Japan merchandise trade deficit widens again

Asian Market Update: Japan merchandise trade deficit widens again; Geneva agreement on Ukraine dented by Sunday shootout

Economic Data

- (JP) JAPAN MAR MERCHANDISE TRADE BALANCE: -¥1.45T V -¥1.08TE; ADJUSTED TRADE BALANCE: -¥1.71T V -¥1.43TE

Market Snapshot (as of 03:30 GMT):

- Nikkei225 +0.6%, S&P/ASX closed, Kospi -0.4%, Shanghai Composite -0.2%, Hang Seng closed, Jun S&P500 +0.1% at 1,860, Jun gold -0.6% at $1,286, May crude oil -0.2% at $104.11/brl

Highlights/Observations/Insights

- Nikkei225 is up for the 4th consecutive session, outperforming among the key regional indices in the wake of fresh round of selling in Japanese yen. Investors are treating the latest disappointment in merchandise trade balance as fodder for more speculation over the Bank of Japan turning less neutral in favor of more easing. Note that the BOJ policy statement on Apr 30th will also feature the release of semiannual outlook on price and economy. March trade deficit for March was wider than expected, and for the fiscal year, a deficit of $14B was up 4 times from the prior year. March exports showed a negligible rise of 1.8% y/y - well below 6.5% consensus - while imports spiked up by 18.1% y/y thanks to another double-digit rise in shipments of crude oil. Separately of note in Japan, local press survey saw 66% of respondents stating they have not altered their spending as a result of higher sales tax.

- Situation in Ukraine continues to be precarious despite the unexpected 4-party agreement in Geneva last week as well as Kiev govt suspending its "anti-terrorist" campaign in observance of the holiday weekend. Early on Sunday, a checkpoint controlled by pro-Russian separatists north of the eastern town of Slaviansk came under fire from an unmarked car, resulting in at least 3 deaths. Separatists claimed the gunmen are affiliated with the nationalist Right Sector from the west and pleaded for Russia's Pres Putin to send in "peace-keeping" troops. Right Sector denied involvement, alleging it was actually Russian agents that stoked violence to further justify a military intervention. Urkaine interim PM Yatsenyuk appeared on NBC "Meet the Press" program, claiming Russia is undermining global stability and poses a threat to global nuclear nonproliferation efforts. Also of note, German foreign min Steinmeier said he would prefer more diplomacy efforts with Russia, as the west has "already exhaustively discussed the sanctions issue." US VP Biden is travelling to Ukraine for a meeting with Kiev govt on Tuesday.

- UK press speculated AstraZeneca was approached by Pfizer with a bid worth as much as $100B. Subsequent financial press report alluded to the talks between the two pharma giants as having taken place several months ago, having since gone dormant.

- Beijing Auto Show presented an opportunity for comments from top global automakers on their plans regarding China. Daimler-BYD joint venture announced plans for an all-electric vehicle for China called DENZA, which could be available for sale as soon as September. GM China president said GM would invest as much as $12B in China in 2014-17 and also targeted sales of Cadillacs in China estimated at 100K vehicles by 2015. Overall, GM sees China auto market growth slowing to about an 8-10% rate. Toyota announced it will bring as many as 15 new models to China by 2017, aiming to double China vehicle sales to 2M units over the long run.

- Elsewhere in China, premier Li announced clean-energy related construction plans that would focus on nuclear and hydropower projects. Also of note in Chinese press, China Securities Regulatory Commission (CSRC) unveiled new rules on issuance of preferred shares by banks that allow for banks that currently meet CSRC's Tier 1 (core) capital requirements to issue preferred stock. Local reports noted that the first batch of preferred shares including ICBC, ABC, BOC, CCB and Pudong Development Bank totaled CNY370B.

Fixed Income/Commodities/Currencies

- (KR) South Korea govt (MOF) sells KRW1.96T in 10-yr govt bonds; avg yield: 3.560%; bid-to-cover: 3.77x

- (CN) PBoC sets yuan mid point at 6.1591 v 6.1586 prior setting (weakest setting since Sept 11th)

- USD majors largely remained in narrow holiday ranges. USD/JPY was the most notable mover, rising to a 2-week high above ¥102.60 after wider than expected trade deficit in Japan. NZD/USD spiked up about 30 pips to $0.86 in the early going but has since reversed all of those early gains. AUD/USD traded in a 25pip range, matching Friday highs of $0.9340 in the morning session before retreating to $0.9315. Note the latest CFTC positioning data saw net longs in both AUD and NZD currencies hit 11-month highs. Gold is volatile in the early going, rising above $1,300 before falling back below $1,290.

Equities

- AZN: Pfizer said to be considering a £60B ($100B) for AstraZeneca - UK press

- TEVA: Announces Supreme Court Denial of Request for Interim Relief to Stay Court of Appeals Ruling for COPAXONEPatent Due to the Potential for the Company to Recover Patent Infringement Damages

- GM: North America chief Batey: April may be a strong month for US vehicle sales - financial press

- CMCSA: Comcast and Time Warner Cable said to be in early-stage talks with Charter Communications on potential sale of assets; Deal may be valued at up to $20B - FT

- VIP: Starts strategic partnership with Global Telecom Holding for the sale of GTH's 51% stake in Orascom Telecom Algerie SpA for $2.64B to the Fonds National d'Investissement, the Algerian National Investment Fund

Notable movers by sector:

- Consumer Discretionary: Daiken 7905.JP -3.4% (cuts FY13/14 guidance); People.cn 603000.CN -2.1% (FY13 results)

- Financials: Changjiang Securities 000783.CN +6.5% (FY13 results)

- Materials: China Minmetal Rare Earth 000831.CN -0.7% (Q1 results); Tokyo Steel Mfg 5423.JP -6.3% (exec comments on steel market) - Industrials: Sufa Technology Industry 000777.CN +2.6%, Dongfang Electric 600875.CN +1.0%, Shenzhen Woer Heat-Shrinkable Material 002130.CN +5.5% (Premier Li comments on nuclear plants); Mitsui Osk Lines 9104.JP -0.8% (Shanghai govt seized ship related to a wartime contractual dispute); Mazda Motor 7261.JP +2.4% (speculation on FY15/16 results); BYD 002594.CN +0.9% (launches DENZA)

- Healthcare: Shinva Medical Instrument 600587.CN -10.0% (announces acquisition)