China lending not showing any signs of a slowdown even

Asian Market Update: China lending not showing any signs of a slowdown even as money supply growth eases; RBA meeting minutes remain neutral

Economic Data

- (CN) CHINA MAR AGGREGATE FINANCING (CNY): 2.07T V 1.85TE

- (CN) CHINA MAR NEW YUAN LOANS (CNY): 1.05T V 1.0TE

- (CN) CHINA MAR FOREIGN RESERVES: $3.95T V $3.92TE

- (CN) CHINA MAR M2 MONEY SUPPLY Y/Y: 12.1% (multi-year low) V 13.0%E; M1 MONEY SUPPLY Y/Y: 5.4% V 6.5%E

- (UK) UK MAR BRC SALES LFL Y/Y: -1.7% V +1.0%E (2nd consecutive decline)

Market Snapshot (as of 03:30 GMT):

- Nikkei225 +0.8%, S&P/ASX +0.8%, Kospi +0.1%, Shanghai Composite

-0.7%, Hang Seng -0.5%, Jun S&P500 flat at 1,825, Jun gold -0.6% at $1,320, May crude oil -0.7% at $103.28/brl

Highlights/Observations/Insights

- Ahead of tomorrow's key release of Q1 GDP, China put out its March figures for lending and money supply - new yuan loans met estimates soundly above CNY1T while M2 growth slowed to a multi-year low. China's quarterly data on FX reserves nudged up by over 0.5% to $3.95T. Also of note ahead of the GDP data, a researcher with China's top economic planning agency NDRC said Q1 will likely come in below 7.5% (consensus is 7.4%), and that even a slowdown to 6.5% in 2014 overall would be acceptable without justifying more stimulus. Another researcher said China is faced with a risk of falling short of 7% GDP growth level in 2014, while former PBoC adviser Yu noted the govt would be able to use its FX reserves to boost commercial banks if necessary to prevent an outside chance of a financial crisis.

- Reserve Bank of Australia maintained its neutral stance in the minutes of the meeting from April 1st. RBA reiterated the most prudent policy course is still likely a period of stability in interest rates, and that rates were appropriately set to maintain inflation within target. In terms of domestic economy, RBA noted consumer demand has strengthened and that forward indicators pointed to modest improvement in employment.

- Rio Tinto put out its quarterly production data. Q1 iron ore output fell 6% sequentially but rose 8% y/y to 66.4M tons. Rio also affirmed its FY14 iron ore production targets of 295M tonnes, but lowered the annual forecast for Australian hard coking coal to 8.2M tonnes from 8.5M prior. Rio Tinto traded up by nearly 1% in afternoon session.

- Russian Pres Putin and US Pres Obama phone conference was tense by all accounts, just as pro-Russia separatists seized more buildings in eastern Ukraine and President Turchynov's threat of "full-scale" anti-terrorist operation turned out to be a bluff. Putin reiterated Kremlin position that the street protests in eastern Ukraine are the result of Kiev govt not taking into account the interests of the Russian-speaking population there, and the White House deemed Russia's meddling as inconsistent with promotion of a diplomatic solution. Meanwhile, ultra-nationalist crowds had reportedly gathered in Kiev, calling for removal of Turchynov and interior minister Avakov, claiming the situation in east Ukraine is slipping from govt control.

- US earnings season kicks into higher gear on Tuesday with pre-market release from JNJ and KO. Afternoon session will see earnings announcements from CSX, Intel, and Yahoo.

Fixed Income/Commodities/Currencies

- JGB: (JP) Japan's MoF sells ¥2.46T in 0.2% (0.2% prior) 5-yr notes; Avg yield: 0.189% v 0.204% prior; Bid to cover: 4.67x v 3.81x prior

- (CN) PBoC to drain CNY93B in 28-day repos, CNY79B in 14-day repos (17th consecutive drain)

- GLD: SPDR Gold Trust ETF daily holdings rise 1.8 tonnes to 806.2 tonnes (first rise since Mar 24th)

- USD/CNY: (CN) PBoC sets yuan mid point at 6.1571 v 6.1531 prior setting (weakest setting since Sep 17th)

- In USD majors, AUD/USD and NZD/USD are down over 30pips a piece below 0.9390 and 0.8660 respectively, while USD/JPY briefly touched the ¥102 handle - up about 20 pips from the lows. USD remained bid after some moderate strength in the US session where it was driven higher by a multi-month high in the rise of US retail sales.

Equities

US markets:

- PBY: Reports Q4 -$0.06 (include items) v +$0.10e, R$496M v $531Me (2 ests); -5.9%

Notable movers by sector:

- Consumer Discretionary: Modern Media Holdings 72.HK -5.3% (FY13 results)

- Materials: Rio Tinto RIO.AU +0.5% (Q1 operating results); OZ Minerals OZL.AU +4.7% (Q1 production results); Inner Mongolia Junzheng Energy & Chemical Industry 601216.CN +3.1% (FY13 results); Perseus Mining PRU.AU -5.5% (shareholder lowers stake)

- Industrials: Nissan Motor 7201.JP +0.7% (to increase local parts purchase in China); Xinjiang Urban Construction Group 600545.CN +7.2%, Xinjiang Beixin Road & Bridge Group 002307.CN +5.4%, China West Construction Group 002302.CN +5.1%, Xinjiang International Industry 000159.CN +10.0% (China to support Xinjiang Province development); AVIC Aircraft 000768.CN +2.2%, Jiangxi Hongdu Aviation Industry 600316.CN +2.3% (China Pres Xi comments on air force)

- Technology: Fujitsu 6702.JP +1.5%, Panasonic Corp +0.5% (speculation on JV)