Japan inflation recovers; Bullard talks down USD

US Session Highlights

- (US) Edmunds forecasts May US sales at 1.53M, +7.5% y/y; auto industry seasonally adjusted annual rate (SAAR) at 16.8M

- (US) INITIAL JOBLESS CLAIMS: 234K V 238KE; CONTINUING CLAIMS: 1.92M V 1.93ME

- (US) APR PRELIMINARY WHOLESALE INVENTORIES M/M: -0.3% V 0.2%E

- (US) APR ADVANCE GOODS TRADE BALANCE: -$67.6B V -$64.5BE

- Stocks continued to rise as markets were buoyed by strong earnings reports from retailers and positive unemployment data, despite the sharp drop in oil prices. S&P set another all-time intra-day high at 2418.7 before paring a bit to finish the day at its new highest close. The worst-performing S&P sector was Energy, dropping 1.7%, and the two best performing sectors were Consumer Discretionary and Utilities, gaining 1.1% and 0.9% respectively.

 

US markets on close: Dow +0.3%, S&P500 +0.4%, Nasdaq +0.7%

- Best Sector in S&P500: Consumer Discretionary

- Worst Sector in S&P500: Energy

- Biggest gainers: BBY +21.5%; PVH +4.8%; CSRA +4.6%

- Biggest losers: SIG -7.8%; RIG -7.6%; MRO -7.1%

- At the close: VIX 10.0 (flat); Treasuries: 2-yr 1.29% (flat), 10-yr 2.26% (-1bps), 30-yr 2.92% (-2bps)

 

US movers afterhours

- NTNX: Reports Q3 -$0.42 v -$0.43e, R$191.8M v $186Me; Guides Q4 -$0.38 v -$0.31e, R$215-220M v $202Me, gross margin ~58% ; +16.3% afterhours

- DECK: Reports Q4 +$0.11 v -$0.06e, R$369.5M v $359Me; Guides Q1 -$1.70 to -$1.65 to $ v -$1.73e, Rev up low single digits % y/y; +12.9% afterhours

- EGHT: Reports Q4 $0.05 v $0.03e, R$66.5M v $65.7Me; Guides initial FY18 Rev $296-300M v $295Me; income margin 7-9% ; +6.1% afterhours

- ULTA: Reports Q1 $2.05 v $1.79e, R$1.31B v $1.28Be; +3.9% afterhours

- COST: Reports Q3 $1.59 v $1.31e, R$28.2B v $28.7Be; +1.9% afterhours

- MRVL: Reports Q1 $0.24 v $0.21e, R$579M v $570Me; -2.0% afterhours

- SPLK: Reports Q1 -$0.01 v -$0.05e, R$242.4M v $233Me; Guides Q2 R$267-269M v $268Me, Non-GAAP op margin ~4% ; -5.7% afterhours

- GME: Reports Q1 $0.63 v $0.49e, R$2.05B v $1.89Be; Affirms FY17 $3.10-3.40 v $3.25e, SSS (Ex Tech Brands) -5% to flat ; -6.9% afterhours

- ZOES: Reports Q1 $0.01 v $0.01e, R$90.6M v $92.2Me; Cuts FY17 Rev $314-322M v $324Me, SSS -3% to flat; -10.8% afterhours

 

Politics

- (US) White House advisor Jared Kushner said to be under the FBI investigation in Russia probe - US press

- (US) Republican candidate Greg Gianforte wins Congressional seat in Montana, defeating Democrat Rob Quist

- (UK) According to the latest YouGov/Times poll, Conservatives lead Labour by 43% to 38% ahead of June 8th elections (note: poll was taken after Manchester terror attacks); Smallest lead since Apr 2016

 

Key economic data

- (JP) JAPAN APR NATIONAL CPI Y/Y: 0.4% (3-month high) V 0.4%E ; CPI EX FRESH FOOD (CORE) Y/Y: 0.3% (2-year high) V 0.4%E

- (JP) JAPAN MAY TOKYO CPI Y/Y: 0.2% (6-month high) V 0.0%E; CPI EX-FRESH FOOD Y/Y: 0.1% (18-month high) V 0.0%E

