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Market Update – Asian Session: RBA Minutes Cautious Amid Softer Employment And Rising Household Credit

Asia Mid-Session Market Update: China top-tier cities property price growth slows; RBA minutes cautious amid softer employment and rising household credit

US Session Highlights

(BR) Brazil Feb Economic Activity Index (Monthly GDP) M/M: 1.3% v 0.5%e; Y/Y: -0.7% v -2.4%e

(US) APR EMPIRE MANUFACTURING: 5.2 V 15.0E; New Orders: +7.0 v +21.3 prior; Prices Paid: +32.8 v +31.0 prior

(US) APR NAHB HOUSING MARKET INDEX: 68 V 70E

(US) Treasury Sec Mnuchin: timeline to get tax reform by Aug is "highly aggressive to not realistic at this point"; schedule has been slowed by the healthcare bill passage problems – FT

Stocks gained momentum again to start the week off with a rally after last week’s negative performance. Investors began to see equity as relatively underpriced at the open, and markets lifted higher into the close. Best performing sectors were Financials and Consumer Discretionary, gaining 1.6% and 1% respectively.

US markets on close: Dow +0.9%, S&P500 +0.9%, Nasdaq +0.9%

Best Sector in S&P500: Financials

Worst Sector in S&P500: Energy

Biggest gainers: NVDA +3.9%; MTB +3.9%; ARNC +3.1%

Biggest losers: INCY -10.5%; DISH -5.8%; LLY -4.1%

At the close: VIX 14.7 (-1.3pts); Treasuries: 2-yr 1.20% (flat), 10-yr 2.25% (+2bps), 30-yr 2.91% (+3bps)

US movers afterhours

CAB: Enters into revised transaction agreements in connection with Bass Pro Shops merger; CAB to get $61.50/shr; +7.5% afterhours

RIGL: Submits New Drug Application to FDA for Fostamatinib in Chronic ITP; +5.0% afterhours

NFLX: Reports Q1 $0.40 v $0.38e, R$2.64B v $2.64Be; Guides Q2 $0.15 v $0.23e; Total streaming net adds 4.95M v 7.05M q/q v 5.2M forecast; +1.4% afterhours

UAL: Reports Q1 $0.41 (adj) v $0.37e, R$8.42B v $8.36Be; +1.0% afterhours

CUDA: Reports Q4 $0.19 v $0.15e, R$89.3M v $88.6Me; Total active subscribers 321K v 309K q/q; +15% y/y; -3.9% afterhours

Politics

(US) President Trump to outline H-1B visa changes tomorrow

(JP) Asahi poll shows Japan Cabinet approval rating at 50%, nearly unchanged from prior

Key economic data

(CN) CHINA MAR PROPERTY PRICES M/M: RISE IN 62 OUT OF 70 CITIES VS 56 PRIOR; Y/Y: RISE IN 68 OUT OF 70 CITIES V 67 PRIOR

Asia Session Notable Observations, Speakers and Press

US equity markets traded higher after 3 consecutive down days, though sentiment in Asia is more subdued. Financials were the best performing sector on Wall St, with rising Treasury rates on the long end widening the yield curve. Technical factors have been attributed in part for the bullish reversal, though commentary from US Treasury Sec Mnuchin late in the day contributed to US markets going out on their highs. Mnuchin said that while the timeline for getting tax reform done by August is "highly aggressive", he did expect tax system changes some time this year, also adding that the border adjustment tax is just one of many elements considered in raising $1T for the tax program. Mnuchin also talked up USD after Trump’s remarks last week that the greenback has gotten too strong, noting that strength of USD over the long term is a positive. USD/JPY rose over 50pips on the comments above ¥109 level and then extended those gains above ¥109.20. NZD/USD found support at 0.70, while AUD/USD fell about 40pips below 0.7550.

Australia’s ASX200 is among the worst performing indices in Asia, falling over 1% to a 2-week low below 5,830. Mining shares are weighed down by more selling in iron ore, with Dalian gauge falling over 3% early in the day. RBA April policy meeting minutes echoed the cautious stance displayed in the original statement, indicating policymakers had to balance some recent deteriorating in employment conditions with rising household debt in calibrating their policy stance. Board plans to continue monitoring labor and housing conditions over the coming months, particularly the overheating Melbourne and Sydney markets.

