Asia Mid-Session Market Update: Macron victorious in France; Nikkei returns with a 2% rise to 18-month highs; China Trade internals underwhelm while Reserves extend rebound
Friday US Session Highlights
Apr CBIZ Small Business Employment Index: -0.3% v +1.6% m/m; first negative reading for the April period since the SBEI’s inception
(US) APR UNEMPLOYMENT RATE: 4.4% V 4.6%E (lowest since May 2007); Underemployment Rate: 8.6% v 8.9% prior; participation Rate: 62.9% v 63.0% prior
(US) APR CHANGE IN NONFARM PAYROLLS: +211K V+190KE; Mar revised lower
(US) APR AVERAGE HOURLY EARNINGS M/M: 0.3% V 0.3%E; Y/Y: 2.5% V 2.7%E; AVERAGE WEEKLY HOURS: 34.4 V 34.4E; prior earnings revised lower
(US) New York Fed Nowcast: cuts Q2 GDP forecast to 1.8% from 2.3% from 4/28
Politics
(FR) France’s Macron defeats Le Pen in French Presidential Elections; Turnout was the lowest since 1969 – French Interior Ministry
(FR) According to Kantar survey, Macron’s party would get 26% in upcoming French parliamentary elections, followed by Republicans’ 21% and Le Pen’s FN party at 21% – press
(GE) Chancellor Merkel’s Christian Democrats (CDU) defeated the Social Democrats in the Schleswig-Holstein state elections; margin 33% to 26% – ARD
(US) Republicans in the Senate said to plan a version of healthcare bill that is radically different from that of the House, including keeping some of the Obamacare provisions – press
(UK) Opposition Labour Party finance chief McDonnell says he can guarantee that low and middle class wage earners would not see any tax increase to fund the party’s spending plans if it wins elections next month – press
Weekend US/EU Corporate Headlines
CCP: To merge with Sabra Health Care REIT for combined equity value of $4.3B in all-stock deal, implies $29.96/share* (implies ~11.8% premium)
DHT: Board Unanimously Rejects Unimproved Proposal from Frontline
TRCO: Sinclair Broadcast expected to make a $45/shr offer for Tribune (implies a $3.9B deal) – financial press
Key economic data:
(CN) CHINA APR FOREIGN RESERVES: $3.030T V $3.020TE (UPDATE); 5-month high; 3rd straight increase (first 3-month streak since mid-2014)
(CN) CHINA APR TRADE BALANCE: $38.1B V $35.2BE
(CN) CHINA APR TRADE BALANCE (CNY): 262.3B V 197.2BE ; 3-month high
(AU) AUSTRALIA MAR BUILDING APPROVALS M/M: -13.4% (biggest decline since mid-2012) V -4.0%E; Y/Y: -19.9% (biggest decline in 5 months) V -10.0%E
(AU) AUSTRALIA APR ANZ JOB ADVERTISEMENTS M/M: +1.4% V +0.8% PRIOR
(AU) AUSTRALIA MAR NAB BUSINESS CONFIDENCE: 13 (highest level since early 2010) V 6 PRIOR; CONDITIONS: 14 V 12 PRIOR
Asia Session Notable Observations, Speakers and Press
Macron defeats Le Pen in French presidential elections by over 20pts as implied by polls, though market reaction is muted as investors look ahead to Parliamentary elections and also question his ability to govern a divided populace used to mainstream politics. Euro initially rises to 1.1020 but quickly reverses initial gains, while US equity futures markets turn marginally lower.
Chinal FX reserves rise for the 3rd straight time to a 5-month high as regulatory actions stem the tide of outflows. China Trade data also mixed, with CNY and USD denominated surplus beating estimates but Exports and Imports growth undershoot projections on both counts. CNY-denominated import growth slows to 4-month lows, and China Customs also notes Iron Ore imports were at lowest since Oct 2016.
Nikkei225 returns from 3-day break to reach its best levels since Dec-2015, tracking USD strength against the Yen following lowest US unemployment rate levels since mid-2007. Australia also firms as miners rally on a bounce in iron ore prices. Recall iron ore fell over 10% late last week, weighing on AUD currency. AUD/USD is tracking higher late in the day, up some 50pips from last week’s lows despite a much bigger than expected decline in Australia building approvals.
Australia’s 2nd biggest lender Westpac is little changed on mixed H1 results. Earnings were in line and bank said the level of delinquent borrowers remains historically “low” despite a modest uptick in overdue home loans.
China
(CN) Moody’s: China shadow banking sector impacted by increasingly tight systemic liquidity – press
(CN) China said to focus on improving the auditing of SOE’s overseas investment – Chinese press
(CN) China Customs: Apr iron ore imports were lowest since Oct – press
Japan
(JP) Japan Bankers Association Chairman Hirano: Japan does not need more monetary or fiscal stimulus, needs structural reforms
(JP) Japan Vice Fin Min of International Affairs (currency chief) Asakawa: Slowdown of China economy is a major global risk – press
(JP) Japan PM Abe: China’s role is important in dealing with North Korea
Australia/New Zealand
(NZ) BNZ (private bank): Believes RBNZ will raise cash rate in Feb 2018 (prior view was May 2018)
Korea
(KR) South Korea govt think tank (KDI) monthly report: Economy is on modest recovery track – Korean press
(KR) North Korea detains another US citizen, bringing the number of total US detainees to 4 – press
Asian Equity Indices/Futures (00:30ET)
Nikkei +2.4%, Hang Seng +0.6%, Shanghai -0.7%, ASX200 +0.5%, Kospi +1.3%
Equity Futures: S&P500 flat; Nasdaq -0.1%, Dax flat, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.0960-1.1020; JPY 112.60-112.95; AUD 0.7385-0.7420; NZD 0.6890-0.6930; GBP 1.2950-1.2990
June Gold +0.3% at 1,231/oz; June Crude Oil +1.3% at $46.80/brl; July Copper -1.2% at $2.51/lb
(US) Weekly Baker Hughes US Rig Count: 877 v 870 w/w (+0.8%) (16th straight weekly rise)
(SA) Saudi Oil Min Al-Falih: OPEC cuts could extend beyond H2 of 2017; Not concerned with oil demand peaking any time soon – press
(CN) PBOC SETS YUAN MID POINT AT 6.8947 V 6.8884 PRIOR
(CN) PBOC skips open market operations (2nd straight skip)
Asia equities / Notables / movers
Australia
Westpac (WBC) +0.2%; Reports H1 cash earnings A$4.02B v A$4.02Be; Rev A$10.77B v A$10.48B y/y
Fairfax (FXJ) +2.6%; Received indicative proposal for certain assets from TPG consortium at A$0.95/shr in cash and shares
Myer (MYR) -8.9%; Credit Suisse Cuts MYR.AU to Underperform from Neutral, price target: A$0.82
Origin Energy (ORG) +3.1%; Announces agreement to sell Stockyard Hill Wind for A$110M
Hong Kong
Geely (175) +2.1%; Apr sales
ePrint (1884) -2.2%; Guides FY16
Japan
Olympus (7733) -4.7%; FY16/17 results
Subaru (7270) -0.3%; FY18 results speculation
Toshiba (6502) -1.0%; KKR said to be in talks over a preemptive bid for Toshiba’s chip unit – press
Mitsubishi Motor (7211); FY16/17 results speculation
