Japan inflation steady

Asian Market Update: Japan inflation steady as PM Abe continues to press for a timely 2% inflation destination

Economic Data

- (JP) JAPAN FEB TOKYO CPI Y/Y: 1.3% V 1.2%E; CPI CORE Y/Y: 1.0% V 0.9%E (5-year high)

- (JP) JAPAN FEB NATIONAL CPI Y/Y: 1.5% V 1.5%E; CPI CORE Y/Y: 1.3% V 1.3%E

- (JP) JAPAN FEB JOBLESS RATE: 3.6% V 3.7%E (6-year low); JOB-TO-APPLICANT RATIO: 1.05 V 1.05E

- (JP) JAPAN FEB OVERALL HOUSEHOLD SPENDING Y/Y: -2.5% V 0.1%E (first decline in 6 months)

- (JP) JAPAN FEB RETAIL SALES M/M: +0.3% V -0.1%E; Y/Y: 3.6% V 3.5%E

- (KR) SOUTH KOREA FEB CYCLICAL LEADING INDEX CHANGE: -0.1 V 0.1 PRIOR

- (KR) SOUTH KOREA FEB INDUSTRIAL PRODUCTION M/M: -1.8% (2nd consecutive decline) V -0.3%E; Y/Y: 4.3% V 3.6%E

- (KR) SOUTH KOREA APR MANUFACTURING BUSINESS SURVEY: 86 (23-month high) V 85 PRIOR; NON-MANUFACTURING SURVEY: 73 V 76 PRIOR

- (UK) UK GFK CONSUMER CONFIDENCE: -5 V -6E (highest reading since Aug 2007)

Market Snapshot (as of 03:30 GMT):

- Nikkei225 flat, S&P/ASX +0.3%, Kospi +0.1%, Shanghai Composite +0.2%, Hang Seng +1.2%, Jun S&P500 +0.2% at 1,844, Jun gold flat at $1,294, May crude oil flat at $101.32/brl

Highlights/Observations/Insights

- Despite the down day on Wall St, Asian indices are modestly higher going into the weekend as more soft US data continued to support the case for a longer period of low US rates. Note that the yield on the 10-year was down for the 5th consecutive session at 2.67%.

- Nikkei225 is underperforming in the region, as bullish sentiment is not translating into softer JPY. A raft of economic data from Japan - namely steady rise in inflation and further decline in unemployment rate - weighed on USD/JPY due to diminished prospects for further BOJ easing. Subsequent comments by PM Abe urging the BOJ to "swiftly" achieve 2% price target turned the tide before USD/JPY could re-test below the ¥102 handle.

- China Premier Li, calling for lower cost of enterprise financing, also helped support bullish flows. Li also said he was still confident the economy is in good shape and that growth can be kept in a reasonable range. Separately, a DBS economist cited in local press warned Q1 GDP could fall to 7.3%.

- PBoC renewed its push for weaker currency going into the weekend to compensate for softer exports. After 2 consecutive stronger settings to start the week, PBoC set Yuan weaker for the past 3 sessions - the last taking USD/CNY to its highest fix in 6 months.

- Ultra-dovish Chicago Fed Pres Evans (alternate on FOMC) said he would prefer the Fed wait until 2016 for the first rate hike, even though he acknowledged rates may actually begin to rise in H2 of 2015. Evans also said US GDP would grow about 3% for the rest of 2014 and into 2015, although risks remain and the current inflation rate of 1% justifies extended accommodation.

Fixed Income/Commodities/Currencies

- (JP) BOJ offers to buy ¥250B in 1-3 yr JGB, ¥250B in 3-5 yr JGB, and ¥170B in JGBs with maturities of over 10 yrs

- (AU) Australia MoF (AOFM) sells A$700M in 4.25% 2017 Bonds; avg yield: 3.1050%; bid-to-cover: 4.19x

- USD/CNY: (CN) PBoC sets yuan mid point at 6.1490 v 6.1465 prior setting (weakest setting since Sept 27th)

- (US) Weekly Fed Balance Sheet Total Assets Week ending Mar 26th: $4.23T v $4.22T prior; Reserve Bank Credit: $4.18T v $4.18T prior; M1: -$54.3B (largest decline in 5 weeks) v -$22.2B prior; M2: +$12.2B v +$23.7B prior; M1 y/y change: 9.9% (6-month high) v 9.7% w/w; M2 y/y change: 5.8% v 5.7% w/w

- In USD majors, AUD/USD hit fresh 4-month highs above $0.9290, while NZD/USD approached $0.87 handle - its highest level since 2011. USD/JPY fell toward 102 after the release of higher CPI / lower unemployment rate but bounced off the figure to trade within a 25pip range on the day. GBP/USD found support at $1.66 ahead of the UK Current Account and GDP release later in the European session.

Equities

US markets:

- RH: Reports Q4 $0.83 v $0.83e, R$472M v $496Me; +7.1% afterhours

- RHT: Reports Q4 $0.39 v $0.37e, R$400M v $399Me; Guides Q1 $0.32-0.33 v $0.37e, R$412-415M v $416Me; Guides initial FY15 $1.54-1.56 v $1.62e, R$1.73-1.755B v $1.76Be - conf call; +0.1% afterhours

- RMAX: Reports Q4 $0.32 v $0.27e, R$40.2M v $39.4Me; flat afterhours

Notable movers by sector:

- Consumer Discretionary: Lawson 2651.JP +1.6% (press speculation on FY13/14 results); Hongbo Co Ltd 002229.CN -5.4% (FY13 results); Hunan Friendship & Apollo Commercial 002277.CN -3.2% (FY13 results); Guangdong Guangzhou Daily Media 002181.CN -7.7% (FY13 results); Jiangsu Yueda Investment 600805.CN -5.0% (FY13 results)

- Financials: ICBC 1398.HK +1.3% (FY13 results); CITIC Securities 600030.CN +1.6% (FY13 results)

- Energy: Sinopec Shanghai Petrochemical 338.HK -8.7% (FY13 results)

- Industrials: Shanghai International Port Group 600018.CN +1.4% (FY13 results); First Tractor 38.HK -2.4% (FY13 results); SAIC Motor 600104.CN +8.6% (FY13 results); United Co RUSAL 486.HK -0.7% (FY13 results); James Hardie Industries NV JHX.AU +1.1% (BlackRock becomes substantial shareholder); Virgin Australia VAH.AU +1.4% (Singapore Airlines raises state)

- Technology: Compal Electronics 2324.TW +6.8% (Q4 results)