Equity markets drop to start the week as US/China trade deal remains elusive

Asia Market Update: Equity markets drop to start the week as US/China trade deal remains elusive; equity declines limited to less than 2% in Asia as trade talks said to continue

General Trend:

- Telecom Services, Financial and Consumer Discretionary firms weigh on Shanghai Composite in early trading

- ZTE pares some of Friday’s gain

- Disappointing debut for Uber’s shares weighs on Softbank

- Commonwealth Bank of Australia declines on lower quarterly profits

- Australian plumbing supplies company Reliance Worldwide declines over 15% on reduction in outlook

-China continues to refrain from announcing trade countermeasures on the US

- There has been renewed speculation that Trump and China’s Xi could meet around the June 28-29th G20 meetings in Japan

- PBOC official said decline in overnight rates is ‘normal’

- China smartphone shipments rise in April (first rise of 2019)

- South Korea’s exports continue to decline into early May, chip exports decline again; Korean Won (KRW) declines over 0.8%

- Asian currencies trade generally weaker on trade uncertainty, track decline in yuan

- Australian poll tightens ahead of May 18th (Saturday) elections

- Saudi and Iranian officials comment on Sunday’s explosions at the UAE Fujiariah port (near Strait of Hormuz), cause of explosions still unknown

Headlines/Economic Data

Australia/New Zealand

-ASX 200 opened -0.2%

- (AU) AUSTRALIA MAR HOME LOANS M/M: -2.8% V -0.5%E; Investment Lending m/m: -2.7% v -1.5%e ; Owner Occupied Loan Value m/m: -3.4% v -0.5%e

- CBA.AU Reports Q3 (A$) Cash profit 1.70B* v 2.35B y/y

-LLC.AU Confirms have not received any approach

-RWC.AU Cuts FY19 EBITDA guidance to A$260-270M (guided A$280-290M prior)

- Looking ahead: New Zealand Fin Min Robertson will make a pre-budget speech ahead of May 30th budget release

Japan

- Nikkei 225 opened -0.8%

- (JP) According to analysts 849 earnings from Japan companies show avg Net profit -2% y/y, noting slowdown in demand and US/China trade war - Nikkei

- (JP) US sought a quick agreement with Japan on bilateral trade deal today in a phone call between Trade Rep Lighthizer and Japan's Motegi – Nikkei (Friday)

-Toshiba, 6502.JP Reports FY18/19 Net ¥1.0T v ¥0.8T y/y; Op ¥35.5B v ¥86.2B y/y; Rev ¥3.69T v ¥3.95T y/y

-(JP) Japan Mar Preliminary Leading Index CI: 96.3 v 96.3e; Coincident Index: 99.6 v 99.6e

Korea

- Kospi opened -0.8%

- (KR) South Korea Apr Foreign Investment in local bonds (KRW): +0.53T v +1.47T prior; Foreign investment in local stock: 2.6T v -0.6T prior

- (KR) South Korea's military has not yet determined the details of the short-range missiles that North Korea fired last week – Yonhap

- (KR) South Korea sells KRW1.7T v 1.7T indicated in 5-yr bonds, avg yield 1.76% v 1.86% prior; bid to cover 2.98x

China/Hong Kong

-Hang Seng closed for holiday; Shanghai Composite opened -1.2%

- (US) White House Economic adviser Kudlow: China has invited Trade Rep Lighthizer and Treasury Sec Mnuchin to China to continue trade talks; Noted that Americans, not the Chinese, pay the tariffs (opposite of what Trump says); China will sugger GDP loss as a result

- (CN) US President Trump tweets on China: "...deal will become far worse for them if it has to be negotiated in my second term"; We are right where we want to be with China, remember they broke the deal not us

- (CN) China allows trading of two matured defaulted corporate bonds for the first time on state-owned platforms - Chinese Press

- (CN) According to Citi analysts US trade tariffs on China will take away 0.8% of China GDP on an annual basis if sustained and -0.3% from South Korea GDP

- 002450.CN China police have taken criminal compulsory measures against major shareholder for suspected crime

- (CN) China PBoC sets yuan reference rate: 6.7954 v 6.7912 prior (weakest fix since Jan)

- (CN) China PBoC Open Market Operation (OMO): Skips for 3rd consecutive session: Net injection: CNY20B drain v CNY0B prior

- (CN) China April smartphone shipments ~34.8M units, +6.5% y/y (first rise in 2019) vs -4.1% prior - China Academy of Information and Communications (CAICT)

Other Asia

- Looking ahead: Philippines mid-term election results expected tomorrow, newly elected officials to take office June 30th, results expected to strengthen President Duterte’s power

North America

- (RU) US Sec of State Pompeo cancels part of trip that will take him to Moscow, but will meet with Lavrov and Putin in Sochi as planned Tuesday

Europe

- (UK) PM May may be asked to step down this week as her talks with Labour Leader Corbyn continue - UK press

- (UK) UK Labour Trade Policy chief Gardiner: We do not know whether successor to PM May will deliver on any Brexit deal negotiated with Govt, that is the biggest sticking point - UK press

- VOD.UK Expected to cut its dividend ~50% to £0.075 from £0.15 in order to finance 5G - UK press (will report on Tuesday)

- (ZA) South Africa election results: Ruling ANC Party wins with 57% of vote (down from 62% in 2014), vows to purge the party of "deviant tendencies"

- (AT) ECB's Nowotny (Austria): ECB did not mean to tell markets easy policy will be prolonged , when Draghi said it would consider steps to mitigate impact of negative rates on banks; Next policy steps will depend on data, premature to talk about what to do if growth slows further - Nikkei (update)

- (AE) Several powerful explosions reported early Sunday morning at United Arab Emirates port of Fujairah, targeting 7 tankers; have not said what caused the fire; called it sabotage; Saudi Energy Min addresses the explosions

- Saudi Energy Min condemns attack on 2 Saudi vessels that targeted security of oil supply; attack caused significant damage to the structure of the 2 Saudi vessels; one of the ships was bound for Aramco customers in US - Saudi State media

Levels as of 01:20ET

- Hang Seng closed; Shanghai Composite -1.0%; Kospi -1.1%; Nikkei225 -0.8%; ASX 200 -0.4%

- Equity Futures: S&P500 -1.0%; Nasdaq100 -1.2%, Dax -0.9%; FTSE100 -0.9%

- EUR 1.1227-1.1245; JPY 109.60-109.86; AUD 0.6974-0.7005; NZD 0.6577-0.6605

- Commodity Futures: Gold -0.2% at $1,284/oz; Crude Oil -0.0% at $61.65/brl; Copper -1.2% at $2.75/lb