US Session Highlights
(US) MBA MORTGAGE APPLICATIONS W/E MAY 12TH: -4.1% V +2.4% PRIOR
(US) Rep Al Green (D-TX) says he will call on Congress to start impeachment proceedings against Pres Trump
(US) House GOP caucus meeting today said to not focus on Pres Trump’s issues; no indication of breaking point with Pres Trump – AP
(US) House Speaker Ryan (R-WI): want facts before rushing to judgment on Trump-Comey reports; there are clearly a lot of politics being played
Stocks lost their foothold as investors began to doubt the capability of the Trump administration to enact its economic agenda. Last night’s news that memos indicate President Trump asked the FBI to drop the Flynn investigation created an overall lack of confidence in the markets. Blue chips and the broader S&P dropped close to 2%, for the largest one-day drop since Mar 21st. Volume at 3:30pm for the S&P was 17% above 3-month average, with decliners leading advancers 3 to 1. The worst hit sectors in the S&P were Financials and Techs, down 3.1% and 2.6% respectively. The VIX was up 34%, hitting its highest intraday level since April 21st.
US markets on close: Dow -1.8%, S&P500 -1.8%, Nasdaq -2.6%
Best Sector in S&P500: Financials
Worst Sector in S&P500: Real Estate
Biggest gainers: CL +5.7%; EXR +4.9%; BF.B +3.6%
Biggest losers: MU -7.0%; CFG -6.8%; NVDA -6.6%
At the close: VIX 15.6 (+4.9pts); Treasuries: 2-yr 1.26% (-2bps), 10-yr 2.22% (-11bps), 30-yr 2.90% (-9bps)
US movers afterhours
LYC: GMI-1271 receives FDA Breakthrough Therapy Designation for Adult Relapsed/Refractory Acute Myeloid Leukemia; +37.1% afterhours
LB: Reports Q1 $0.33 v $0.29e, R$2.44B v $2.46Be; Guides Q2 $0.40-0.45 v $0.45e; Raises FY17 $3.10-3.40 v $3.19e; +6.8% afterhours
CSCO: Reports Q3 $0.60 v $0.58e, R$11.9B v $11.9Be- Guides Q4 $0.60-0.62 v $0.63e, Rev -6% to -4% y/y v -1%e, gross margin 63-64% ; -7.7% afterhours
GMED: Receives FDA letter saying company had not sufficiently addressed the FDA’s questions regarding the 510(k) submission for the Excelsius GPS robotic guidance and navigation system – filing; -10.5% afterhours
ASNA: Guides Q3 EPS $0.04-0.06 v $0.11e, SSS -8% y/y; -33.0% afterhours
Key economic data
(CN) CHINA APR PROPERTY PRICES M/M: RISE IN 58 OUT OF 70 CITIES VS 62 PRIOR; Y/Y: RISE IN 69 OUT OF 70 CITIES V 68 PRIOR; avg all-70 new home prices m/m: 0.7% v 0.6% prior; y/y: 10.7% v 11.3% prior
(JP) JAPAN Q1 PRELIMINARY GDP Q/Q: 0.5% V 0.5%E; ANNUALIZED GDP: 2.2% V 1.7%E; 5th consecutive quarter of growth for the first time in 11 years
(JP) JAPAN Q1 HOUSING LOANS Y/Y: 3.3% V 3.1% PRIOR
(AU) AUSTRALIA APR EMPLOYMENT CHANGE: +37.4K (2nd straight increase; best 2-month rise since late 2015) V +5.0KE; UNEMPLOYMENT RATE: 5.7% (3-month low) V 5.9%E
(AU) AUSTRALIA MAY CONSUMER INFLATION EXPECTATION: 4.0% V 4.1% PRIOR; matches 5-month low
(NZ) NEW ZEALAND MAY ANZ CONSUMER CONFIDENCE INDEX: 123.9 V 121.7 PRIOR; M/M: +1.8% V -2.8% PRIOR; First increase in 4 months
Asia Session Notable Observations, Speakers and Press
Asian equity indices are down across the board, tracking the biggest US market decline of the year. White House political risk has risen from a simmer to an open flame over the past 24 in the wake of alleged interference by Pres Trump into the FBI investigation of former NSA Flynn. The presidential crisis has sunk so deep that the appointment of a special counsel Mueller to head the Russia probe on Wednesday evening is treated as a positive development, helping US equity futures regain some ground.