In China, property names are modestly lower, while declines in financials, gaming, and energy stocks weighed on returning from holiday Hang Seng index. Mar property prices were up in 62 out of 70 cities m/m and 68 y/y – up from 56 and 67 respectively in the prior month. Across the top 70 cities, prices were up 0.6% m/m v 0.3% prior, though y/y rate of growth slowed to 11.3% v 11.8% prior. Beijing y/y price growth slowed to 20.6% v 22.1% prior and that of Shanghai slowed to 19.8% v 21.1% prior, with Stats Bureau noting the impact of property curbs for tier-1 cities unveild in recent weeks.

China

(CN) China Insurance Regulatory Commission (CIRC) to start checking credit, guarantee businesses of insurers that help offer financing to sell bonds as well as trust and fund products

(CN) China regulators hopes listed companies to cool financing actions – Chinese press

(CN) JPMorgan raised its China 2017 GDP target to 6.7% from 6.6% following stronger than expected Q1 – Chinese press

Japan

(JP) US Commerce Sec Ross: Too soon to talk about FTA with Japan; made good progress in establishing dialogue and reaching mutual understanding

(JP) Moody’s: Japan economic momentum is building due to rising exports and expected fiscal support

Australia/New Zealand

(AU) Australia govt has investigated the possibility of putting a limit on the number of properties an investor can buy – AFR

Korea

(KR) South Korea govt think tank (KDI) raises 2017 GDP target to 2.6% from 2.4%; Sees 2018 GDP at 2.5%

(KR) South Korea Ministry of Trade, Industry, and Energy: March auto exports value rose 4.1% y/y to $4.12B, 2nd straight month of increase

(KR) China reiterates opposition to South Korea’s THAAD anti-missile system – press

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.2%, Hang Seng -0.9%, Shanghai Composite -0.1%, ASX200 -1.2%, Kospi -0.2%

Equity Futures: S&P500 -0.1%; Nasdaq +0.1%, Dax +0.2%, FTSE100 -0.1%

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

EUR 1.0635-1.0655; JPY 108.90-109.25; AUD 0.7555-0.7595; NZD 0.7000-0.7015

June Gold -0.5% at 1,285/oz; May Crude Oil -0.1% at $52.58/brl; May Copper -0.5% at $2.58/lb

(CN) PBOC SETS YUAN MID POINT AT 6.8849 V 6.8785 PRIOR (3rd consecutive weaker setting)

(CN) PBOC to inject combined CNY80B v zero prior

(JP) Japan MoF sells ¥2.00T in 0.1% 5-year JGB bonds; avg yield -0.160% v -0.118% prior; bid-to-cover 3.28x v 2.86x prior

Asia equities/Notables/movers

Australia

TPM.AU TPG Telecom -17.6% (share sales)

NCM.AU Newcrest Mining -4.4% (Cadia cannot meet guidance, gold price lower)

FMG.AU Fortescue -5.5%, BHP.AU -2.0%, RIO.AU -1.7% (iron ore falls over 3%)

FBU.AU Fletcher Building +1.4% (potential sale of building co)

HUB.AU Hub24 +5.8% (Q3 result)

TAH.AU Tabcorp Holdings -0.9% (divestment)

TPG.AU TPG Telecom -17.5% (institutional offering)

PLS.AU Pilbara Minerals -12.0% (project update)

AGO.AU Atlas Iron -16.7% (Q3 result)

AZJ.AU AUrizon -4.0% (Cuts guidance on cyclone impact)

Japan

4569.JP Kyorin Co -0.8% (annual result speculation)

Taiwan

2324.TW Compal Electronics +1.5% (speculated to assemble Apple watch)

China

000503.CN Searainbow Holding -1.6% (guidance)

600048.CN Poly Real Estate Group Co -1.5% (annual result)

Hong Kong

347.HK Angang Steel -3.7% (profit warning)

2338.HK Weichai Power +2.9% (profit alert)

124.HK Kingway Brewery Holding -2.7% (profit warning)

1898.HK China Coal Energy -2.2% (Mar result)

1889.HK Wuyi International Pharmaceutical Co -3.6% (annual result)

921.HK Hisense Kelon Electrical Holdings +8.8% (quarterly result)

390.HK China Railway Group -0.4% (Q1 result)

210.HK Daphne International -1.3% (Q1 result)

1816.HK CGN Power Co -2.9% (Q1 result)

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