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Market Update – Asian Session: Trump Keeps The Pressure On North Korea

Asia Mid-Session Market Update: Trump keeps the pressure on North Korea, defers on border wall funding;  CAD under pressure as US protectionism looks north

US Session Highlights

(US) Mar Chicago Fed National Activity Index: 0.08 v 0.50e

(US) APR DALLAS FED MANUFACTURING ACTIVITY: 16.8 V 17.0E; New order growth rate: 5.1 v 3.2 prior

US and EU stocks were given a boost of confidence today after yesterday’s first round of French presidential elections put mainstream candidate (and likely eventual winner) Macron into the second round. Investors returned to risk in a big way, sending the Dow to jump 176 points at the open. Financials were the outperforming sector for the S&P, gaining 2.27%. Fixed income continued to pay the price, as the 10-yield rose back above 2.30%.

US markets on close: Dow +1.1%, S&P500 +1.1%, Nasdaq +1.2%

Best Sector in S&P500: Financials

Worst Sector in S&P500: Real Estate

Biggest gainers: BCR +19.5%; HAS +5.7%; XLNX +3.0%

Biggest losers: BDX -4.4%; KIM -2.9%; MU -2.8%

At the close: VIX 10.8 (-3.8pts); Treasuries: 2-yr 1.23% (+4.5bps), 10-yr 2.27% (+3.7bps), 30-yr 2.93% (+3.2bps)

US movers afterhours

UIS Reports Q1 $0.30 v $0.11 y/y, R$664.5M v $626Me (1 est)- Affirms FY17 R$2.65-2.75B v $2.70Be, FCF $130-170M (prior R$2.65-2.75B, FCF $130-170M); +12.6% afterhours

LLNW Reports Q1 $0.02 v $0.00e, R$44.7M v $43.4Me; +11.6% afterhours

HUM Pre-announces Q1 $2.75 v $2.43e, R$13.5B v $13.6Be; Raises FY17 guidance; +2.8% afterhours

WHR Reports Q1 $2.50 v $2.67e, R$4.79B v $4.76Be; Cuts FY17 GAAP guidance; -1.8% afterhours

ABX Reports Q1 $0.14 v $0.24e, R$1.99B v $2.18Be; -3.6% afterhours

ESRX Reports Q1 $1.33 v $1.32e, R$24.7B v $25.0Be; discloses Anthem intends to move its business when the current contract expires in 2019; -14.9% afterhours

Politics

(US) Pres Trump believes he can get funding for the border wall either now or in Sept – One America News Network

Key economic data

(JP) JAPAN MAR PPI SERVICES Y/Y: 0.8% V 0.7%E

(KR) South Korea Mar Consumer Confidence: 101.2 v 96.7 prior (6-month high)

Asia Session Notable Observations, Speakers and Press

Asian indices continued to trend higher, tracking outsized rally on Wall St on the heels of market-friendly French presidential elections Round 1 results. Hang Seng is up nearly 1% with banks leading the way, while Nikkei225 remains supported by softer JPY. Japanese Telecoms are particularly soft on speculation of discounting due to competition in the sector, and industrials are performing strongly. Australia is on holiday for Anzac day.

In FX, EUR and AUD were rangebound against the greenback, while NZD retreated below $0.70. Kiwi weakness partially attributed to trade protectionism stateside, as US Commerce Ministry determined that Canada softwood lumber exporters get subsidies, applying a 20% tariff, also warning it may put an import tax on Canadian dairy products. USD/CAD spiked up over 50pips above 1.3550 – highest level since late December on the protectionist posturing, just as Canada govt ministers Freeland (Foreign Affairs) and Carr (Natural Resources) condemn "unfair and punitive" dutes on softwood lumber.

US political risk of govt shutdown was dialed down to a simmer, with US President Trump claiming he could wait on funding the southern border wall to avert an impasse with Congress. Geopolitics on the Korean peninsula remain tense however as US administration officials will hold a session with the full Senate abouth the North Korea threat on Wednesday.

China

(CN) China said to have indicted former Stats Bureau head Wang on bribery – Chinese press

(CN) China issues plan for medium and long term auto sector development

Japan

(JP) Japan Fin Min Aso: Economy has prospered due to benefits of free trade

(JP) BOJ Dep Gov Iwata: Doing internal simulations of exit from QE; Too early to discuss exit externally

Korea

(US) President Trump has called on the UN Security Council to be prepared to impose additional sanctions against North Korea’s nuclear and ballistic missile programs; Says now is the time to solve the problem of North Korea – financial press

(KR) South Korea Nuclear Envoy Chief: Discussed with US, Japan counterparts ways to gain cooperation from China and Russia on North Korea

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.8%, Hang Seng +0.9%, Shanghai Composite +0.4%, ASX200 closed, Kospi +0.5%

Equity Futures: S&P500 +0.1%; Nasdaq +0.1%, Dax +0.2%, FTSE100 +0.3%

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

EUR 1.0850-1.0870; JPY 109.60-110.20; AUD 0.7550-0.7570; NZD 0.6985-0.7015

June Gold -0.2% at 1,275/oz; June Crude Oil +0.5% at $49.46/brl; July Copper +0.7% at $2.58/lb

SPDR Gold Trust ETF daily holdings rise 1.5 tonnes to 860.2 tonnes; 2nd straight increase

Goldman Sachs continues to expect pressure in Gold prices with 3-month target of $1,200/oz; Medium term target remains at $1,250/oz – press

(CN) PBOC SETS YUAN MID POINT AT 6.8833 V 6.8673 PRIOR; Weakest Yuan fix since Apr 18th; biggest margin of weakness since Mar 7th

(CN) PBOC to inject combined CNY80B v CNY30B prior in 7-day, 14-day and 28-day reverse repos, 6th straight injection

Asia equities / Notables / movers by sector

Japan

JSR (4185) +0.9%; FY16/17 results

NEC (6701) +3.8%; FY16/17 results

Lixil (5938) -4.3%; FY16/17 results

Kose (4922) +1.2%; FY16/17 results

NTT Docomo (9437) -2.1%; FY17 results speculation

Mazda (7261) +1.8%’ FY17 result speculation

Hong Kong

AAG Energy (2686) -1.6%; Q1 results

Northeast Electric Development (42) +0.9%; Q1 results

Korea

Korea Zinc (010130) +2.3%; Q1 results

SK Innovation (096770) +3.0%; Q1 results

SK Hynix (000660) -0.8%; Q1 results

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