New Zealand budget boosts funding and reduces taxes for families

Asia Mid-Session Market Update: BOK on hold with an upbeat view of economy; New Zealand budget boosts funding and reduces taxes for families

US Session Highlights

- (US) FDIC Q1 Quarterly Banking Profile: US banks on problem list 112 v 123 q/q (9-year low)

- (US) Mar FHFA House Price Index M/M: 0.6% v 0.5%e; Q/Q: 1.4% v 1.5% prior

- (CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED; adjustment to lower oil prices largely over, CPI pressures appear to be temporary

- (US) APR EXISTING HOME SALES: 5.57M V 5.65ME; low supply continues to push up prices

- (US) DOE CRUDE: -4.4M V -2ME; GASOLINE: -0.8M V -1ME; DISTILLATE: -0.5M V -0.5ME

- Equity markets continued to gain ground, taking the Fed minutes release in stride. The minutes sent oil and US dollar prices slightly lower, but that also failed to deter investors, as the S&P rose to close at a new all-time high at 2404.39. Best performing sectors for S&P were Materials, gaining 0.7%, and Real Estate & Utilities both rising 0.6%

 

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

- Best Sector in S&P500: Materials

- Worst Sector in S&P500: Telecom

- Biggest gainers: INTU +6.7%; FSLR +6.7%; NRG +5.5%

- Biggest losers: TIF -8.7%; SIG -6.6%; AAP -5.6%

- At the close: VIX 10.0 (-0.7pts); Treasuries: 2-yr 1.29% (-3bps), 10-yr 2.27% (-2bps), 30-yr 2.94% (-1bps)

 

US movers afterhours

- AERI Reports positive Roclatan (netarsudil/latanoprost ophthalmic solution) 0.02%/0.005% Phase 3 Topline efficacy results; +27.5% afterhours

- GES Reports Q1 -$0.24 v -$0.31e, R$458.6M v $447Me; Guides Q2 $0.08-0.11 v $0.15e, Rev +2-4% (+3.5-5.5% cc), op margin 2.2-3.0%; +16.7% afterhours

- PSTG Reports Q1 -$0.14 v -$0.23e, R$182.6M v $178Me; Guides Q2 R$214-222M v $217Me; Gross margin 63.5-66.5%; Operating margin -16% to -12%; +11.5% afterhours

- WSM Reports Q1 $0.51 v $0.48e, R$1.11B v $1.11Be- Guides Q2 $0.55-0.61 v $0.59e, R$1.20-1.23B v $1.19Be, comparable brand rev 2% to 5%; +9.4% afterhours

- PVH Reports Q1 $1.65 v $1.61e, R$1.99B v $1.96Be; Raises FY17 $7.40-7.50 v $7.41e; +3.6% afterhours

- HPQ Reports Q2 $0.40 v $0.39e, R$12.4B v $11.9B; +3.0% afterhours

 

Key economic data

- (KR) BANK OF KOREA (BOK) LEAVES REPO RATE UNCHANGED AT 1.25%; AS EXPECTED

- (SG) SINGAPORE Q1 FINAL GDP Q/Q: -1.3% V -0.9%E; Y/Y: 2.7% V 2.7%E

 

Asia Session Notable Observations, Speakers and Press

- Asian equity markets are notably higher, tracking 5th straight session of gains on Wall St where cash indices have now erased all of last Wednesday's steep declines. US markets ended on the highs, as investors took note of increased caution about lower inflation data in the latest Fed minutes, and while the case for June rate hike remained above 80% (prior 83%), Fed funds probability of 2 more rate hikes this year slid below 50%. USD was also slightly lower in the wake of Minutes release and then consolidated against the majors and fell against EM currencies in the Asia session - USD/JPY fell some 50pips below 111.50, AUD/USD rose 40pips to 0.75, and NZD/USD rose 30pips to 0.7050.

- Korea's Kospi was the best performing regional index, hitting record high above 2,340. Bank of Korea left rates on hold in a unanimous decision, but signalled a bullish view, stating growth was now seen above the April forecast as household debt increase subsided. BOK Gov Lee also said monetary policy would remain accommodative as inflation stabilizes around 2%.