In FX, USD index has now erased all of its post-election gains, while the 10-2 Treasury spread was below 1% for the first time since Trump was elected last year. Predictably, Financials sector was the worst performer on THE S&P500 as long-end Treasuries rose on safe-haven demand. Nikkei225 is among the biggest decliners in Asia as USD/JPY fell as low as 110.50. USD selling is also sufficiently pronounced to boost commodity currencies despite the risk-off mode – AUD/USD was supported into the US market close and then rallied some 30pips on strong Australia employment data. MXN fell for the 2nd straight day however, with USD/MXN rising above 19 level.
In economic data, Aussie employment change was much higher than expected and unemployment rate fell back to 5.7% for a 3-month low despite participation rate remaining unchanged. Japan Q1 GDP was also constructive with a beat on q/q annalized. Sequentially, Japan grew for the 5th straight quarter – the longest such streak since 2006. Capex was the standout component, rising 0.2% against expected 0.4% decline. Also of note, China house price growth continued to retreat in the wake of property curb measures by regulators – Y/Y growth across top 70 cities slowed to 10.7% from 11.3%.
China
(CN) Templeton’s Mobius: No doubt there’s risk in China, but govt will insulate SOEs – press
(CN) China said to be considering excluding some industries from carbon permit trade
(CN) China Banking Regulator (CBRC) to increase protections after recently global cyber attack – local press
(CN) Fitch: Rapid growth in China investment companies is building risks – press
Japan
(JP) BOJ Dep Gov Iwata: No details of policy exit have been decided – press
(JP) Credit Suisse: Pace of Japan GDP growth may slow – press
Asian Equity Indices/Futures (00:30ET)
Nikkei -1.6%, Hang Seng -0.2%, Shanghai Composite -0.2%, ASX200 -1.2%, Kospi -0.5%
Equity Futures: S&P500 +0.2%; Nasdaq +0.3%, Dax +0.3%, FTSE100 +0.3%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1145-1.1175; JPY 110.50-111.20; AUD 0.7410-0.7465; NZD 0.6925-0.6950
June Gold +0.1% at 1,260/oz; June Crude Oil -0.3% at $48.92/brl; July Copper -0.8% at $2.52/lb
(CN) PBOC to inject combined CNY80B v CNY140B prior in 7-day and 14-day reverse repos
(CN) PBOC SETS YUAN MID POINT AT 6.8612 V 6.8635 PRIOR; Strongest Yuan setting since Feb 7th; 6th consecutive firmer fix
(JP) Japan’s MoF sells ¥0.9T in 0.7% (0.7% prior) 20-year JGBs; Avg yield: 0.560% v 0.562% prior; bid-to-cover: 3.84x v 4.06x prior
Asia equities notable movers
Australia
Sirtex (SRX) -28.6%; Announces combined Foxfire analysis; primary endpoint of overall survival superiority not met in mCRC
Virgin Australia (VAH) -2.8%; Reports Q3
Fairfax (FXJ) +6.6%; Receives takeover offer from Hellman&Friedman consortium at $1.225-1.250/shr cash
James Hardie (JHX) -5.6%; Reports FY16/17
Japan
Sumitomo Mitsui (8316) -3.0%; Guides FY20
Nintendo (7974) -0.4%; Switch sales
Senko Group (9069) -1.3%; Cut at Nomura
Hong Kong
Tencent (700_ +3.9%; Q1 result
Parkson Retail Group (3368) +1.0%; Q1 result
TPV Technology Ltd (903) -7.7%; Q1 result
Johnson Electric Holdings (179) +8.1%; Q1 result
