North Korea Still in Focus after Failed Missile Launch; USD Extending Decline on Low US CPI

Friday US Session Highlights

• (US) MAR CPI M/M: -0.3% V 0.0%E; CPI EX FOOD AND ENERGY M/M: -0.1% V +0.2%E; MAR CPI INDEX NSA: 243.801 V 244.237E
• (US) FEB BUSINESS INVENTORIES: 0.3% V 0.3%E
• (US) MAR ADVANCE RETAIL SALES M/M: -0.2% V -0.2%E (2nd straight decline); RETAIL SALES EX AUTO M/M:0.0 % V 0.1%E
• Friday US markets were closed

Politics

• (TR) Turkey Passes referendum on changing the constitution to replace its parliamentary system with the executive presidency with 51.5% v 48.7%; opposition to challenge result
• (FR) France presidential candidate Mélenchon (far left, communist) is rapidly rising in the polls – press
• (US) Pres Trump expected to name Randy Quarles as Federal Reserve’s top bank regulator – Politico
• (JP) Japan PM Abe’s cabinet approval rating rises 4pts to 60% – Yomiuri

Weekend US/EU Corporate Headlines

• MGI: Ant Financial raises offer price ~36% to $18.00/shr from $13.25/shr to acquire MoneyGram
• AMZN: Said to be interested in BJ’s Wholesale, who is putting itself up for sale – NY Post

Key economic data:

• (CN) CHINA Q1 GDP Q/Q: 1.3% (1-year low) V 1.5%E; Y/Y: 6.9% (6-quarter high) V 6.8%E
• (CN) CHINA MAR RETAIL SALES Y/Y: 10.9% (3-month high) V 9.7%E; YTD Y/Y: 10.0% V 9.6%E
• (CN) CHINA MAR INDUSTRIAL PRODUCTION Y/Y: 7.6% (highest since Dec 2014) V 6.3%E; YTD 6.8% V 6.3%E
• (CN) CHINA MAR FIXED ASSETS EX RURAL YTD Y/Y: 9.2% (10-month high) V 8.8%E
• (CN) CHINA MAR M2 MONEY SUPPY Y/Y: 10.6% V 11.1%E; 8-month low
• (CN) CHINA MAR NEW YUAN LOANS (CNY): 1.02T V 1.20TE; 4-month low
• (CN) CHINA MAR AGGREGATE FINANCING (CNY): 2.120T V 1.50TE

Asia Session Notable Observations, Speakers and Press

• Asian equity markets are mixed in light trade, with Australia and Hong Kong remaining closed for Easter holidays. Nikkei225 is little changed despite continued strength in JPY, as USD/JPY fell to fresh 5-month lows below 108.20 following softer than expected US CPI on Friday. USD weakness was also more pronounced against NZD, as New Zealand fundamentals justify expectations of RBNZ tracking the Fed tightening pace down the line. Gold prices rose some $7 above $1,295, tracking weaker USD, while US Treasury yield was seen testing 2.20% level.
• China economic data offered some positive surprises, as Q1 GDP, industrial output, and retail sales all topped consensus to hit multi-month rates of growth. Q1 GDP y/y rose to a 6-quarter high of 6.9%, and Stats Bureau noted Consumption accounting for 77.2% of Q1 growth, up from 64.6% in 2016. Fixed asset investment rose over 10% as property investment value rose 9%, sales value rose 25%, construction up 11%, and home sales aresa rose 17%. Industrial output growth was similarly impressive, rising at the fastest pace since late 2014 – power generation was up 7%, while coal and steel output were both up 2% despite the recent production curbs. NBS further noted that employment was stable, but also warned that structural problems remain an issue and property sales growth could start to slow as govt curbs impact is felt.
• Situation on the Korean peninsula remains tense even though there was no activity at the nuclear test site over the weekend. Instead, Pyongyang held a military parade commemorating 105th birthday of North Korea founder and also attempted to launch another missile test which reportedly failed. In the mean time, National Security Advisor McMaster remarked that US is working with China and other partners on a range of responses that will not include a military action at this, though VP Pence travelling in the region said all options are still on the table. US carrier USS Vinson is also reportedly about a week away from arriving to South Korea’s east coast.
• Turkish Lira rallied over 2% in the wake of this weekends referendum to expand the executive powers of Pres Erdogan; While the “Yes” vote was deemed victorious, the margin of victory at 51.3% v 48.7% opposed was well below the 55% mandate predicted by Erdogan and will likely be challenged by the opposition. Under upcoming constitutional changes, the winner of 2019 elections will in effect assume full control of the government, ending the current parliamentary system which treated office of the president as a role without full executive authority.

