Asia Mid-Session Market Update: Japan Trade surplus smaller than forecast; North Korea launches another test missile
Friday US Session Highlights
OPEC Panel said to be considering scenario of deepening and extending oil supply cut agreement following meeting with non-member on Friday, May 19th – financial press
(US) Speaker Ryan: Congress won’t undercut Pres Trump’s military budget – comments in DC
(US) Fed’s Bullard (non-voter, dovish): do not expect growth much above 2% in 2017; drop in long-term yields and inflation expectations suggest Fed may be moving too fast
(BR) Fitch affirms Brazil’s BB ratings
(US) New York Fed Nowcast: raises Q2 GDP forecast to 2.3% from 1.9% from 5/12
Politics
(IR) Iran President Hassan Rouhani wins second term with 57% of the vote, defeating Hard-liner Ebrahim Raisi
(US) President Trump’s budget said to cut entitlements by $1.7T – US financial press
(UK) According to the latest Survation survey, ruling Conservative party’s lead on Labour has narrowed to 43% to 34% – press
(ES) Spain’s Pedro Sanchez expected to win Socialist party elections by a margin of 49.6% vs 40.2% for Susana Diaz
(JP) Japan Cabinet Approval rating declines by 5 pct points to 46% – Japanese Press
Weekend US/EU Corporate Headlines
HUN: Said to be close to all-stock merger agreement with Clariant; Combined enterprise value $20B – US financial press
F: Reportedly CEO Mark Fields to be replaced by James P. Hackett – press
(SA) US to sign $110B of military contracts as part of memorandum of intent to support Saudi defense
Key economic data:
(JP) JAPAN APR TRADE BALANCE: ¥482B V ¥521BE; ADJ TRADE BALANCE: ¥97.6B V ¥260BE
(KR) South Korea Custom Agency: South Korea May 1-20 exports +3.4% y/y, imports +11.6% y/y
(KR) South Korea April Producer Prices M/M: -0.1% v 0.0% prior; Y/Y: +4.0% v +4.3% prior
Asia Session Notable Observations, Speakers and Press
Asian equity markets are mostly higher, tracking 2nd day of gains on Wall st on Friday as investors bought the Trump political controversy dip. Energy sector is performing particularly well, with Crude Oil prices rising above $51/brl – a 1-month high – on chatter of OPEC supply cut extension.
In FX, renewed risk-on flows translated into JPY weakness, as USD/JPY rose some 60pips from opening lows. Commodity currencies AUD and NZD are rangebound despite the jump in iron ore prices. GBP underperformed following UK press report citing Brexit min Davis threatening pullout out from Brexit negotiation if EU imposes a penalty as part of the deal. Separately, UK’s Survation poll for the upcoming elections saw PM May and Conservatives’ lead slip to single digits, shrinking in half.
Over the weekend, US Pres Trump kicked off his Middle East trip with first stop in Saudi Arabia, where he signalled US is signing some $110B of military contracts as part of memorandum of intent to support Saudi defense. Saudi Oil Min Al-Falih also said OPEC and non-OPEC producers are on course to back an agreement extending the oil supply deal by a further nine months. Also of note in the region, Iranian Pres Rouhani defeated hard-line candidate Raisi by a wide margin in re-election for 2nd term.
In economic data, Japan trade surplus was smaller than expected on bigger than anticipated rise in imports than exports, though both were in positive territory for 5th and 4th month respectively. Shipments to Asia and China were up mid-teens again, while export growth to US and Europe grew low single digits.
Korean peninsula remained in focus with another ballistic missile test by Pyongyang. Projective said to have flown about 500km, and South Korea defense officials suggested today’s test did provide "meaningful data" to the North.
China
(CN) China PBOC Q1 Monetary Policy Operations Report: Concerned by the aggregate impact of different regulatory agencies all tightening at the same time, to enhance cooperation to stabilize the market
(CN) China FX regulator (SAFE) head Pan Gongsheng: China’s current cross-border capital flows are stabilizing and improving – press
(CN) China Commerce Ministry (MOFCOM) to implement a 45% duty on out of quota sugar imports for 1-yr from May 22nd
Japan
(JP) Japan summer bonuses decline by 2.8% y/y, first decline in 5 years – Japanese Press
(JP) Japan Cabinet Approval rating declines by 5 pct points to 46% – Japanese Press
Australia / New Zealand
(AU) CoreLogic: 77% of Australia property auctions were successful in the capital cities last week, up from 73% prior – press
(AU) S&P cuts various banks in Australia on which it previously had Negative Outlook
(NZ) New Zealand growth forecast expectations to be unveiled with this week’s budget to be upbeat – NZ Press
Korea
(KR) North Korea leader Kim Jong Un said to have supervised a test firing of a ballistic missile
(KR) Japan chief cabinet Seg Suga: Considering unilateral sanctions on North Korea
Asian Equity Indices/Futures (00:30ET)
Nikkei +0.5%, Hang Seng +0.9%, Shanghai -0.2%, ASX200 +0.8%, Kospi +0.5%
Equity Futures: S&P500 +0.1%; Nasdaq +0.2%, Dax +0.1%, FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1180-1.1210; JPY 111.00-111.60; AUD 0.7435-0.7620; NZD 0.6910-0.6940; GBP 1.2975-1.3025
June Gold -0.1% at 1,252/oz; June Crude Oil +0.9% at $51.14/brl; July Copper -0.5% at $2.57/lb
SPDR Gold Trust ETF daily holdings fall 1.2 tonns to at 850.7 tonnes; 6th straight decline
(US) Weekly Baker Hughes US Rig Count: 901 v 885 w/w (+1.8%) (18th straight weekly rise)
(CN) PBOC SETS YUAN MID POINT AT 6.8673 V 6.8786 PRIOR
(CN) PBOC to inject combined CNY40B v skipped prior
(KR) South Korea MOF sells 10-yr bonds;avg yield 2.270%
Asia equities / Notables / movers
Australia
Alumina (AWC) +4.2%; Names new CE) / Rise in metals
WorleyParsons (WOR) +0.5%; Announces 5-yr framework agreement with Shell, financial terms not disclosed
Surfstitch (SRF) -26.5%; Guides FY17
Hong Kong
Kingsoft Corp (3888) +3.8%; Q1 result
Cathay Pacific (293) +1.8%; Restructuring / job cuts
Melbourne Enterprises (158) +0.6%; H1 result
Japan
Rakuten (4755) +3.1%; Launches JV project ‘Rakuten Trade’
Sharp (6753) +3.0%; Partners SoftBank’s tech fund
Sony (6758) +0.1%; FY17 result speculation
