Equities Eebound Despite US Implementing Tariffs On EU And China

General Trend

• Asian equity markets open generally higher following Wednesday’s gains in Italy and the US
• Macau casino names rise ahead of release of May gaming revenues
• MSCI is expected to add China large-cap A-shares to its EM index, it has said the index changes will be implemented as of the close of Thursday May 31, 2018
• US President Trump speculated to proceed with metals tariffs on the EU, Canada and Mexico; Aluminum companies trade higher, Mexican Peso (MXN) declines
• China PMIs rise m/m, manufacturing index hits the highest since Sept 2017
• PBoC steps up liquidity injection into month end amid speculation cash may tighten during the summer months
• Japan Industrial Production was weaker than expected at start of Q2
• Australia Q1 Capex misses estimates ahead of next week’s GDP print; Aussie declines
• NZD declined as May business confidence weakened: ANZ noted weakness in the construction and retail industries
• Indonesia Rupiah (IDR) rises after inter-meeting rate hike by central bank
• Japan Finance Min Aso expected to meet US Treasury Sec Mnuchin today at the G-7 meeting
• BoJ may release bond purchase amounts for June after the market close
• Japan Q1 Capex data due on Friday’s session
• Focus remains on US Commerce Sec Ross’ expected visit to China (June 2-4th); China confirmed plan to cut import tariffs on consumer goods, announced plans to reduce foreign investment curbs related to energy, infrastructure and transportation

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.7%; closed +0.8%
• TOPIX Electric Appliances index +0.6%; Marine Transportation -1%
• Automakers trade generally higher: Toyota gains over 1%
• (JP) Japan Investors Net Buying of Foreign Bonds: -¥717.0B v +¥966.5B prior week; Foreign Net Buying of Japan Stocks: -¥380.0B v +¥97.1B prior week
• (JP) JAPAN APR PRELIM INDUSTRIAL PRODUCTION M/M: 0.3% V 1.4%E; Y/Y: 2.5% V 3.6%E
• (JP) Japan Chief Cabinet Sec Suga: Confident that China will cut tariffs on consumer goods
• (JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.10% (prior 0.10%) 2-yr JGBs; avg yield -0.147% v -0.134% prior; bid to cover 4.91x v 5.39x prior
• (JP) JAPAN APR ANNUALIZED HOUSING STARTS: 992K V 900KE; Y/Y: +0.3% V -8.9%E

Korea

• Kospi opened +0.8%
• (KR) SOUTH KOREA APR INDUSTRIAL PRODUCTION M/M: 3.4% V 0.9%E; Y/Y: 0.9% V -1.4%E
• (KR) South Korea Apr Retail Sales m/m: -1.0% v 2.7% prior; y/y: 5.3% v 7.0% prior
• 005930.KR Samsung Life Insurance and Samsung Fire & Marine Insurance to sell down stakes in Samsung Electronics by Thursday
• (KR) South Korea Government Think Tank KDI: Reiterates Bank of Korea (BoK) monetary policy should remain accommodative
• (KR) Aide to North Korea leader Kim met with Sec of State Pompeo in New York, to try and get US/N. Korea summit on track – press

