Asian equities drop after US losses

Asia Market Update: Asian equities drop after US losses; focal points have included US/China, Fed speak and negative rates; Aussie declines on historic jobs data; Upcoming China production data and Trump interview in focus.

General Trend:

- New coronavirus cases continue to be reported in Northeast China

- Shanghai Composite dropped by less than 1% during morning session, financials and consumer discretionary companies are among the decliners

- Tencent rises over 1% in HK following earnings report, gaming firm Galaxy Entertainment declines following earnings

- Declining sectors in Australia include Energy and Financials [in line with Wednesday’s US session]

- New Zealand bond yields rise as traders assess raised issuance plans [issuance announcement came a day after the RBNZ raised its QE program]

- RBA skips bond purchases at 4th straight auction, 3-year yield is currently below the target of 0.25%

- Japan confirms plan to ease emergency for most prefectures

- China PBOC has yet to announce rollover of MLF funds that mature today [despite press speculation], central bank has said that banking liquidity is ‘reasonably ample’; China gov’t bond FUTs decline

- China’s Commerce Ministry (MOFCOM) sometimes holds weekly news conferences on Thursday

- Fox Business is expected to air full interview of Trump at 6 am ET (10 GMT)

- Australia and New Zealand are due to sell bonds on Friday

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opened -0.3%

- (AU) AUSTRALIA APR EMPLOYMENT CHANGE: -594.3K V -575.0KE; UNEMPLOYMENT RATE: 6.2% V 8.2%E; Full Time Employment Change: -220.5K v -9.5K prior; Part Time Employment Change: -373.8K v +10.1K prior

- (NZ) Reserve Bank of New Zealand (RBNZ) Gov Orr: NZ$60B is a cap not a target for QE program, reiterates negative rates could be used if needed, happy with effectiveness of QE to date - speaking to parliament

- (NZ) Reserve Bank of New Zealand (RBNZ) buys NZ$70M in LGFA bonds in QE auction v NZ$70M sought

- (AU) Reserve Bank of Australia (RBA): Excess cash at exchange settlement (ES) accounts at A$69.3B v A$67.6B prior

- (AU) Reserve Bank of Australia (RBA) adds A$933M to banking system through repos v A$369M prior

- (AU) Australia May Consumer Inflation Expectation: 3.4% v 4.6% prior

- (AU) Reserve Bank of Australia (RBA) skips offering to buy bonds for 4th consecutive session (buys no bonds this week)

- (NZ) NEW ZEALAND 2020 BUDGET: Raises debt issuance forecasts through 2023/24; To issue NZ$165B in govt bonds in 4-years to June 2024

- (AU) Australia Treasurer Frydenberg: Jobkeeper program is now assisting 6M people; Numbers will get worse before they get better

Japan

- Nikkei 225 opened -0.6%

- (JP) Japan govt plans to inject capital into companies negatively affected by coronavirus; Will be partially funded by a 2nd extra budget for the current FY - Nikkei

- (JP) Japan Investors Net Buying of Foreign Bonds: +¥239.1B v -¥149.2B prior week; Foreign Net Buying of Japan Stocks: -¥86.6B v -¥393.7B prior week

- (JP) Japan Apr Money Supply M2 y/y: 3.7% v 3.4%e; M3 y/y: 3.0% v 2.8%e

- (JP) Bank of Japan (BOJ) Gov Kuroda: Reiterates will not hesitate to add easing if needed, watching virus impact closely, will take time to reach CPI target; most important role for BOJ is to prevent financial vulnerabilities from putting downward pressure on economy

- (JP) Japan MoF sells ¥700B v ¥700B indicated in 0.40% 30-yr JGBs, avg yield: 0.449% v 0.426% prior, bid to cover: 3.69x v 3.53x prior

Korea

- Kospi opened -0.9%

- (KR) South Korea Fin Min Hong: Aiming to create 1.56M jobs in the public sector – Yonhap

- (KR) South Korea: Export downturn may gradually ease in late May into early June

China/Hong Kong

- Hang Seng opened -0.6%; Shanghai Composite opened -0.4%

- (CN) Global Times tweets: "China will soon impose countermeasures on US individuals and entities filing lawsuits seeking COVID19 damages from China, sources told GT. US states suing China are highly likely to face business and trade consequences.“

- (CN) China Fin Min Liu Kun: See decline in 2020 fiscal revenues - Chinese press

- (CN) China PBOC sets Yuan reference rate: 7.0948 v 7.0875 prior

- (CN) China PBoC Open Market Operation (OMO): Skips Reserve Repo Operations for the 28th consecutive session; Net CNY0B v CNY0B prior

- (CN) China Customs: To allow imports of US Blueberries and Barley

- 1610.HK Exec: Chances are higher that China will speed up buying US farm goods; China soybean supply pressure will be huge from May-Sept

- (CN) China PBOC sells CNY30B in 3-month and 1-yr bills in Hong Kong

North America

- (US) FED CHAIR POWELL: MAY NEED ADDITIONAL POLICY MEASURES TO SHIELD ECONOMY; WILL FULLY USE TOOLS TO AID ECONOMY UNTIL RECOVERY IS WELL UNDERWAY

- (US) Pres Trump: disagrees with Dr. Fauci, believes the US should open its schools; virus has little effect on young people

- TSN Said to be reducing prices at much as 30% this week for ground beef, roasts and other products sold to restaurants and supermarkets due to virus related increases seen recently - financial press

- (US) Fed's Daly (dove, non-voter): Economic recovery will be slow as states cautiously reopen their economies and guard against the risk of a coronavirus flare up; getting people back to work is "a project that will last longer than just a few months" - speaking on SiriusXM

Europe

- (UK) According to Zoopla CEO: Housing revival plan expected to unlock £82B in 373K stalled deals – press

Levels as of 1:15ET

- Hang Seng -1.4%; Shanghai Composite -0.7%; Kospi -1.2%; Nikkei225 -1.5%; ASX 200 -1.2%

- Equity Futures: S&P500 -0.2%; Nasdaq100 -0.1%, Dax -0.7%; FTSE100 -0.9%

- EUR 1.0825-1.0804; JPY 107.09-106.81; AUD 0.6462-0.6421; NZD 0.6005-0.5968

- Commodity Futures: Gold +0.3% at $1,721/oz; Crude Oil +1.0% at $25.54/brl; Copper -0.1% at $2.35/lb