Japan govt still mulling sales tax hike timing

Asian Market Update: PBoC weakens Yuan fix to 5-year low; Japan govt still mulling sales tax hike timing; NZ trade recovers

 

Economic Data

- (AU) AUSTRALIA Q1 CONSTRUCTION WORK DONE Q/Q: -2.6% V -1.5%E (3rd consecutive decline)

- (AU) AUSTRALIA APR SKILLED VACANCIES M/M: 0.6% V -0.1% PRIOR

- (NZ) NEW ZEALAND APR TRADE BALANCE (NZ$): 292M (4th straight surplus) V 25ME; ANNUALIZED: -3.66B V -3.97BE

- (SG) SINGAPORE Q1 FINAL GDP Q/Q: 0.2% V 0.6%E; Y/Y: 1.8% V 1.9%E

- (PH) Philippines Mar Trade Balance: -$1.75B v -$1.36Be

- (KR) South Korea Q1 Short-Term External Debt: $102.8B v $107.1B prior

- (CN) China Assets Supervision and Administration Commission (SASAC): China JAN-APR SOE profit -8.4% y/y, revenue -1.7% y/y

- (US) NORTH AMERICA APR SEMI BOOK/BILL RATIO: 1.10 V 1.15 PRIOR; 4th straight month above parity

 

Index Snapshot (as of 04:00 GMT)

- Nikkei225 +1.7%, S&P/ASX +1.8%, Kospi +1.2%, Shanghai Composite +0.3%, Hang Seng +2.5%, Jun S&P500 +0.4% at 2,079

 

Commodities/Fixed Income

- June gold flat at $1,229/oz, June crude oil +1.4% at $49.28/brl, Jul copper +1.0% at $2.09/lb

- GLD: SPDR Gold Trust ETF daily holdings fall 3.8 tonnes to 868.7 tonnes; first decline since Apr 25 after 12 straight increases

- (US) Weekly API Oil Inventories: Crude: -5.1M v -1.1M prior; 2nd straight draw; largest draw since Jan 5th

- (CN) China MoF sells 3-yr bonds at 2.54%

- (CN) PBOC SETS YUAN MID POINT AT 6.5693 V 6.5468 PRIOR; Weakest Yuan fix since Mar 2011

- (CN) PBOC to inject CNY70B in 7-day reverse repos

- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥450B in 5-10yr JGBs

- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2027 Bonds; avg yield: 2.43%; bid-to-cover: 2.50x

 

Market Focal Points/FX

- Asian equity markets are up strongly, tracking the biggest rise in US indices in weeks. The rally was sparked by a very impressive set of US home sales, where volume was the highest since early 2008 and median prices reached a record high. Investors are interpreting the figures as indication that US economy may be healthy enough to withstand higher interest rates and thus no longer seem to fear hawkish Fed comments or the accompanying stronger USD. Hawkish FOMC voter Bullard in remarks to CNBC today also expressed that the Fed is still data dependent, but does not necessarily have to move in a meeting accompanied by press conference, suggesting July is also on the table. Steadily rising oil prices are also supporting bullish sentiment. Today's API inventories saw the largest draw since early January, sending July WTI contract up about 1% to $49.30 in electronic trade. In FX majors, USD/JPY consolidated US session gains around ¥110, while AUD/USD and NZD/USD rose about 30pips off their lows above $0.7210 and $0.6760 respectively. GBP/USD came in about 30pips toward $1.46 after a much closer YouGov poll on Brexit after a recent spate of widening surveys in favor of Stay camp. PBoC also took note of upside USD pressure, setting Yuan fix at the weakest level in 5 years.

- There was another Japanese press report stating PM Abe will announce a delay to the sales tax hike after the conclusion of the Diet session on June 1st, deferring to call an election to the Lower House to accompany that of the Upper house of parliament. Govt spokesperson Suga again denied those reports, noting a decision will be made at appropriate time. Vocal proponent of the tax being raised on schedule - Fin Min Aso - said he already expressed to G7 leaders that Japan will raise sales tax as planned.

- In China, SASAC announced April YTD revenue for SOEs down 1.7% and profits down 8.4% y/y. A local press report also stated regulators are concerned about high-valuation M&A targets in A-share market and may tighten regulations. PBoC adviser Huang called for reduced leverage for non-financial companies, particularly in overcapacity sectors.

- Australia's construction data saw its 3rd straight quarter of sequential declines, driven by outsized reduction in Non-Residential sector of the economy. A research note from Morgan Stanley saw RBA cut rates another 75bps to 1.00%, warning that household leverage boom is ending and commodity super-cycle continues to unwind. In New Zealand, April Trade was relatively stronger with a 4th straight month of surplus. Exports to US rose 8% after a 15% decline prior, and shipments to China were up 11% after a 4% slide prior.

- After Greek lawmakers voted in favor of added fiscal reform measures in exchange for continued relief, Eurogroup announced it has reached a deal with Athens that offers €10.3B in several disbursements. IMF will also remain a part of the deal after some recent tensions with the Tsipras govt, and creditors declared that Greek program is now fully back on track.

 

Equities

US equities/ADRs:

- HPE: Reports Q2 $0.42 v $0.42e, R$12.7B v $12.4Be; Announces plans for tax-free spin-off and merger of enterprise services business with CSC; HPE +11.9%, CSC +27.8% afterhours

- DY: Reports Q3 $1.08 v $0.75e, R$664.6M v $598Me; +11.4% afterhours

- INTU: Reports Q3 $3.43 (adj) v $3.19e, R$2.30B v $2.25Be; -2.2% afterhours

- SPWH: Reports Q1 +$0.01 v -$0.02e, R$151.6M v $158Me; -4.5% afterhours

 

Notable movers by sector:

- Consumer discretionary: Tian Ge Interactive Holdings 1980.HK +0.6% (Q1 result); Peak Sports Products Co 1968.HK +13.5% (considers privatization)

- Consumer staples: Australian Agricultural Company AAC.AU +9.7% (FY16 result)

- Financials: Poly Real Estate Group Co 600048.CN -1.0% (plans to set up brokerage JV); Programmed Maintenance Services PRG.AU +12.3% (FY15/16 result); WesFarmers WES.AU -0.8% (impairment); Suncorp-Metway SUN.AU +1.1% (guidance)

- Technology: Forgame 484.HK -2.4% (H1 guidance); Sony Corp 6758.JP +5.8% (guidance)

- Materials: Adelaide Brighton ABC.AU +2.2% (AGM comments)

- Energy: China Coal Energy 1898.HK +9.6%, China Shenhua Energy Co 1088.HK +5.6% (China coal companies said to raise prices)

- Healthcare: Pulse Health PHG.AU -23.0% (guidance); Primary Healthcare PRY.AU +2.3% (speculation of interest from China's Jangho Group)