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Market Update – Asian Session: Aussie Retail Sales Disappoint While Japan Wage Inflation Shrinks

US Session Highlights

(US) Apr Labor Market Conditions Index Change: 3.5 v 1.0e

(US) April Conference Board Employment Trends: 132.64 v 131.58 in March

(US) Fed’s Bullard (non-voter, dovish): Fed’s current policy rate setting is appropriate; US economy looks like it’s in a low growth state

(US) Fed’s Mester (hawkish, non-voter): actions must be taken before Fed policy goals are fully met; reiterates calls for further rate hikes and trimming balance

(US) New York Fed Consumer Expectations Apr survey: households expecting finances to improve rises to 44%; April inflation expectations 3 years ahead to 2.9% v 2.7% prior

The S&P touched new all-time highs before retreating and closing flat on the day. The VIX reached lows not seen since 1993, dropping 8% to 9.7. The outperforming S&P sector was energy, thanks to higher oil prices, rising 0.8%.

US markets on close: Dow flat, S&P500 flat, Nasdaq flat

Best Sector in S&P500: Energy

Worst Sector in S&P500: Materials

Biggest gainers: NWL +11.9%; CTL +5.1%; COH +4.8%

Biggest losers: TSN -6.1%; LYB -4.0%; INCY -3.8%

At the close: VIX 9.8 (-0.8pts); Treasuries: 2-yr 1.33% (flat), 10-yr 2.38% (+2bps), 30-yr 3.01% (+3bps)

US movers afterhours

MAR Reports Q1 $1.01 v $0.90e, R$5.56B v $4.91Be; +4.9% afterhours

BLDR Reports Q1 $0.11 v $0.05e, R$1.53B v $1.49Be; Adjusted EBITDA $76.1M v $61.8M y/y; gross margin 24.5% v 25.0% y/y; +4.8% afterhours

P Reports Q1 -$0.24 v -$0.34e, R$316M v $318Me; Announces $150M investment by KKR; Confirms ongoing strategic review; +3.2% afterhours

BKD Reports Q1 -$0.68 (GAAP*) v $0.48e, R$1.22B v $1.21Be; +2.9% afterhours

OTEX Reports Q3 $0.45 v $0.53e, R$593M v $608Me; raises dividend 15% to $0.132 from $0.115 (indicated yield 1.52%); Operating margin 29.1% v 31.4% y/y; -9.7% afterhours

NVRO Reports Q1 -$0.50 v -$0.26e, R$68.4M v $68.1Me- Affirms FY17 R$31-320M v $318Me (prior $310-320M); -14.5% afterhours

HTZ Reports Q1 -$1.61 v -$1.00e, R$1.92B v $1.89Be; International car rental rev $411M, -5% y/y; US car rental rev $1.35B, -4% y/y; -17.7% afterhours

Key economic data

(JP) JAPAN MAR LABOR CASH EARNINGS Y/Y: -0.4% (biggest decline in 21 months) V 0.5%E ; REAL EARNINGS (EX-INFLATION) Y/Y: -0.8% V 0.0% PRIOR

(AU) AUSTRALIA MAR RETAIL SALES M/M: -0.1% (2nd straight decline) V +0.3%E; Q/Q ex-inflation: +0.1% V 0.5%E

(NZ) ANZ: New Zealand Apr non-tradable inflation m/m 0.0% v 0.2% prior, y/y: 2.2% v 2.2% prior

Asia Session Notable Observations, Speakers and Press

Asia indices mixed after a flat day on Wall St where S&P500 hit record intraday high and Vix saw a multi-year low. Australia underperforming ahead of the release of its FY17/18 budget, with retailers slumping on much weaker than expected Aussie Retail Sales. CBA shares also trading lower following Q3 results. AUD/USD fell nearly 40pips toward 0.7350 on the release.

Japan wage inflation posted its biggest y/y decline in nearly 2 years, and BOJ Gov Kuroda noted central bank is prepared to do more policy adjustment if needed, sending USD/JPY pair to session highs near 113.40.

China press speculated Terms of Trade could turn to deficit this year on rising imports following overnight Apr Trade data. CASS researchers also warned new home prices may decline amid property curbs.

China

(CN) China’s NDRC said to plan a meeting with power companies about coal quality – press

(CN) China Passenger Car Association (PCA): Jan-Apr vehicle sales 7.27M units, -1.7% y/y

(CN) China Academy of Social Sciences (CASS): New home prices may fall in 2017 – press

(CN) China may see Terms of Trade at a deficit this year amid growth in Imports – Chinese press

Japan

(JP) Moody’s: Japan to become more sensitive to BOJ recalibrations

(JP) BOJ Gov Kuroda: Reiterates Japan’s virtuous economic cycle is strengthening

Australia/New Zealand

(AU) Australia Foreign Investment Review Board (FIRB): Investment gains mainly driven by real estate

(AU) Australia Govt considering a levy on big four banks under new budget – Australian press

(NZ) NZIER’s Shadow Board: RBNZ should adopt tightening bias

Asian Equity Indices/Futures (01:00ET)

Nikkei -0.1%, Hang Seng +0.3%, Shanghai Composite flat, ASX200 -0.6%, Kospi closed

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

FX ranges/Commodities/Fixed Income (01:00ET)

EUR 1.0920-1.0935; JPY 113.15-113.40; AUD 0.7352-0.7398; NZD 0.6900-0.6925

June Gold +0.1% at 1,228/oz; June Crude Oil +0.1% at $46.47/brl; July Copper -0.4% at $2.48/lb

SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 851.9 tonnes; 4th straight decline

(CN) PBOC SETS YUAN MID POINT AT 6.9037 V 6.8947 PRIOR

(CN) PBOC skips open market operations (3rd straight skip)

(JP) Japan MoF sells ¥2.08T v ¥2.3T offered in 10-year 0.1% JGBs; Avg yield: 0.030% v 0.064% prior; bid to cover: 3.76x v 3.96x prior

(AU) Australia MOF sells A$150M in 2030 bonds; avg yield 0.8288%; bid-to-cover 3.10x

Asia equities notable movers

Australia

Incitec Pivot (IPL) +2.9%; H1 result

Commonweath Bank (CBA) -3.6%: Q3 resut

Beach Energy (BPT) -0.7%; interest in AWE (AWE +5.6%)

JB Hi Fi (JBH) -4.8%, Harvey Norman (HVN) -3.7%; Australia retail sales

Japan

IHI (7013) +3.8%, FY16/17 result

Mitsubihi Heavy (7011) +0.5%, FY16/17 result

TEPCO (9501) +3.3%; To set retail gas prices as much as ~8% cheaper than Tokyo Gas f

Subaru (7270) -3.8%; FY16/17 result

United Arrows (7606) -5.8%; FY16/17 result

Hong Kong

Longfor Properties (960) +0.2%; Apr result

Great Wall Motor (2333) -0.1%; Apr sales

International Entertainment (1009) +0.6%; FY guidance

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