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Market Update – Asian Session: US Launches Missile Strike On Syrian Airbase Deemed Responsible For Chemical Attack

US launches missile strike on Syrian airbase deemed responsible for chemical attack

US Session Highlights

(US) INITIAL JOBLESS CLAIMS: 234K V 250KE; CONTINUING CLAIMS: 2.03M V 2.03ME

(US) House Intel Chief Nunes: to temporarily step down from committee’s Russia investigation; says charges filed against him with Office of Congressional Ethics are entirely false and politically motivated

(US) House Freedom Chair Caucus Meadows (R-NC): majority of Freedom Caucus members will vote for healthcare bill if earlier White House offers are included in the legislation

(US) White House economic adviser Cohn reportedly tells lawmakers Trump administration remains open to a new Glass-Steagall law – press

US markets on close: Dow +0.1%, S&P500 +0.2%, Nasdaq +0.3%

Best Sector in S&P500: Energy

Worst Sector in S&P500: Telecom

Biggest gainers: LB +11.0%; STZ +6.4%; KSS +5.6%

Biggest losers: INCY -2.1%; FAST -1.5%; AMZN -1.2%

At the close: VIX 12.4 (-0.5pts); Treasuries: 2-yr 1.22% (-1bps), 10-yr 2.34% (-1bps), 30-yr 2.99% (-2bps)

US movers afterhours

HYGS: Awarded funding to build two hydrogen fueling stations fo Greater Toronto Area (GTA); +6.3% afterhours

RYI: Guides Q1 higher Rev y/y; guides Q1 adj EBITDA $53-55M v $37M y/y; +5.7% afterhours

OCLR: To join S&P SmallCap 600 index; +4.4% afterhours

WDFC: Reports Q2 $0.87 v $0.90e, R$96.5M v $99.8Me; affirms FY17 $3.64-3.71 v $3.65e, Cuts R$390-395M v $387Me; -4.2% afterhours

NPTN: CFO Ray Wallin to depart; effective May 15th; -2.2% afterhours

RT: Reports Q3 -$0.06 (adj) v +$0.03 y/y, R$225.7M v $271.5M y/y; Names James F. Hyatt as new CEO effective immediately; -9.3% afterhours

Politics

(US) Bipartisan group of senators including Sen Warren (D-MA) and Sen McCain (R-AZ) introduce 21st Century Glass Steagall legislation – press

(US) President Trump to nominate exec Derek Kan as Under Sec of Policy at DOT – press

Key economic data

(JP) JAPAN FEB LABOR CASH EARNINGS Y/Y: 0.4% V 0.5%E ; REAL EARNINGS (EX-INFLATION) Y/Y: 0.0% V 0.0% PRIOR

(AU) AUSTRALIA MAR AIG PERFORMANCE OF CONSTRUCTION INDEX: 51.2 V 53.1 PRIOR; 2nd straight expansion

(PE) PERU CENTRAL BANK (BRCP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED

Asia Session Notable Observations, Speakers and Press

Asian equity markets are mixed though risk is decidedly on the defensive as simmering geopolitical jitters are burning hotter. Two days after a chemical weapons attack against a Syria rebel stronghold by the Assad regime, President Trump ordered a missile strike against an air base from which the chemical attack was apparently staged. Nearly 60 Raytheon missiles were launched by two Navy destroyers that also took precaution not to hit any Russian assets that were present near the targeted airfield. Pentagon official said Russian military was informed where and when the Syria strike was coming, though State Sec Tillerson took a more critical tone of Moscow, noting that "Russia was either complicit or incompetent in carrying out its 2013 commitment in Syria". Tillerson added that US did not seek an approval from Moscow despite its explicit support for the Assad regime. Initial Congressional response has thus far been positive even though President Trump did not seek Congressional approval before authorizing the strike.

Markets reacted with sharply accentuated risk-off flows – US Treasuries spiked as the yield on the 10-yr fell to a 4-month low below 2.29%, Gold prices rose nearly $20 above 1,270, June S&P500 e-minis fell nearly 20 handles below 2,338 before consolidating the drop around 2,345, and WTI crude rose $1 above $52 even though Syria is not a major crude supplier with worries over Assad ally Iran taking a position against US action. Initial response from Russian officials has also been predictably cool, with one govt official stating that US-Russia cooperation may be in jeopardy. FX markets were also active in what is typically a less volatile session ahead of the non-farm payrolls – USD/JPY fell nearly 100pips to ¥110, AUD/USD fell 25pips below 0.7520, and USD/CHF fell 40pips to 1.0030.

