New Zealand jobless rate rises on spike in labor force

Asian Market Update: New Zealand jobless rate rises on spike in labor force; Sellers return to stocks as USD rises and Oil retreats; Ted Cruz suspends campaign

 

Economic Data

- (AU) AUSTRALIA APR AIG PERF OF SERVICES INDEX: 49.7 V 49.5 PRIOR; 2nd month of contraction

- (NZ) NEW ZEALAND Q1 UNEMPLOYMENT RATE: 5.7% V 5.5%E; EMPLOYMENT CHANGE Q/Q: 1.2% (1-year high) V 0.6%E; Y/Y: 2.0% V 1.3%E

- (NZ) NEW ZEALAND APR ANZ COMMODITY PRICE M/M: -0.8% V -1.3% PRIOR; 2nd straight decline

- (NZ) NEW ZEALAND APR QV HOUSE PRICES Y/Y: 12.0% V 11.4% PRIOR; 1st rise since Nov

- (UK) APR BRC SHOP PRICE INDEX Y/Y: -1.7% V -1.7% PRIOR (36th month of decline)

- (KR) South Korea Apr Foreign Reserves: $372.5B v $369.8B prior

 

Index Snapshot (as of 04:30 GMT)

- Nikkei225 closed, S&P/ASX -1.0%, Kospi -0.6%, Shanghai Composite -0.2%, Hang Seng -1.0%, Jun S&P500 -0.1% at 2,054

 

Commodities/Fixed Income

- June gold -0.8% at $1,282/oz, June crude oil flat at $43.65/brl, Jul copper -0.1% at $2.21/lb

- (US) Weekly API Oil Inventories: Crude: +1.3M v -1.1M prior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.4943 V 6.4565 PRIOR; weakest Yuan setting since Apr 28th; biggest margin of weakening in 9 months

- (CN) PBOC to inject CNY100B in 7-day reverse repos

- (AU) Australia MoF (AOFM) sells A$700M in 4.25% 2026 Bonds; avg yield: 2.4144%; bid-to-cover: 2.89x

 

Market Focal Points/FX

- Asian equity markets are tracking the selling on Wall St, where the overnight rally has been fully reversed. In the absence of meaningful new data, soft China Caixin PMI and surprise rate cut by the RBA have been widely cited as evidence of a slowdown in global growth. Out of the US, Fed speak that continues to treat the June FOMC meeting as "live" for further rate hikes has added to the bearish sentiment via stronger USD which, in turn, weighed on oil prices for the 2nd straight day. In USD majors, USD/JPY spiked toward 107.50 in the first hour of Asia trade before consolidating in 107.00-40 range for the balance of the session. Post-RBA AUD/USD selling ebbed below $0.7470 and the pair retraced to around $0.75 level. NZD/USD came under initial pressure after Q1 jobless rate rose higher than expected, then recovered to $0.6940 before sliding to 0.6880s - a 1-week low. USD strength was also on display in the latest Yuan fix, as PBoC weakened CNY by the biggest amount in 9 months.

- Down under, after yesterday's RBA surprise rate cut decision and subsequent Budget release, Australia PM Turnbull reiterated that Australia can avert a recession as the govt has a long term plan to reduce the deficit and China growth story would remain intact. Recall Australia maintained its projections for achieving return to budget surplus by FY20/21 despite announcing reductions of corporate tax rates. S&P has also subsequently affirmed Australia AAA rating. In New Zealand, Q1 unemployment rose to 5.7% even with q/q employment change rising by the biggest margin in over a year. The strong job growth / higher unemployment dynamic was the result of a 12-year high increase in the Kiwi labor force, sending participation rate up to 69.0% v 68.6% expected - the biggest increase in 11 years.

- China state planner NDRC warned the economy is faced with downward pressure in investment, even as the financial sector remains burdened by the increase in bad loans. According to a Chinese press report, 11 out of 16 banks reporting Q1 results thus far saw higher levels of NPLs. There was some better news in the materials / industrials space - according to Steel Logistics Committee, Apr PMI for the steel sector saw its first expansion in 2 years.

- Japan markets remain closed until Friday, though markets remain on edge given the recent one-way trade in Yen pairs. Long positioning among speculators has been around multi-year highs and stops are tight, raising the probability of spikes such as the one markets experienced in early Asia trade today. Comments from BOJ's Kuroda and Fin Min Aso earlier were boilerplate - former reiterating commitment to take additional easing measures if deemed necessary and latter stating the govt maintains its focus on FX moves. Separately, Japan's monthly GDP, according to JCER, was down 0.5% m/m as decline in consumption overshadowed slight increase in exports and capital investment.

- Stateside, just when the tone of Republican primaries took a turn for the worse, a decisive victory by Donald Trump in Indiana virtually cemented his path to the threshold number of delegates to secure the nomination. Ted Cruz announced he was pulling out of the race as the probability of a contested convention shrunk, and RNC's Priebus called for the GOP to unite behind the presumptive nominee Trump. Sanders defeated Clinton in Indiana but did not make a significant dent in her delegate lead. Still, the Democratic primary race is likely to continue until the California poll in early June.

 

Equities

US equities/ADRs:

- ETSY: Reports Q1 +$0.01 v -$0.02e, R$81.8M v $76.0Me; Affirms 3-year outlook; +12.9%

- Z: Reports Q1 -$0.13 v -$0.10e, R$186M v $127M y/y; +11.9% afterhours

- MDVN: Pfizer said to have approached Medivation to express interest in a takeover bid - press; +4.6% afterhours

- TSE: Reports Q1 $1.62 v $1.33e, R$894M v $949Me; +4.3% afterhours

- CAR: Reports Q1 -$0.28 v -$0.11e, R$1.88B v $1.88Be; +2.6% afterhours

- DVN: Reports Q1 -$0.53 v -$0.60e, R$2.13B v $2.59Be; +2.3% afterhours

- CBS: Reports Q1 $1.02 v $0.94e, R$3.85B v $3.82Be; +2.2% afterhours

- AGU: Reports Q1 $0.05 v -$0.07e, R$2.73B v $2.75Be; -0.5% afterhours

- WU: Reports Q1 $0.37 v $0.38e, R$1.30B v $1.31Be; -1.7% afterhours

Notable movers by sector:

- Consumer discretionary: SJM Holdings 880.HK -1.2% (Q1 result); Sydney Airport SYD.AU +0.4% (guidance); Peak Sports Products Co 1968.HK -7.1% (Q1 result)

- Financials: Evergrande Real Estate Group 3333.HK -1.6% (Apr result); QBE Insurance Group QBE.AU +1.9% (targets additional expenses cuts)

- Industrials: Hyundai Motor Co 005380.KR -1.4% (Apr China sales)

- Energy: Santos STO.AU -6.5% (to purchase solar power)