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Market Update – Asian Session: China Official PMIs Slow To 6-Month Lows

Asia Mid-Session Market Update: China official PMIs slow to 6-month lows; Risk trade recovers on reports of US govt funding agreement

Friday US Session Highlights

(US) Q1 ADVANCE GDP ANNUALIZED Q/Q: 0.7% V 1.0%E; PERSONAL CONSUMPTION: 0.3% V 0.9%E

(US) Q1 EMPLOYMENT COST INDEX (ECI): 0.8% V 0.6%E

(US) APR CHICAGO PURCHASING MANAGER: 58.3 V 56.2E; new orders and employment show significant m/m growth

(US) APR FINAL MICHIGAN CONFIDENCE: 97.0 V 98.0E

Politics

(US) Congress negotiators from both parties said to have reached a tentative deal on $1.1T omnibus spending bill to fund the govt through Sept 30th – financial press

(FR) French presidential candidate Le Pen indicating she would not rush to leave the euro if elected – press

(US) Pres Trump signs Congressional stopgap funding to keep the govt open until May 5th

Weekend US/EU Corporate Headlines

COH: Coach said to be interested in a possible offer for Jimmy Choo after failed takeover of Burberry – UK press

TRCO: Fox and Blackstone said to be in talks to acquire Tribune Media – financial press

Key economic data:

(CN) CHINA APR MANUFACTURING PMI (GOVT OFFICIAL): 51.2 (6-MONTH LOW) V 51.6E; NON-MANUFACTURING PMI: 54.0 (6-MONTH LOW) V 55.1 PRIOR

(JP) JAPAN APR FINAL PMI MANUFACTURING: 52.7 V 52.8 PRELIM (confirms 8th straight month of expansion)

(AU) AUSTRALIA APR MELBOURNE INSTITUTE INFLATION M/M: 0.5% (3-month high) V 0.1% PRIOR; Y/Y: 2.6% (highest since July 2014) V 2.2% PRIOR

(AU) AUSTRALIA APR AIG MANUFACTURING INDEX: 59.2 V 57.5 PRIOR; 7TH MONTH OF EXPANSION

(AU) AUSTRALIA APR CORELOGIC RPDATA HOUSE PRICES M/M: 0.1% V 1.4% (slowest gain in 16-months)

(KR) SOUTH KOREA APR TRADE BALANCE: $13.3B V $8.6BE

Asia Session Notable Observations, Speakers and Press

Asian trading is light to start the week despite the release of key data out of China, with most markets closed for May 1st Labor Day. April’s official manufacturing and non-manufacturing PMIs both hit 6-month low on lower prices and lower demand – new export orders and employment components slumped to a 3-month low, while Input Prices are at a 10-month low. Risk-on flows were initially depressed with firmer JPY and lower US futures at the open before a mid-day reversal on reports that Congressional negotiators from both parties said to have reached a tentative deal on $1.1T omnibus spending bill to fund the govt through Sept 30th. The deal does not include funding for the border wall and was cheered by Senate Minority leader Schumer as a "good agreement".

In other key datapoints, Japan Apr Manufacturing PMI was confirmed at an 8-month high, as Markit economist noted growth is supported by strengthening overall demand across the South East Asia region with exports as a key driver of growth. Australia MI inflation also trended hotter, reaching July-2014 highs, while Aussie manufacturing expanded for 8th straight month.

Geopolitical tensions around the Korean peninsula remained an issue following a missile test late on Friday. Even though the projectile had reportedly failed, landing within North Korean territory, US CIA director Pompeo was said to be meeting with South Korea’s national security officials about the buildup of nuclear capability of the North. Also out over the weekend, US National Security Advisor McMaster assured South Korea that US is paying for THAAD despite Pres Trump claiming Seoul should pay a $1B for deployment.

Japan

(JP) According to Kyodo poll 49% favor changing Article 9 of Japan constitution (outlaws war as a means to settle international disputes involving the state) v 47% opposed

Australia/New Zealand

(AU) Australia Treasurer Morrison did not commit for ruling Coalition to return govt to surplus by 2021; Looking to lower living costs in upcoming May 9th budget – press

(NZ) RBNZ seeks views on capital adequacy framework for banks

(NZ) New Zealand Treasury: Inflation to hold near 2% over 2017 in absence of any additional shocks – press

Korea

(KR) CIA director Pompeo said to have met South Korea National Security officials in Seoul – Korean press

(KR) South Korea Fin Min Yoo: Already working with US on reducing trade surplus – press

(KR) US National Security Advisor McMaster said to have spoken with South Korea chief Kim Kwan-jin; Assured him that US will pay for THAAD system deployment – press

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.4%, Hang Seng closed, Shanghai closed, ASX200 +0.3%, Kospi closed

Equity Futures: S&P500 flat; Nasdaq +0.1%, Dax closed, FTSE100 closed

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

EUR 1.0890-1.0910; JPY 111.20-111.75; AUD 0.7465-0.7490; NZD 0.6850-0.6880; GBP 1.2900-1.2940

June Gold -0.3% at 1,264/oz; June Crude Oil -0.2% at $49.24brl; July Copper -0.4% at $2.60/lb

(AU) Australia MoF sells A$300M 2.75% 2035 bonds, avg yield 3.1375%, bid-to-cover 3.59x

Asia equities / Notables / movers

Australia

RCG Corp (RCG) -21.7%; Cuts FY17 Underlying EBITDA guidance to A$74-80M (prior A$85-88M)

Saracen Mineral (SAR) +2.9%; Canaccord Genuity Raised SAR.AU to Buy from Hold

Japan

Sojitz (2768) +3.2%; FY16/17 results

Sharp (6753) +2.7%; FY16/17 results

Ricoh (7752) -7.3%; FY16/17 results

Fujitsu (6702) +9.0; FY16/17 results

ANA (9202) -2.8%; FY16/17 results

JAL (9201) -7.3%; FY16/17 results

Honda (7267) +0.3%; FY16/17 results

Tokyo Electron) +13.3%; FY16/17 results

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