- New Zealand budget saw Fin Min unveil Family Incomes Package through more spending and lower taxes designed to help lower-middle income families burdened by rising rent prices in urban areas. On the spending side, outlays will average NZ$1.8B per year over forecast period vs NZ$1.5B prior forecast. New Zealand also forecast GDP to pick up slightly this year, supported by migration inflows, investment and a recovery in export, and then reach a peak in 2019 as Family Incomes Package provisions are felt in consumption.

- In other economic data, Singapore Q1 final GDP was in line y/y and slightly worse than expected sequentially, though MAS kept 2017 GDP target of 1-3% with a view the actual figure will be above the midpoint. Singapore MAS economist also noted the assessment of GDP growth and CPI inflation is essentially unchanged from the April statement.

- Among key corporates, Lenovo rose over 5% in the afternoon session following Q4 results. Net profit of $107M beat consensus $98Me and gross margins also topped forecasts, even as the company noted constraints in supply chain and higher component prices as key challenges in the industry.

China

- (CN) US Navy destroyer conducted navigation operation in the South China Sea, within 12 nautical miles of Mischief Reef, which is claimed by China – financial press

- (CN) China said to raise gasoline prices by CNY140/ton and diesel by CNY135/ton; effective tomorrow - press

- (CN) China Banking Association economist Ba Shusong: Need more efforts to reduce leverage

- (CN) China Commerce Ministry (MOFCOM): Will continue to relax foreign investment rules for auto industry - press

- (CN) China said to consider expanding energy imports from US - press

- (CN) China Securities Regulatory Commission (CSRC): Considering allowing foreign investors into futures market; Will not allow innovation in futures to bupass regulation - press

Japan

- (JP) BOJ's Deputy Gov Iwata: BOJ Rev from holdings bonds could rise at exit - speaking at parliament

- (JP) Bank of Japan (BOJ) Sakurai: Given moderate inflation, uncertainty over overseas economies it is crucial to maintain monetary easing

Australia/New Zealand

- (AU) Moody's: Australia auto ABS delinquencies rose in Q1 - press

- (NZ) New Zealand press speculates today's budget will be a "catch-up affair", shifting income tax threshold that will benefit lower and middle-income earners

Korea

- (KR) South Korea to set up a strategic command to effectively respond to North Korea’s nuclear and missiles threats - Korean press

- (KR) South Korea National Pension Fund: To raise overseas investment allocation to 40% by 2022 v 27% in 2016

 

Asian Equity Indices/Futures (01:00ET)

- Nikkei +0.4%, Hang Seng +0.6%, Shanghai Composite +0.4%, ASX200 +0.2%, Kospi +0.9%

- Equity Futures: S&P500 +0.3%; Nasdaq +0.3%, Dax +0.2%, FTSE100 +0.1%

 

FX ranges/Commodities/Fixed Income (01:00ET)

- EUR 1.1210-1.1245; JPY 111.50-111.70; AUD 0.7490-0.7515; NZD 0.7030-0.7050

- June Gold +0.5% at 1,259/oz; July Crude Oil +0.8% at $51.76/brl; July Copper -0.3% at $2.58/lb

- iShares Silver Trust ETF daily holdings fall to 10,635 tonnes from 10,693 tonnes prior; first decline since May 3rd

- (CN) China Apr Swift Global Payments (CNY): 1.6% v 1.8% prior (yuan share lowest level since 2014)

- (CN) PBOC SETS YUAN MID POINT AT 6.8695 V 6.8758 PRIOR

- (CN) PBOC to inject combined CNY70B v CNY90B prior

- (JP) Japan MoF sells ¥500B in 0.9% (0.4% prior) 40-year JGB bonds, bid to cover: 2.87x v 2.95x prior

 

Asia equities notable movers

Australia

- Annsell (ANN) +4.0%; Sells sexual wellness business for $600M

- Aristocrat Leisure (ALL) +3.7%; Reports H1

- Mesoblast (MSB) -4.8%; Reports Q3

Hong Kong

- Lenovo (992) +5.5%; Reports Q4

- CSPC (1093) +2.3%; Reports Q1

- China Railway (1186) +0.9%; Nigeria contract