA MAR BUILDING APPROVALS M/M: 2.6% V 1.0%E; Y/Y: 14.5% V 10.6%E
• NAB.AU Reports H1 (A$) Cash profit 3.29B (ex restructuring costs) v 2.77Be, Net Op Rev 9.1B v 8.87B y/y
• (NZ) New Zealand sells NZ$100M v NZ$100M indicated in Inflation-Indexed Sept 2040 bonds, avg yield 2.1452%
• (NZ) New Zealand PM Ardern urges domestic businesses to show confidence in the government – US financial press

Other Asia

• United overseas bank, UOB.SG Reports Q1 (S$) Net 978M v 807M y/y; Net interest income 1.47B v 1.30B y/y
• (SG) Singapore Fin Min Heng: Singapore should try harder to reach GDP more than 2-3% annually

North America

• US equity markets closed mostly lower: Dow -0.7%, S&P500 -0.7%, Nasdaq -0.4%, Russell 2000 +0.3%
• S&P500 Consumer Staples -2%, Health Care -1.4%
• XRX Reports Q1 $0.68 v $0.15 y/y, Rev $2.44B v $2.45B y/y; Withdraws guidance due to pending nominations
• LOGI Reports Q4 $0.32 v $0.30 y/y, Rev $592.4M v $510.6M y/y, affirms guidance
• XPO Logistics [XPO]: Said to consider up to $8.0B in new deals – FT
• (US) FOMC HOLDS TARGET RATE RANGE AT 1.50-1.75% (AS EXPECTED); INFLATION HAS MOVED CLOSE TO 2% TARGET SINCE MARCH
• (US) President Trump Lawyer Giuliani: Odds are Trump won’t be interviewed by Mueller, but does not rule out interview
• (US) DOE CRUDE: +6.2M V +1ME
• Q1 gold demand 973.5T, -7% y/y (weakest Q1 in 10-yrs) – World Gold Council

Europe

• (UK) UK core cabinet said to make no decision on post-Brexit customs during ministers meeting; Hybrid customs union idea appears dead – press
• (UK) House of Lords votes in support of power to prevent a hard border in Ireland; Votes 309-242 to ensure no hard border, defying PM May’s position – press
• (EU) ECB’s Weidmann (Germany): ECB should not unnecessarily delay its exit from stimulus
• (SA) Saudi Oil Min: producers are monitoring markets and will adjust plans if needed
• Shire [SHP.UK]: There is speculation that Takeda may receive ¥3.0T (~$27.4B) loan from a group of banks – Japanese Press

Levels as of 02:00ET

• Hang Seng -1.4%; Shanghai Composite +0.2%; Kospi -0.5%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.0%, Dax +0.2%; FTSE100 +0.2%
• EUR 1.1989-1.1948; JPY 109.88-109.57; AUD 0.7527-0.7485;NZD 0.7012-0.6991
• Jun Gold +0.4% at $1,310/oz; Jun Crude Oil -0.2% at $67.83/brl; Jul Copper +0.4% at $3.08/lb