US Session Highlights
(US) MAR ISM NON-MANUFACTURING COMPOSITE: 55.2 V 57.0E (lowest since Oct 2016); new orders 58.9 v 61.2 prior
(US) MAR ADP EMPLOYMENT CHANGE: +263K V +185KE
(US) DOE CRUDE: +1.6M V -0.5ME; GASOLINE: -0.6M V -1.5ME; DISTILLATE: -0.5M V -1ME
Stocks had a bumpy ride today, with a considerable amount of volatility. Major indices rose early in the morning after much stronger than expected ADP jobs data, but then began to fall in the afternoon once March FOMC minutes were released and Speaker Ryan said the road ahead for tax reform may be longer than healthcare. The Dow had rallied 142 points to reach a day high just short of 20,900, before retracing nearly 250 points, the biggest intraday reversal for the Dow and S&P in 14 months.
US markets on close: Dow -0.2%, S&P500 -0.3%, Nasdaq -0.6%
Best Sector in S&P500: Utilities
Worst Sector in S&P500: Financials
Biggest gainers: UA +3.0%; CRM +2.9%; SPLS +2.6%
Biggest losers: CHK -3.3%; BBBY -3.0%; SWN -2.9%
At the close: VIX 12.9 (+1.1pts); Treasuries: 2-yr 1.23% (-2bps), 10-yr 2.35% (flat), 30-yr 3.01% (+1bps)
US movers afterhours
YUMC: Reports Q1 $0.44 v $0.37e, R$1.28B v $1.29Be; +10.4% afterhours
KOPN: Enters into partnership agreements to meet coming demand for OLED micro-displays for virtual reality and augmented reality; +8.2% afterhours
JAZZ: Reaches settlement with Hikma Pharmaceuticals related to Xyrem patent litigation; +5.9% afterhours
MACK: Declares $140M special dividend in connection with recently completed asset sale; +5.1% afterhours
BBBY: Reports Q4 $1.84 v $1.77e, R$3.53B v $3.50Be; Guides initial FY17 EPS to decline low single digits to 10%, implies low end $4.12 v $4.56e; +3.8% afterhours
MDT: Cardinal Health said to be near $6B purchase of Medtronic medical supplies unit – press; +2.2% afterhours
RECN: Reports Q3 $0.09 v $0.14e, R$143.8M v $146Me; Adj EBITDA margin 5.8% v 8.9% y/y; -8.4% afterhours
SYNC: Files to sell shares of indeterminate amount through Canaccord and Needham; -10.7% afterhours
CAFD: Reports Q1 +$0.03 v -$0.18e, R$9.9M v $10.0Me; Guides Q2 R$14-16M v $16.2Me, adj EBITDA $24.0-26.5M; -11.4% afterhours
Politics
(US) President Trump: May include infrastructure in either healthcare or tax reform legislation – NYT
(US) House Majority Leader McCarthy: Highly confident of Obamacare repeal this year
Key economic data
(CN) CHINA MAR CAIXIN PMI SERVICES: 52.2 (6-month low and 3rd straight sequential decline) V 52.6 PRIOR, COMPOSITE PMI: 52.1 (6-month low) V 52.6 PRIOR
(HK) HONG KONG MAR COMPOSITE PMI: 49.9 V 49.6 PRIOR; 3rd straight contraction
(TW) TAIWAN MAR CPI Y/Y: 0.2% V 0.8%E; WPI Y/Y: 1.8% V 2.3%E
Asia Session Notable Observations, Speakers and Press
Asian equity indices are trending lower as risk aversion flows that struck sentiment in the 2nd half of the US trading session reverberate in Asia Pacific. Fed’s meeting minutes were the perceived culprit behind the biggest bearish reversal in US stocks this year, with US central bank officials expressing concern over stretched valuations, questioning the timing of US fiscal stimulus being stretched out to 2018, and also signalling impending policy change of balance sheet adjustment as soon as this year. Worries about the "Trump trade" pro-business agenda were also on display as House Speaker Ryan said White House and Congress are still not on the same page in terms of tax reform. Later in the Asia session, NY Times reported that Pres Trump may try to push through his infrastructure package as part of a bundle with healthcare or tax reform. S&P futures continued to slide to 1-week lows, gold tested $1260, and Treasuries rallied.
Nikkei225 is again leading the decliners as USD/JPY fell over 40pips from the highs, while Shanghai Composite remains resilient on support from economic zone speculation. In other FX majors, AUD/USD is also notably lower on risk aversion and also softer China Caixin PMIs, sliding to 3-week lows below 0.7540. CNY weakened offshore on more reports that Pres Trump may alter Obama-era criteria on what it means to be a currency manipulator and avoid labeling China as such despite his strong campaign rhetoric on the issue.
North Korea overnight missile launch related tensions continued to simmer today, as South Korea official said he would discuss the matter with US and Japan. PM Abe reiterated that the launch was provocative, while a US commander in the region went as far as to state that economic measures against North Korea have not had expected results, with any possible pre-emptive attack against Pyongyang being the decision of US president Trump.
