PBoC steps up easing with 100bps cut in RRR as worries over CSRC curbs on margin trading recede

Economic Data

- (CN) CHINA PBOC CUTS RESERVE RATIO REQUIREMENT (RRR) FOR ALL BANKS BY 100BPS FROM 19.50% TO 18.50%; Effective Monday, Apr 20th

- (NZ) NEW ZEALAND Q1 CPI Q/Q: -0.3% (3-year low) V -0.2%E; Y/Y: 0.1% V 0.2%E

- (NZ) NEW ZEALAND MAR PERFORMANCE SERVICES INDEX: 57.6 V 56.0 PRIOR

- (JP) JAPAN FEB TERTIARY INDUSTRY INDEX M/M: +0.3% V -0.7%E

- (KR) South Korea Mar PPI Y/Y: -3.7% v -3.6% prior; 8th consecutive month of decline, multi-year low

- (UK) UK APR RIGHTMOVE HOUSE PRICES M/M:1.6% V 1.0% PRIOR; Y/Y: 4.7% v 5.4% PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 flat, S&P/ASX -0.8%, Kospi -0.1%, Shanghai Composite +1.0%, Hang Seng -0.3%, Jun S&P500 +0.4% at 2,084

Commodities/Fixed Income

- Jun gold flat at $1,203/oz, Jun crude oil +1.5% at $58.15/brl, May copper +0.6% at $2.79/lb

- USD/CNY: PBoC sets yuan mid point at 6.1255 v 6.1267 prior setting (strongest Yuan setting since Jan 22nd)

- (KR) South Korea sells 10-yr pre-issuance govt bond at 2.155%

Market Focal Points/FX

- China investors grappled with conflicting developments over the weekend, as Shanghai Composite swung between gains and losses. Late on Friday, markets around the world sold off after reports cited CSRC spokesperson "encouraging short selling" by institutional investors so as to crack down high leveraged "umbrella trust" margin trading. Subsequently, CSRC clarified the statement was not intended to punish equities or depress the market, but rather promote a "healthy" market function. On top, the PBoC announced a 100bp RRR cut from 19.5% to 18.5% effective Monday - the biggest RRR move since 2008 estimated to release as much as CNY1-2T of liquidity. Regional economists disagreed on which was more appropriate given the weak recent set of economic data, the timing or the scope. PBoC chief researcher however explained the move as an intention to keep liquidity stable, reaffirming "neutral stance" on monetary policy despite interpretations that China has entered a more aggressive monetary easing cycle. Also of note on the monetary front, PBoC is reportedly also considering allowing banks to swap local-govt bailout bonds for cash to boost liquidity, viewed to be in the same vein as ECB's LTRO operations.

- While the markets digested interpretations of a bearish CSRC comment combined with another easing by the PBoC, China housing data continues to showcase the struggling property sector. March home prices fell 0.2% for the 11th month of decline m/m, and y/y fell by the biggest margin on record of -6.1%. Prices overall declined in 48 out of 70 cities, which was lower than 61 in the prior month. Perception of a topping out in the property space has been widely attributed to the recent surge in margin trading account that produced a 30%+ YTD rally on the mainland.

- Outside China, Japan is on the verge of a 1-year anniversary of its April tax hike, though as many as 60% suggest their lives have not changed from the hike vs 37% answered the impact has been noticeably negative. Nearly 60% were also opposed to the 2nd round of increases, which has been rescheduled to next year. BOJ Gov Kuroda in the mean time continued to talk up progress on inflation, warning markets may see higher rates if the price objective is achieved.

- Greece has not made any strides with European officials, and negotiations remain tense. In Athens, Dep PM Dragasakis said no "red lines" will be crossed to secure agreement and also warned there is a possibility of new elections or a referendum if talks with its creditors remained deadlocked. Fin Min Varoufakis also repeated that the euro zone would be subject to contagion if it allows Greece to leave.

- In FX, EUR/USD selling returned amid Greek tensions, falling about 50pips from session highs to 1.0770. AUD/USD opened sharply higher above 0.7820 but has since retreated to low $0.78 going into this week's quarterly CPI data and RBA meeting minutes. USD/JPY was little changed, trading in a 20pip range below 119.

Equities

US equities/ADRs:

- RTN: Reportedly Raytheon reaches agreement to buy cybersecurity provider Websense for $1.9B including debt - press

- MS: Said to be in talks to pay about $500M as part of settlement with New York AG related to mortgage bond investments during GFC - financial press

- GM: Shanghai GM JV with SAIC motor to invest $16B in new-car development during 2016-20 to cater to China demand - financial press

- PLD: Confirms agreements to acquire $5.9B portfolio from KTR Capital Partners

- TWC: Comcast and Time Warner Cable to meet with DOJ next week to begin negotiating merger conditions

- MRK: KEYTRUDA(pembrolizumab), Merck's Anti-PD-1 Therapy, Demonstrates Superior Survival, Progression Free Survival and Overall Response Rate Compared to Ipilimumab

- MYL: Responds to media speculation about TEVA bid for MYL: remains fully committed to its stand-alone strategy, including the proposal to acquire Perrigo

Notable movers by sector:

- Consumer Discretionary: Panasonic Corporation 6752.JP +2.1% (speculation on FY14/15 results); Great Wall Motor 2333.HK +0.3% (Q1 results)

- Financials: AgBank of China 601288.CN +1.0%, Bank of China 3988.HK +1.1% (China cuts RRR); China Fortune Land Development 600340.CN -1.3% (Q1 results)

- Materials: OZ Minerals OZL.AU -2.1% (Q1 production results); Arrium Ltd ARO.AU -11.8% (Q3 shipment results)

- Energy: China Oilfield Services 2883.HK -3.5% (Q1 results)

- Industrials: Furukawa Electric 5801.JP +2.8% (speculation on FY15/16 results)