China/Hong Kong

• Hang Seng opened +0.7%, Shanghai Composite +0.7%
• Hang Seng Services index +1.5%, Consumer Goods +1.3%, Materials +1.3%, Utilities +1%, Industrial Goods +0.9%, Property/Construction +0.6%, Financials flat; Telecom -0.2%
• Shanghai Composite Property index rises over 1%, declined over 2% on prior session
• (CN) China State Grid Corp plans to invest $38B in Brazil over the next 5 years – financial press
• (CN) CHINA MAY OFFICAL GOVT MANUFACTURING PMI: 51.9 V 51.4E (highest level since Sept 2017); NON MANUFACTURING PMI: 54.9 V 54.8E
• (HK) Press speculates that Macau gaming Rev in May will be +15% y/y
• (CN) China State Council to cut import tariffs for daily consumer goods, effective July 1st
• (CN) China should boost management of bond market expectations – China Securities Times
• (CN) Analysts notes that increasing liquidity pressure gives PBOC a good reason to lower reserve requirement ratio (RRR) – financial press
• (CN) China PBoC Open Market Operation (OMO): Injects CNY220B in 7-day, 14-day and 28-day reverse repos v CNY270B prior; Net: injects CNY180B v CNY70B prior
• (CN) China Apr Swift Global Payments (CNY): 1.7% v 1.6% prior
• (CN) China PBoC sets yuan reference rate at 6.4144 v 6.4207 prior
• (CN) China Commerce Ministry (MOFCOM): Not willing to see escalation in China/US trade frictions; To reduce curbs for foreign firms in areas related to energy, infrastructure and transportation
• (CN) World Bank: affirms 2018 GDP growth forecast for China at 6.5%, 2019 GDP growth forecast at 6.3%; external risks for China have become more prominent – Economic Update
• (CN) China Premier Li: China economy is stable and sustainable – local radio
• (CN) China offshore yuan (CNH) overnight HIBOR rises almost 290bps, above 6.07%

Australia/New Zealand

• ASX 200 opened +0.3%, closed +0.3%
• ASX 200 Energy index +2.5%, Resources +2.1%, Telecom +0.6%, Utilities +0.6%, Financials +0.1%; REIT -0.2%
• Sino Gas, SEH.AU Receives cash takeover offer from Lone Star worth A$0.25/share
• (AU) AUSTRALIA Q1 PRIVATE CAPITAL EXPENDITURE: 0.4% V 1.0%E; Australia firms planning to spend A$117.5B in 2017/18
• AWC.AU CEO Ferraro: China will be significantly short on bauxite from 2021, so in addition to expanding existing mines, will look closely at opportunities to acquire new assets – AFR
• Compumedics, [+65%], CMP.AU To enter JV with China’s Meinian Onehealth Healthcare
• (NZ) New Zealand sells NZ$200M in 2037 bonds, avg yield 3.2423%; bid to cover 2.45x
• (NZ) New Zealand Debt Management Office (DMO): DMO head Sarah Vrede has stepped down

Other Asia

• (PH) Philippines Central Bank (BSP): Sees May y/y inflation 4.6-5.4% vs 4.5% in April [Note: The April Y/Y reading matched the highest since Oct 2014, above the 2-4% target; On May 10th, the Philippines Central Bank raised its overnight rate by 25bps to 3.25% (first rate hike since Sept 2014)]

North America

• US equities ended higher: Dow +1.3%, S&P500 +1.3%, Nasdaq +0.9%, Russell 2000 +1.5%
• S&P500 Energy +3%, Financials +1.8%
• (US) US President Trump said to impose metal tariffs on Canada and Mexico – Washington Post
• (CA) Canada said to align country of origin marking regime for steel with the US – US financial press
• (US) Weekly API Oil Inventories: Crude: +1M v -1.3M prior
• (US) FEDERAL RESERVE BEIGE BOOK: ECONOMIC ACTIVITY ROSE AT A MODERATE OR BETTER PACE IN ALL 12 FED DISTRICTS

Europe

• (UK) France reportedly blocks UK plan for post-Brexit security arrangement – UK press
• (EU) US said to plan to go ahead with tariffs on European Union steel and aluminum – press
• (UK) May GfK Consumer Confidence: -7 v -8e (matches highest level since May 2017)
• On Tuesday’s session Bill Gross’ Global Unconstrained Bond Fund declined by over 3%; some analysts cite bets related to decline in Germany Bund prices – US financial press

Levels as of 02:00ET

• Hang Seng +1.1%; Shanghai Composite +1,7%; Kospi +0.7%
• Equity Futures: S&P500 0.0%; Nasdaq100 +0.1%, Dax 0.0%; FTSE100 -0.1%
• EUR 1.1688-1.1648; JPY 108.89-108.53; AUD 0.7579-0.7552;NZD 0.6990-0.6968
• Jun Gold +0.2% at $1,304/oz; Jul Crude Oil -0.0% at $68.19/brl; Jul Copper +0.2% at $3.08/lb