In economic data, China Caixin Services and Composite PMIs hit 6-month lows with both manufacturers and service providers noting slower expansions in output. Markit economists also noted weaker growth in composite new orders, weakest expansion of employment in 2017, flat work backlogs after 2 months of increases, and slowing input price inflation. Hong Kong composite PMI remained in contraction for 3rd straight month, though hit slightly higher levels thanks to first growth in output in 2 years and another increase in total input costs during March. Expectations for output over the next 12 months in Hong Kong however remain subdued amid economic downturn, political uncertainty, and higher housing rental costs.
Asia Development Bank releases its latest outlook report for the region, maintaining 5.7% target this year and next. China 2017 GDP view was raised to 6.5% from 6.4% before a 2018 slowdown to 6.2%. ADB noted risks of capital outflows due to US policy tightening.
China
(CN) China Housing Ministry calls for reasonable residential land supply – financial press
(CN) China will take more active measures to increase jobs – Chinese press
(CN) China SAFE: China FX market relatively stable, cross-border capital flow gradually tends to balance – Chinese press
(CN) Former PBoC advisor Li Yang: China should control housing loans – Chinese press
Japan
(JP) Japan PM Abe: Agreed with Trump that North Korea missile launch is provocative; interested in how Trump will talk about it China President Xi
Australia/New Zealand
(AU) Moody’s: Home loan arrears are rising in all Australia states; expects delinquencies to continue to increase over 2017
(AU) Australia Treasurer Morrison: Economic growth is the starting point of 2017 budget
(AU) RBA’s Debelle: Increase in mining profits, reflecting coal and iron ore price spikes, will partly go to foreign owners as dividends, increasing net income deficit
(AU) Australia govt said to see A$4B budget increase from higher iron ore and coal prices – Australian press
(NZ) China-New Zealand free trade talks to be held in Beijing on Apr 27th – press
(NZ) New Zealand Treasury reports 8-month Budget Surplus NZ$1.41B v NZ$498M expected
Korea
(KR) US Navy Pacific Commander: Diplomatic and economic measures against North Korea have not had expected results; Any preemptive attack is up to Pres Trump – – press
(KR) South Korea presidential candidate Ahn Cheol-soo: Korea’s next leader should continue to allow the US to install the Thaad missile-defense system
(KR) South Korea envoy to discuss North Korea missile with US and Japan – Korean press
Asian Equity Indices/Futures (00:00ET)
Nikkei -1.4%, Hang Seng -0.6%, Shanghai Composite +0.1%, ASX200 -0.6%, Kospi -0.5%
Equity Futures: S&P500 -0.2%; Nasdaq -0.3%, Dax flat, FTSE100 -0.2%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.0660-1.0685; JPY 110.30-110.75; AUD 0.7530-0.7575; NZD 0.6960-0.6985
June Gold +0.1% at 1,255/oz; May Crude Oil -0.5% at $50.91/brl; May Copper -0.2% at $2.67/lb
SLV iShares Silver Trust ETF daily holdings fall to 10,237 tonnes from 10,242 tonnes prior; 5th straight decline
(CN) PBOC SETS YUAN MID POINT AT 6.8930 V 6.8906 PRIOR
(CN) PBoC skips open market operations for 9th straight session; Drains CNY10B
(JP) Japan MoF sells ¥3.979T 3-month bills; avg yield -0.1431% v -0.1612% prior; bid-to-cover 4.44x v 5.30x prior
Asia equities notable movers
Australia
JBH.AU JB Hi-Fi +3.7% (Q3 result)
RIO.AU Rio Tinto -2.1% (income tax assessments)
ASX.AU ASX -3.2% (Credit Suisse trims FY17 earnings estimates)
EHE.AU Estia Health +3.7% (Sentinel has bought 4.988% stake and is exploring purchase of a controlling interest)
Japan
2678.JP Askul Corp +5.5% (discloses fire damage)
6502.JP Toshiba Corporation -0.4% (seeks additional aid)
3632.JP Gree Inc +2.7% (SMBC Nikko upgrades)
9984.JP Softbank Corp -1.3% (rework snapdeal plan)
6857.JP Advantest Corp +2.0% (Daiwa raises PT)
4565.JP Sosei Group Corp +5.1% (Heptares receives milestone payment)
4208.JP Ube Industries +0.8% (Jefferies upgrades)
Hong Kong
762.HK China Unicom -1.5% (mixed ownership reform)
1918.HK Sunac China Holdings +7.3% (quarterly result)
2238.HK Guangzhou Automobile Group -1.4% (March result)
813.HK Shimao Property +4.2% (Mar result)
576.HK Zhejiang Expressway -5.4% (to issue bond)
1970.HK IMAX China Holding -9.7% (investors’ divestment)
China
000709.CN Hebei Iron & Steel Co +10.1%, 600550.CN Baoding Tianwei Baobian Electric +10.0%, 000401.CN Tangshan Jidong Cement Co +10.0% (new special economic zone momentum)