China

• (CN) China Stats Bureau: Domestic structural problems remain relatively striking
• (CN) PBoC adviser Fan Gang: China FX reserves may decline further – Chinese press
• (CN) China to take steps to boost domestic demand this year – Chinese press
• (CN) China Securities Regulatory Commission (CSRC) approves IPO applications for 10 companies; Will be allowed to raise up to CNY5.1B – Chinese press
• (HK) Trade between mainland China and Hong Kong in Jan-Feb was down 1.5% y/y – Chinese press

Japan

• (JP) Japan Chief Cabinet Sec Suga: No comment on details of US FX report; not intervening into the FX market, committed to G20 agreement on FX policy
• (JP) Japan to seeking to revive Trans-Pacific Partnership (TPP) without the US – Singapore press
• (JP) Japan PM Abe: Need to pressure North Korea for a sincere dialogue; Working for China to play a larger role in North Korea – speaking in parliament

Australia / New Zealand

• (AU) RBA’s Harper: Australia economic strength has been the result of good luck and good management; Govt does not make decisions based on rating agency implications – press

Korea

• (KR) North Korea said to have failed in a ballistic missile launch early on Sunday – press
• (KR) US National Security Advisor McMaster: US, China, and allies working on a range of responses to North Korea’s latest ballistic missile test; Trump is not considering military action for now – press
• (KR) US carrier USS Vinson to reach South Korea east coast on Apr 25th – Korean press
• (KR) US State Sec Tillerson and China top diplomat Yang Jiechi discussed situation in North Korea in a phonecall on Sunday – Chinese press
• (US) VP Pence: Reiterates all options remain on the table on North Korea

Asian Equity Indices/Futures (00:00ET)

• Nikkei +0.1%, Hang Seng closed, Shanghai Composite -1.3%, ASX200 closed, Kospi +0.4%
• Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.6%, FTSE100 -0.3%

FX ranges/Commodities/Fixed Income (00:00ET)

• EUR 1.0600-1.0630; JPY 108.15-108.80; AUD 0.7570-0.7595; NZD 0.6990-0.7030; GBP 1.2525-1.2545
• June Gold +0.3% at 1,293/oz; May Crude Oil -0.8% at $52.75/brl; May Copper +0.6% at $2.58/lb
• (CN) PBOC SETS YUAN MID POINT AT 6.8785 V 6.8740 PRIOR; 2nd straight weaker setting
• (CN) PBoC conducts CNY495.5B in combined 6-month and 1-yr Medium Term Lending Facility (MLF) operations today
• (CN) PBoC skips reverse repo operations v CNY90B prior in combined 7-day, 14-day, and 28-day reverse repos
• (KR) South Korea MoF sells 10-yr bonds at 2.165% v 2.215% prior

Asia equities / Notables / movers

Japan

• 4587 Peptidream +7.0%; Seen as likely to co-develop drug with major US pharmaceutical
• 6502 Toshiba -0.3%; Broadcom does not want an alliance w/ Japan govt or company if it bids for chip unit
• 6753 Sharp +1.4%; Said to consider returning into IT equipment business in partnership with Hon Hai; Smartphones said to be not part of the plan – Nikkei

China

• 601139 Shenzhen Gas Corporation +1.3%; Guides Q1 Net +5.5% y/y
• 600886 SDIC Power Holdings Co -3.1%; Reports FY16 Net CNY3.9B, -27.8% y/y
• 000036 China Union Holdings +2.3%; Guides Q1 Net higher y/y