PBoC Gov Zhou warns over risks of deflation

Asian Mid-session Update: PBoC Gov Zhou warns over risks of deflation; Japan industrial production falls by a wider margin

Economic Data

- (JP) JAPAN FEB PRELIMINARY INDUSTRIAL PRODUCTION M/M: -3.4% V -1.9%E (falls at fastest pace since Jun 2014); Y/Y: -2.6% V -0.6%E

- (KR) SOUTH KOREA APR BUSINESS MANUFACTURING SURVEY: 80 V 82 PRIOR; NON-MANUFACTURING SURVEY: 74 V 74 PRIOR

- (KR) South Korea Feb Final Department Store Sales y/y: 6.6% v 7.1% prelim; Discount store sales y/y: 24.5% v 30.5% prelim

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +0.5%, S&P/ASX -1.2%, Kospi +0.3%, Shanghai Composite +1.8%, Hang Seng +1.5%, Jun S&P500 +0.3% at 2,058

Commodities/Fixed Income

- Apr gold -0.3% at $1,195/oz, May crude oil -0.8% at $48.12/brl, May copper flat at $2.76/lb

- (JP) BOJ offers to buy ¥400B in 5-10yr JGBs and ¥20B in inflation-indexed JGBs

Market Focal Points/FX

- Asian indices are trading mixed, with Shanghai Composite leading the regional rally with new 7-year highs, while Australia struggles under the brunt of new lows in base metals. Over the weekend, PBoC Gov Zhou expressed some added concern over the risk of deflation, potentially paving the way to another easing move as soon as next month. Zhou also noted China may update laws on currency controls and that there is still room for more rate cuts. Separately, PBoC researcher Chen warned Q1 GDP could fall below 7%. President Xi also spoke, downplaying the threat of economic slowdown and reiterating the new normal in China justifies emphasis on quality of growth over the size of expansion.

- Industrial output was one of the brighter parts of the Japanese economy in the eyes of the BOJ, as it has recently made consecutive upgrades in its assessment. However, today's industrial production for February marks another instance of disappointing economic data, making Wednesday's release of quarterly Tankan survey particularly crucial going for the BOJ into new fiscal year in Japan. Gov Kuroda, speaking over the weekend, said he expects inflation to begin accelerating starting in early fall, which could signify some added reluctance by the BOJ to add to its already unprecedented stimulus measures.

- Greek PM Tsipras said he was confident there will be a happy ending to this week's negotiation, however other EU sources said to have indicated the latest Greek proposals are still missing sufficient detail, making it difficult to disburse new aid. Separately, Greece had reportedly agreed to the sale of Piraeus port assets as part of a reform list submitted to creditors, with estimated proceeds of about €500M. German press speculated "the institutions" (troika) see Greece missing its primary surplus target this year even though the new govt promised a 1.5% surplus.

- Oil markets stumbled in early electronic trade amid hopes that Iran nuclear standoff will be resolved as soon as this week, potentially ending the sanctions and opening the market to Iranian exports. US House speaker Boehner and Israel's Netanyahu were reluctant to show much trust or endorse agreement with Tehran. In Yemen, former ruler Saleh allied with the Houthi militants who reportedly made further strides toward Aden despite the Saudi/Egyptian air strikes.

Equities

US equities/ADRs:

- FB: Said to have hired a second partner in China to reach local advertisers

- financial press

- MDLZ: Said to be considering a $3B auction of its Philadelphia cream cheese brand - UK press

- O: To be added to S&P500, replacing WIN, after the close of trading on April 6

Notable movers by sector:

- Financials: Industrial Bank of China 601166.CN +7.3%, Bank of China 601988.CN +2.6% (Fin Min provides update local debt swap); China Everbright Bank 601818.CN +4.1% (spins-off unit); Greentown China 3900.HK -4.2% (FY14 results)

- Materials: PanAust PNA.AU +39.8% (receives takeover offer); Sirius Resources SIR.AU -6.2% (issues operations and exploration update)

- Energy: Caltex Australia CTX.AU -9.9% (Chevron sells stake)

- Industrials: China Communications Construction 601800.CN +10.0%, Sinohydro Group 601669.CN +10.0%, Metallurgical Corporation of China 601618.CN +6.9% (China Pres Xi's speech on "one-belt one-road" strategy)

- Technology: Kyocera Corp 6971.JP +1.0% (activist fund initiates stake); Toshiba Corporation 6502.JP -1.3% (said to sell stake in Eygpt jv)

- Healthcare: Novogen Limited NRT.AU +15.8% (releases data on Cantrixil)