- (JP) JAPAN APR PPI SERVICES (CGPI) Y/Y: 0.7% V 0.9%E (3-month low)

- (KR) South Korea May Consumer Confidence: 108.0 v 101.2 prior

 

Asia Session Notable Observations, Speakers and Press

- Asian markets traded mixed despite continued bullish momentum on Wall St, where 6th consecutive gaining session took US cash indices to new record highs. US gains were particularly impressive given the large sell-off in Energy, as mere extension (rather than expansion) of OPEC supply cut weighed on oil prices to the tune of about 5%. Consumer discretionary has supported markets with a strong beat for big box electronics store Best Buy (up over 20%) as well as more strength in Amazon.

- ASX200 is underperforming thanks to a drop in Mining space, with Dalian iron ore futures down 4% while tech-heavy Kospi is adding to its record highs with more gains. In FX, dollar majors are generally rangebound, though USD/JPY is under some notable pressure with a 40pip drop to 111.40. Comments from Fed's Bullard were seen weighing on the greenback as he noted prices deviating noticeably from 2% inflation path and called market expectations of 2 more rate hikes this year as too aggressive. GBP/USD was impacted to the downside as well, with the latest YouGov survey showing Conservative's lead over Labour continue to narrow ahead of next month's elections.

- In economic data, rising energy prices last month are finally making a dent in disinflationary forces in Japan, as Headline CPI hit 3-month high while Core CPI (ex food) hit a 2-year high. Recall the latest soft patch of CPI prints, both in Japan and US, have been attributed to price pressure in mobile communications space.

China

- (CN) Moody's comments following recent sovereign downgrade of China: China may no longer get A1 rating if there are signs that debt keeps rising and debt exceeds expectations

- (CN) China can meet 2017 GDP target of around 6.5% despite slowing economic indicators in Apr - Chinese press

Japan

- (JP) Japan PM Abe and US President Trump to hold bilateral meeting at G7 on Friday, May 26th - financial press

Australia/New Zealand

- (NZ) Moody's: New Zealand budget shows better debt and growth than AAA rating

- (AU) Capital Economics: Australia retail sales growth in April likely weak due to disruptions from Cyclone Debbie - press

 

Asian Equity Indices/Futures (00:45ET)

- Nikkei -0.4%, Hang Seng flat, Shanghai Composite +0.1%, ASX200 -0.6%, Kospi +0.6%

- Equity Futures: S&P500 flat; Nasdaq +0.1%, Dax -0.1%, FTSE100 -0.1%

 

FX ranges/Commodities/Fixed Income (00:45ET)

- EUR 1.11.85-1.1215; JPY 111.55-111.85; AUD 0.7420-0.7460; NZD 0.7005-0.7025

- June Gold +0.2% at 1,259/oz; July Crude Oil -0.6% at $48.60/brl; July Copper flat at $2.60/lb

- (CN) PBOC SETS YUAN MID POINT AT 6.8698 V 6.8695 PRIOR

- (CN) PBOC to inject combined CNY40B v CNY70B prior

- (AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 1.7612%; bid-to-cover: 4.45x

 

Asia equities notable movers

Australia

- Appen (APN) +4.5%; Guides FY17

- Alumina (AWC) -1.6%; CEO sells shares

- Ansell (ANN) -6.9%; Cut at UBS

- Select Harvests (SHV) -9.7%; Cuts FY17 crop estimate to 13.5K-14K MT, expects material impact on earnings

Japan

- Nissan (7201) -0.2%; China's GSR said to be close to $1B deal to purchase Nissan's rechargeable battery unit - financial press

- Toshiba (6502) -0.2%; Western Digital said to secure large amount of financing and emerging as a frontrunner for Toshiba chip unit - Japan press

Hong Kong

- Oriental Watch Holdings (398) +1.7%; Positive profit alert

- China Agri-Industries Holding (606) +1%.6%; To acquire COFCO Fortune Foods for CNY1.05B in cash

- GOME Electrical Appliances (493) +1.0; Reports Q1