Fortescue spikes on reports of China investment

Asian Mid-session Update: Fortescue spikes on reports of China investment; IMF chief economist sees Greek efforts as insufficient

Economic Data

- (SI) SINGAPORE Q1 FINAL GDP Q/Q: 3.2% V 2.0%E; Y/Y: 2.6% V 2.2%E

- (JP) JAPAN APR PPI SERVICES Y/Y: 0.7% V 0.6%E

- (NZ) NEW ZEALAND APR TRADE BALANCE (NZD): 123M V 98ME; 4th month of surplus

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 113.5 v 114.6 prior

- (KR) SOUTH KOREA MAY CONSUMER CONFIDENCE: 105 V 104 PRIOR; 7-month high

Index Snapshot (as of 02:30 GMT)

- Nikkei225 flat, S&P/ASX +0.7%, Kospi -0.2%, Shanghai Composite +0.9%, Hang Seng +1.4%, Jun S&P500 -0.2% at 2,120

Commodities/Fixed Income

- Jun gold +0.1% at $1,205/oz, Jul crude oil +0.2% at $59.82/brl, Jul copper +0.3% at $2.82/lb

- JGB: (JP) Japan's MoF sells ¥1.09T in 1.2% 20-year JGBs; Avg yield: 1.221% v 1.071% prior; bid-to-cover: 2.91x v 2.63x prior

- USD/CNY: PBoC sets yuan mid point at 6.1172 v 6.1165 prior setting; weakest Yuan setting since May 5th

- (CN) PBoC won't conduct open market operations (OMO) in today's session (11th consecutive halt)

- (AU) Australia MoF (AOFM) sells A$200M in 1% 2018 indexed Bonds; avg yield: 0.0427%; bid-to-cover: 5.05x

Market Focal Points/FX

China markets are building on impressive gains from the overnight session that took Shanghai Composite up by over 3% to fresh 7-year highs. Shanghai Composite was up nearly 1% late in the morning session, as Premier Li stated the economy is on track to achieve around 7% GDP target for 2015, with April and May data showing continued momentum. Broker names also remained strong despite some cautious sentiment in the press. An FT report noted that more than half of $9.5B in equity raised by brokers in Hong Kong will be used to finance more margin loans. Separately, a CSRC exec warned that brokerages need to strengthen management of higher-risk margin trading business. Hong Kong was still bid higher, with a local press report speculating the ) Shanghai-Hong Kong stock connect overall quota may be abolished.

Australia's Fortescue Metals - the country's third largest iron ore producer - spiked up by over 10% on local press reports that China's Citic Group and Baosteel filed with the foreign investment authority to take a stake in the company. FMG has been particularly impacted by the decline in metal prices, and its founder has recently gone as far as to call for all producers to curb output. Also of note down under, New Zealand trade data saw the 4th straight month of surplus, but both exports and imports were below expectations. Just as Japan trade data overnight, shipments to the US grew double digits (30%), while those to China and Australia were down by just over 15% y/y.

Singapore Q1 Final GDP was much better than initially reported and also topped estimates, however the govt only affirmed 2015 target range of 2-4%. SGD initially rallied but retraced those gains after MAS announced there would be no material change to inflation outlook or monetary policy from the strong GDP report.

EUR/USD was once again in focus among USD majors, falling about 50pips to fresh 4-week lows below 1.0930. IMF chief economist Blanchard remarked the budget reforms proposed by Greece are not sufficient to achieve a budget surplus this year, and more "credible measures are needed to transform this into a surplus and maintain a surplus in the future..." Overnight, Greek govt spokesperson announced Athens is still seeking to have an agreement with creditors by end of May or early June period, and that the govt will attempt to make payments on loans as long as it can. AUD/USD and NZD/USD saw some initial downside, but since retreated to unchanged levels for the session at 0.7830 and 0.7310. USD/JPY picked up about 30pips to trade within 15pips of its multi-month March highs around ¥122.

Equities

US equities/ADRs:

- TWC: Charter said to be closing in on a deal to acquire Time Warner Cable at $55B or $195/shr; Follow-up: According to CNBC's Faber, the $195/shr deal has been signed.

Notable movers by sector:

- Consumer discretionary: Tingyi Cayman Islands 322.HK -3.8% (Q1 result)

- Financials: CITIC Securities 6030.HK +2.8%, Haitong Securities +3.9% (Hong Kong and China mutual fund recognition); Investa Office Fund IOF.AU +1.6% (possible bid)

- Industrials: Sany Heavy 631.HK +3.5% (clarification on cooperation); Lifan Industry 601777.CN +10.0% (private placement)

- Technology: Tsinghua Unisplendour 000938.CN +10.0% (private placement); Leshi Internet Info & Tech Co Beijing 300104.CN -2.0% (private placement, Chairman to reduce holdings); Qingdao Haier Co Ltd 600690.CN +7.2% (to acquire assets); Toshiba Corporation 6502.JP -0.1% (speculation on dividend suspension)

- Materials: Fortescue Metals Group FMG.AU +9.5% (speculation on FIRB applications); Norton Gold Fields NGF.AU +8.7% (Zijin Mining to raise offer price); Cheil Industries Inc 028260.KR +14.4% (merger speculation)

- Energy: AGL Energy AGL.AU +6.7% (reaffirms guidance, asset divestment)