China industrial production beats expectations

Asia Market Update: China industrial production beats expectations, jobless rate falls; RBA minutes highlight possible risks, noting next rate move is more likely to be a raise

General Trend:

- Asian indices trade generally lower: Hang Seng on track for first decline in 7 days

- MSCI announces China A-share index changes ahead of June 1st additions to the EM index

- Tencent is expected to report quarterly earnings on Wednesday, May 16th

- Australia’s Bluescope Steel raises H2 outlook on strength in US operations

- Japanese megabank SMFG rises over 2%, announced FY outlook and buyback

- China April industrial production growth accelerates, beat ests

- China April YTD fixed asset investment below ests: Gov’t notes moves to clean up certain infrastructure projects

- US Ambassador to China says both countries are still very far apart on trade

- Moody’s suggests China could disrupt its economy if it meets US trade surplus reduction demand of $200B

- PBoC injects cash in open market operation (OMO), as no reverse repos matured

- Few surprises seen in RBA minutes, reiterates rate comments; Assistant Gov Debelle notes recent decline in money market rates

- Australian interest rates track Monday’s increase in US Treasury yields

- Malaysian assets trade calmly on session vs. recent election related volatility

Headlines/Economic Data

Japan

-Nikkei 225 opened +0.1%; closed -0.2%

- Topix Real Estate index -2.3%, Securities -0.6%; Iron & Steel +0.4%

- Megabanks trade broadly higher with earnings in focus

- (JP) Japan is considering tax reductions on home and vehicle purchases to ease the sting of a consumption tax hike planned for next year - Nikkei

- Nissan Motors, [+0.7%], 7201.JP Reports FY17/18 Net ¥747B v ¥727Be; Op ¥574.8B v ¥566.4Be; Rev ¥12.0T v ¥12.0Te (after the close yesterday)

- Toshiba, [+1.2%], 6502.JP Reports FY17/18 Net ¥804B v ¥ y/y; Op ¥64.1B v ¥ y/y; Rev ¥3.95T v ¥4.87T y/y, to conduct 10 to 1 reverse stock split

- (JP) Japan MoF sells ¥699B v ¥700B indicated in 0.8% (0.8% prior) 30-yr bonds; Avg yield: 0.746% v 0.714% prior; Bid to cover: 4.41x v 4.34x prior

Korea

-Kospi opened 0.0%

- (KR) South Korea Apr Export Price Index M/M: 0.0% v -0.9% prior; Y/Y: -2.0% v -0.9% prior; Import Price Index M/M: 1.2% v 0.5% prior; Y/Y: 4.0% v 3.1% prior

- (KR) Satellite imagery shows North Korea has begun dismantling the Punggye-ri Nuclear test site - 38North

- (KR) South Korea Unification Ministry confirms high level talks with North Korea on May 16th

China/Hong Kong

- Hang Seng opened +0.1%, Shanghai Composite +0.2%

- Hang Seng Info Tech index -2%, Industrial Goods -1%, Financials -0.9%; Telecom +0.2%

- (CN) MSCI: 234 large cap mainland China companies to be added to EM and China indexes; The 234 A-shares will have a combined market cap of ~$22.0B

- (CN) US Ambassador to China Branstad: China and US still very far apart on trade; President Trump wants 'dramatic' increase in farm exports to China

- (CN) US Pres Trump tweets: "ZTE, the large Chinese phone company, buys a big percentage of individual parts from U.S. companies. This is also reflective of the larger trade deal we are negotiating with China and my personal relationship with President Xi."

- (CN) CHINA APR INDUSTRIAL PRODUCTION Y/Y: 7.0% V 6.4%E

- (CN) CHINA APR RETAIL SALES Y/Y: 9.4% V 10.0%E

- (CN) China PBoC Open Market Operation (OMO): Injects CNY180B in 7-day and 14-day reverse repos v skips prior; Net injects CNY180B

- (CN) China PBoC sets yuan reference rate 6.3486 v 6.3345 prior

-(CN) China State Council senior adviser Xia Bin: China’s financial risk greater than official numbers suggest - SCMP

- (CN) Moody's: China unlikely to meet US demands on bilateral trade

- (CN) China Apr Surveyed Jobless Rate: 4.9% v 5.1% prior

- (CN) China Apr Fixed Assets Urban YTD y/y: 7.0% v 7.4%e

- (CN) China NBS Comments on April data: Economy steadied with improvement in April; US/China trade frictions have yet to show impact on domestic economy

- (CN) MSCI: 234 large cap mainland China companies to be added to emerging markets (EM) and China indexes on June 1st

- (HK) Hong Kong Monetary Authority (HKMA) Chief Chain reiterates has confidence to maintain stable HKD peg; HK$ falls to lower end of trading band

-(HK) Two China bitcoin mining equipment makers planning to IPO in Hong Kong this year - press

Australia/New Zealand

-ASX 200 opened +0.1%, closed -0.5%

- ASX 200 Telecom index -4.6% (Telstra -5.6%), Utilities -1.5% Energy -0.9%, Resources -0.8%, Financials -0.3%

- (AU) RBA Deputy Gov Debelle: Sees no pressure to raise rates; economy is on a slowly improving trajectory, but that doesn't make a case for raising interest rates in the near term - The Outlook for the Australian Economy – at the CFO Forum

- (AU) Reserve Bank of Australia (RBA) April Meeting Minutes: members agreed that it was more likely that the next move in the cash rate would be up, rather than down

- (AU) Australia AOFM prices A$1.7B in June 2019 bonds through syndication; yield to maturity 3.205%

Other Asia

- Taiwan's Hon Hai declines over 1% after Q1 profits missed ests

- (VN) Fitch raises Vietnam sovereign rating to BB from BB-; Outlook Stable

North America

- (CA) Canada PM Trudeau's office: Pres Trump and PM Trudeau discussed in call the possibility of reaching a prompt conclusion of NAFTA deal - press

-TSLA, Engineers said to have has concerns about autopilot before first fatal crash; had wanted to add sensors to keep drivers attentive, but CEO Musk and other executives said no, citing costs - financial press

Europe

- (UK) UK Labour Leader Corbyn said to rule out ‘Norway-style’ Brexit option – UK Press

- (EU) European Commission is considering invoking a 19th century law to prohibit European companies from submitting to US sanctions, in the event they are imposed as a result of its withdrawal from the Iranian nuclear pact

- German press

- (EU) ECB's Coeure: divergence between our key policy rates and market rates could become more important in the future once policy rates begin to normalize

- First Group [FGP.UK]: The co. is being urged to consider a full sale, along with other options - UK Press

- Carrefour Brazil reported Q4 (BRL) Net 596M v 494Me; Rev 13.7B v 13.8Be

Levels as of 02:00ET

- Hang Seng -1.2%; Shanghai Composite -0.2%; Kospi -0.8%

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

- EUR 1.1938-1.1912; JPY 109.92-109.66; AUD 0.7537-0.7508;NZD 0.6928-0.6892

-Jun Gold -0.5% at $1,311/oz; Jun Crude Oil +0.0% at $70.95/brl; Jul Copper -0.3% at $3.08/lb