AUD sinks on lower than expected Australia Q1 CPI

Asian Market Update: AUD sinks on lower than expected Australia Q1 CPI; China flash PMI remains in contraction

Economic Data

- (CN) CHINA APR HSBC/MARKIT FLASH MANUFACTURING PMI: 48.3 V 48.3E (first sequential rise in 4 months; 4th consecutive contraction)

- (AU) AUSTRALIA Q1 CONSUMER PRICES (CPI) Q/Q: 0.6% (3-quarter low) V 0.8%E; Y/Y: 2.9% (below 2-3% RBA range) V 3.2%E; CPI Trimmed Mean Q/Q: 0.5% (1-year low) v 0.7%e ; Y/Y: 2.6% v 2.9%e

- (AU) AUSTRALIA MAR SKILLED VACANCIES M/M: -0.2% V +0.3% PRIOR

- (NZ) NEW ZEALAND MAR CREDIT CARD SPENDING M/M: 1.3% V 0.3% PRIOR; Y/Y: 8.1% V 5.9% PRIOR

- (NZ) NEW ZEALAND MAR NET MIGRATION: 3.8K V 3.5K PRIOR (multi-year high)

Market Snapshot (as of 03:30 GMT):

- Nikkei225 +0.6%, S&P/ASX +0.6%, Kospi -0.1%, Shanghai Composite -0.5%, Hang Seng -0.7%, Jun S&P500 flat at 1,874, Jun gold +0.3% at $1,285, May crude oil -0.2% at $101.55/brl

Highlights/Observations/Insights

- Australia Q1 CPI was well below estimates, remaining in the 2-3% RBA target range on headline basis and posting a 1-year low on Q/Q Trimmed Mean (core) basis. AUD/USD plummeted some 90pips below 0.9280, as lower CPI gives RBA more room to preserve its neutral stance for longer and negates expectations of an inevitable rate hike to forestall accelerating property prices.

- Asian indices are mixed with China leading the decliners after the release of April flash manufacturing PMI. Despite posting a slight improvement with the first sequential rise in 4 months, PMI was also in contraction for the 4th consecutive month. Moreover, the closely monitored New Exports and Employment subindices were decidedly negative - the former "changed direction" and is now decreasing while the latter is decreasing at a faster rate. HSBC China economist said the govt's new measures announced recently will likely produce limited impact, and more measures may be unveiled in the coming months.

- Also of note in China, State Information Central of China official Zhu noted some Tier-2 and Tier-3 cities will be allowed to ease property sector curbs. Announcement comes after last week's release of March property prices where average new home prices rose just 7.7% y/y, an 8-month low. In other notable Chinese press reports, MOFCOM report estimated 2014 retail sales growth at 13% - in line with 2013 but well below 14.5% target. China Securities Regulatory Commission (CSRC) released additional 19 pre-IPO disclosures, with the 3-day tally amounting to 65 companies. IPO-related dilution was also cited as posing considerable weakness to China equity markets.

- Australia's top gold miner - Newcrest - reported its quarterly output figures. Q2 production fell 11% q/q to 551.6k oz, which was up from 514K y/y. Copper output rose to 21K tonnes from 19K y/y. Newcrest shares traded firmer, helped by its bullish guidance for the balance of the year. NCM affirmed production, noting output is expected to be around the top end of the guidance range (2.3M oz).

- Ahead of tomorrow's RBNZ policy decision, New Zealand Institute of Economic Research (NZIER) Shadow Board saw a near-unanimous support for the central bank to raise rates by another 25bps. NZIER said recovery in the economy is broadening, and households are starting to spend more after years of putting many decisions on hold following the global financial crisis.

Fixed Income/Commodities/Currencies

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

- (US) API PETROLEUM INVENTORIES: CRUDE: +520K (smallest build in 3 weeks) v +2.5Me, GASOLINE: -3.4M v -1.5Me, DISTILLATE: +570K v -0.5Me

Equities

US markets:

- SMCI: Reports Q3 $0.37 v $0.28e, R$373.8M v $335Me; +17.2% afterhours

- ILMN: Reports Q1 $0.53 v $0.44e, R$420.8M v $391Me; +10.4% afterhours

- SWKS: Reports Q2 $0.62 v $0.59e, R$481M v $470Me; Initiates $0.11 dividend; +8.8% afterhours

- YUM: Reports Q1 $0.87 v $0.84e, R$2.72B v $2.83Be; +3.6% afterhours

- GILD: Reports Q1 $1.48 (adj) v $0.90e, R$4.87B v $3.68Be; +2.9% afterhours

- JNPR: Reports Q1 $0.29 v $0.29e, R$1.17B v $1.15Be; -1.1% afterhours

- DFS: Reports Q1 $1.31 v $1.25e, R$2.08B v $1.76Be; -1.7% afterhours

- T: Reports Q1 $0.70 v $0.70e, R$32.5B v $32.4Be; -2.0% afterhours

- AMGN: Reports Q1 $1.87 v $1.89e, R$4.52B v $4.73Be; -2.4% afterhours

- IRBT: Reports Q1 $0.18 v $0.16e, R$114.2M v $113Me; -2.8% afterhours

- VMW: Reports Q1 $0.80 v $0.79e, R$1.36B v $1.35Be; Maintains FY14 R$5.94-6.10B v $6.04Be; Affirms license rev $2.55-2.63B - conf call; -4.9% afterhours

- ISRG: Reports Q1 $1.13 v $3.26e, R$464.7M v $512Me; Cuts FY14 procedure growth +2-8% (prior +9-12%); Will not provide FY14 revenue guidance today [2nd quarter in a row with no rev guidance] - conf call; -5.8% afterhours

- CREE: Reports Q3 $0.39 v $0.39e, R$405.3M v $409Me; -7.8% afterhours

- PLUG: Files to offer 15M shares of stock; -9.0% afterhours

Notable movers by sector:

- Financials: Resona Holdings Inc 8308.JP +3.3% (Einhorn discloses position)

- Materials: Apac Resources 1104.HK +1.9% (repurchase program); Mincor Resources MCR.AU +5.1% (Q3 production results); Newcrest Mining Ltd NCM.AU +2.8% (Q2 production results)

- Energy: CNOOC 883.HK -1.2% (Q1 results); Resolute Mining RSG.AU +5.2% (Q3 production results)

- Industrials: CNR 601299.CN +2.7% (awarded CNY30B contract); Shenji Group Kunming Machine Tool 300.HK -5.2% (profit warning); Aisin Seiki 7259.JP +1.7% (production plans)

- Utilities: Huaneng Power International 902.HK +1.0% (Q1 results)

- Telecom: China Mobile 941.HK -2.2% (Q1 results); Softbank Corp 9984.JP +1.6% (partnership with GE)