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Market Update – Asian Session: Le Pen – Macron Runoff In France Soothes Concerns Over Eurozone Future

Friday US Session Highlights

(US) APR PRELIMINARY MARKIT MANUFACTURING PMI: 52.8 V 53.8E; new orders: 53.7 v 54.1 prior (lowest since Sept)

(US) MAR EXISTING HOME SALES: 5.71M V 5.60ME

(US) Fed’s Kashkari (dove, dissenting vote): next rate move is not as important in the big picture; what matters in the long term is fiscal policy – comments in Minnesota

(US) New York Fed Nowcast: raises Q1 GDP forecast to 2.7% from 2.6% on 4/14; maintains Q2 GDP forecast at 2.1%, unchanged from 4/14

OPEC Committee reportedly finds that oil supply cut agreement compliance improved in March; calls for 6-month extension to output cuts – press

(US) Fed Vice Chairman Fischer: still feels 3 rate hikes is appropriate this year, but Fed is not tied to 3 rate hikes – CNBC interview

Politics

(FR) With 100% of votes in France Presidential Election counted: Macron 23.75%; Le Pen 21.53%; Fillon 19.91%; Melenchon 19.64%; Macron and Le Pen move on to run-off in 2 weeks

(US) White House and Congress remain at a standstill on funding the govt ahead of a potential shutdown on Friday – Politico

(US) House Speaker Ryan: Spending bill will be ready before the end of the week to avert a potential govt shutdown – press

(UK) According to the latest Comres poll, support for PM May’s Conservative party was at 50% – highest since 1991 – press

(DE) Bid by Germany’s Co-leader of euro-skeptic AfD party, Frauke Petry, to have a debate on the party’s future was scrapped by party delegates – press

Weekend US/EU Corporate Headlines

BCR: Becton Dickinson to acquire Bard for $24B

Key economic data:

(TW) Taiwan Mar Unemployment Rate: 3.8% v 3.8%e

(TH) Thailand Mar Trade Balance: $1.6B v $1.7Be

Asia Session Notable Observations, Speakers and Press

First-round of presidential elections in France has produced the most market-friendly of outcomes, as centrist Macron and far-right Le Pen head for the runoff in 2 weeks. Macron is the heavy favorite and polls most favorably against the anti-euro FN candidate, pulling the single-currency from the precipice of populist revolts observed in US and UK over the past year. With 100% of the vote counted, Macron had 23.71% of the vote, followed by Le Pen at 21.91%. EUR/USD spiked up nearly 2 big figures to 1.09 in early trade before consolidating around 1.0850, USD/JPY rose nearly 150pips above 110.40, and safehaven Gold fell over $15 below $1,270. Indicated yields on the US Treasury 10-yr benchmark were up 8bps to reach 2.3% for the first time in over a week, while S&P futures rose nearly 20 handles above 2,365.

Nikkei225 is the best performing index among the majors thanks to weaker JPY, as Shanghai Composite is notably weaker. Selling attributed to smaller reverse repo injections as well as expectations for more deleveraging measures by regulators. Moody’s has also warned about profitability pressure on China banks, while investors shrug positive comments from PBOC Gov Zhou.

Among corporates, Sony and JVC Kenwood in Japan were up over 4% and 8% after raising FY16 guidance following market close on Friday. Australia’s Chorus was also lifted by inclusion into ASX200.

Geopolitical focus turns to the Korean peninsula with more saber-rattling by the North along with detainment of a US citizen by Pyongyang authorities. Investors are also watching Washington this week, as Congress and White House standoff on funding for a southern border wall come to a head.

China

(CN) China expected to implement more deleveraging measures – Chinese press

(CN) Moody’s: China banks are facing profitability pressure

(CN) PBOC Gov Zhou: China’s 2017 GDP target is "within reach"; Financial risks are under control – press

(CN) According to research firm Wind, 66% of China listed companies to report Q1 results saw net profit growth – Chinese press

Japan

(JP) Japan PM Abe’s cabinet approval rating is near-flat at 50.4% – Japan press

(JP) Japan Fin MIn Aso: Trade imbalances cannot be fixed through FX adjustments alone – press

(JP) Nomura chief economist: Within the BOJ’s inner circle, the willingness to stick to the ¥80T commitment is waning – Nikkei

Australia/New Zealand

(AU) UBS: Australia property prices have likely peaked; Will correct but not collapse – press

Korea

(KR) South Korea Defense Ministry spokesman Moon Sang-gyun: Discussions are underway on whether South Korea and the US Forces will conduct a joint military drill when Carl Vinson

(KR) North Korea state media claims its military was ready to sink USS Vinson in a show of military strength – press

(KR) North Korea has detained another US citizen; Brings the total of Americans held to 3 – US press

(KR) Top Trump administration officials will brief senators on April 26 about North Korean situation – financial press

Asian Equity Indices/Futures (00:00ET)

Nikkei +1.3%, Hang Seng -0.1%, Shanghai Composite -1.6%, ASX200 +0.3%, Kospi +0.2%

Equity Futures: S&P500 +0.8%; Nasdaq +0.8%, Dax -+1.3%, FTSE100 +0.4%

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

EUR 1.0820-1.0915; JPY 109.85-110.50; AUD 0.7540-0.7585; NZD 0.7020-0.7050; GBP 1.2780-1.2835

June Gold -0.9% at 1,277/oz; June Crude Oil +0.5% at $49.87/brl; July Copper +0.7% at $2.57/lb

(US) Weekly Baker Hughes US Rig Count: 857 v 847 w/w (+1.2%) (14th straight weekly rise)

OPEC/non-OPEC technical committee meeting said to call for six-month extension to oil output cut agreement – press

SPDR Gold Trust ETF daily holdings rise 4.3 tonnes to 858.7 tonnes

iShares Silver Trust ETF daily holdings fall to 10,119 tonnes from 10,149 tonnes prior; lowest since Apr 10th

(CN) PBOC SETS YUAN MID POINT AT 6.8673 V 6.8823 PRIOR; strongest setting since Apr 19th

(CN) PBOC to inject combined CNY30B v CNY100B prior in 7-day, 14-day and 28-day reverse repos, 5th straight injection

(JP) BOJ reduced 3-5yr maturity JGB purchases to ¥320B from ¥350B

(AU) Australia MoF sells A$300M in 4.5% 2033 bonds; avg yield 3.0205%; bid-to-cover 3.07x

(KR) South Korea MoF sells 20-yr bonds; avg yield 2.34% v 2.30% prior

Asia equities / Notables / movers

Australia

Sirtex Medical (SRX) -14.3%; ARAH Study Shows Statistically Significant Safety, Toxicity and Quality of Life Benefits for SIR-Spheres versus Sorafenib with No Difference in Survival

Worleyparsons (WOR) -0.7%; CEO: Not seeking to be acquired – AFR

Chorus Ltd (CNU) +2.8%; To replace Duet Group in S&P/ASX 200 Index at the open May 2nd

Japan

Toshiba (6502) +0.7%; To split off its four in-house companies into wholly-owned subsidiaries

Mitsubishi Motor (7211) +1.5%; To invest ¥10B to build a plant in China to supply engines for locally built Outlander SUVs – Nikkei

Kobe Steel (5406) -0.3%; FY17 results speculation

Sony (6758) +4.2%; Raises FY16/17 guidance

JVC Kenwood (6758) +8.5%; Raises FY16/17 guidance

Hong Kong

Da Ming International Holdings (1090) +2.3%; Q1 result

Beijing Jingkelong Company (0814) -2.9%; Q1 result

China State Construction Int’l Holdings (3311) -3.4%; Q1 result

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