High-profile initial dinner meeting between US Pres Trump and China Pres Xi in Florida has taken a back seat to the Syria escalation. Trump only stated that the two leaders "had a long discussion already, and so far I have gotten nothing, absolutely nothing, but we have developed a friendship."

In notable corporate news, Samsung Electronics put out its preliminary Q1 results beating expectations at Op profit KRW9.9T v KRW9.2Te, Rev KRW50T v KRW49.5Te, though the stock was down slightly in early going. Toshiba remained volatile, rising after today’s local press report that Hon Hai submitted a bid near ¥3T for chip unit.

China

(CN) US Pres Trump: US to have a "very, very great relationship" with China in long term – financial press

(CN) Morgan Stanley: China growth and inflation will probably start to roll over in coming quarters due to high base and shift in policy; Expect only gradual moderation rather than sharp slowdown – Chinese press

(CN) China and South Korea to discuss North Korea nuclear issues – financial press

Japan

(JP) Japan Fin Min Aso: US-Japan dialogue agenda not limited to trade and FX

Australia/New Zealand

(AU) Australia govt reportedly has finished a scoping study for a potential free trade agreement with the EU

Korea

(KR) Japan said to extend its unilateral sanctions on North Korea by 2 years – press

Samsung Electronics: Reports prelim Q1 Op profit KRW9.9T v KRW9.2Te, Rev KRW50T v KRW49.5Te

Asian Equity Indices/Futures (23:00ET)

Nikkei -0.1%, Hang Seng -0.7%, Shanghai Composite +0.1%, ASX200 -0.1%, Kospi -0.4%

Equity Futures: S&P500 -0.3%; Nasdaq -0.3%, Dax -0.4%, FTSE100 -0.2%

FX ranges/Commodities/Fixed Income (23:00ET)

EUR 1.0635-1.0660; JPY 110.10-111.00; AUD 0.7515-0.7545; NZD 0.6960-0.6975

June Gold +1.0% at 1,265/oz; May Crude Oil +1.9% at $52.65/brl; May Copper +0.2% at $2.66/lb

iShares Silver Trust ETF daily holdings fall to 10,208 tonnes from 10,237 tonnes prior; 6th straight decline, lowest since Mar 2016

(CN) PBOC SETS YUAN MID POINT AT 6.8949 V 6.8930 PRIOR

(CN) PBoC skips open market operations for 10th straight session; Drains net CNY100B this week v drained CNY290B prior

(AU) Australia MoF (AOFM) sells A$600M in 2.0% 2021 Bonds; avg yield: 2.0635%; bid-to-cover: 6.12x

(US) US based stock funds see $11.9B outflow (largest outflow since Dec) in week ended Apr 5th v $1.8B inflow in prior week – Lipper

Asia equities notable movers

Australia

HLO.AU Helloworld +6.1% (raises guidance)

AGL.AU AGL Energy +2.7% (UBS upgrades)

ALL.AU Aristocrat +1.1% (Ord Minnett raises PT)

S32.AU South32 -2.7% (Morgans Financial downgrades)

JBH.AU JB Hi-Fi -1.4% (Deutsche Bank comment)

MET.NZ Metlifecare -4.0% (Infratil sells stake)

EHE.AU Estia Health -5.2% (update on Sentinel portfolio management)

Japan

8354.JP Fukuoka Financial +2.4% (Credit Suisse upgrades)

6502.JP Toshiba Corporation +2.0% (Hon Hai offer)

8174.JPNippon Gas Co +5.2% (JPMorgan initiates)

7735.JPScreen Holdings Co -3.0% (Macquarie downgrades)

2659.JPSan-A Co -3.7% (annual result)

3382.JPSeven & I Holdings +4.4% (annual result)

7013.JPIHI Corp +4.0% (Jefferies initiates)

2337.JPIchigo Group Holdings +3.5% (March result)

South Korea

005930.KR Samsung Electronics -0.7% (prelim Q1 result)

139480.KR E-Mart +4.4% (monthly sales)

Hong Kong

1317.HK China Maple Leaf Educational Systems +1.7% (H1 guidance)

960.HK Longfor Properties +1.2% (Mar result)

1030.HK Future Land Development Holdings +2.6% (Mar result)

1910.HK Samsonite +0.9% (acquisition)

1157.HK Zoomlion Heavy Industry Science and Technology +2.2% (Q1 guidance)

China

600489.CN Zhongjin Gold Co +5.7%, 601899.CN Zijin Mining +3.8%

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