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Asian Market Update: Trump Rally Skids Off Track As Health Care Bill Faces Stiff Opposition Ahead Of Thursday House Vote

Trump rally skids off track as Health Care bill faces stiff opposition ahead of Thursday House vote

US Session Highlights

(US) Mar Philadelphia Fed Non-Manufacturing General Business Conditions: 35.4 v 29.3 prior

(US) Fed’s Dudley (dove, FOMC voter): rules must make sure risk of big bank failure is really low – Q&A with reporters

(US) President Trump: asked whether he can get health care bill votes, "I think so"

(US) Rep Peter King (R-NY): does not know if health care bill has the votes to pass the House

(US) House Speaker Ryan (R-WI): a lot of Freedom Caucus members are supporting Trump healthcare bill

(US) 25 Freedom Caucus members are now ‘hard no’s’ on the healthcare bill (GOP can only lose 21 Republican votes and still get the bill passed); unless the bill is dramatically changed by Wed night, the Freedom Caucus may issue a formal statement of opposition and House leaders may have to consider delaying the vote that is scheduled for Thursday – CNBC’s Harwood

US markets on close: Dow -1.1%, S&P500 -1.2%, Nasdaq -1.8%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Financials

Biggest gainers: CMG +2.8%, DUK +1.9%, PPL +1.8%, D +1.8%, XEL +1.8%

Biggest losers: KEY -6.5%, HBAN -6.1%, CMA -6.1%, BAC -5.8%, TDG -5.5%

At the close: VIX 12.5 (+1.1 pts); Treasuries: 2-yr 1.26% (-4bps), 10-yr 2.44% (-4bps), 30-yr 3.05% (-4bps)

US movers afterhours

DLTH: Reports Q4 $0.43 (adj) v $0.33e, R$174.7M v $163Me; Guides initial FY17 GAAP EPS $0.66-0.71, net sales $455-465M v $445Me, Adj EBITDA $47-49.5M v $41.2M y/y; +20.7% afterhours

ACHN: USPTO grants composition of matter patent for small molecule complement alternative pathway Factor D inhibitors; +3.9% afterhours

SLW: Reports Q4 $0.19 v $0.17e, R$258M v $253Me; raises dividend 16.7% to $0.07 (implied yield 1.05%); +3.4% afterhours

FDX: Reports Q3 $2.35 v $2.63e, R$15.0B v $15.0Be; Cuts FY17 capex (incl TNT Express) $5.3B (prior $5.6B); CEO: expect an excellent Q4; +2.1% afterhours

NKE: Reports Q3 $0.68 v $0.52e, R$8.43B v $8.45Be; Q3 Worldwide Futures orders -1% v +3.4%e; -3.7% afterhours

Politics

(US) Pres Trump: Thursday’s vote on healthcare legislation is crucial for Republican party – press

(US) US Chamber of Commerce: supports Republican healthcare bill – letter to lawmakers

(US) White House: Pres Trump plans to attend the NATO summit on May 25th – press

Asia Key economic data:

(JP) JAPAN FEB TRADE BALANCE: ¥813B (10-month high) V ¥807BE; ADJ TRADE BALANCE: ¥680B (7-year high) V ¥551BE

(AU) AUSTRALIA FEB WESTPAC LEADING INDEX M/M: -0.1% V 0.0% PRIOR

(AU) AUSTRALIA FEB SKILLED VACANCIES M/M: 0.1% V 0.6% PRIOR

Asia Session Notable Observations, Speakers and Press

Asian equity markets are down significantly, tracking the biggest loss of the year on Wall St where political risk has become increasingly amplified. US indices closed near the lows on late US session report that 25 members of Congressional Republican "Freedom Caucus" are united with a "hard no" position on Trump/Ryan version of Obamacare repeal/replace, which in turn puts into question the viability of White House plans for fiscal stimulus and tax reform. President Trump is making last ditch efforts to negotiate a deal, but also warned that dissenters risk

losing their Congressional seats in the midterms. Treasuries were bid higher across the curve and low-beta Utilities rallied, while Financials and Materials took the most direct hit.

Nikkei225 is the worst performing index in Asia, with added headwinds from overall decline in USD boosting JPY, as Financials is also the worst segment in Japan. Australia is also underperforming as miners slump on lower iron ore prices. In FX, USD/JPY fell below 111.50 for the first time since last November, and AUD’s decline to 0.7650 was a 1-week low. NZD/USD was rangebound ahead of tomorrow’s RBNZ decision after a brief rally in US hours on increasing dairy auction prices.

Economic data centered around Japan, where Feb Trade Balance recovered from last month’s multi-month lows. Exports spiked to a 2-year high 11.3% v 10.1%e, as shipments to Asia and China grew over 20% and US exports recovered from last month’s loss with a flat print. BOJ Minutes from Jan meeting maintained view that economy is in moderate recovery trend, though most members agreed price momentum is not yet firm and inflation expectations remain in weakening phase. Recall that meeting preceded the latest BOJ statement when the medium-term outlook for inflation was improved.

China

(CN) Chinese press op-ed speculates economy may face more downward pressure in H2; Govt should increase efforts to stabilize growth

(CN) According to a PBoC survey in Q1, 52% of China urban households believe housing prices are "unacceptably high" – Chinese press

Japan

(JP) BOJ Member Funo: Vintal for BOJ to continue with powerful easing; Must be mindful of downside risks to price outlook; Price momentum is still insufficient

(JP) According to Recruit Jobs, average part time wages in Japan’s Tokyo, Nagoya and Osaka metropolitan areas rose 2.3% y/y amid tighter labor market – Nikkei

(JP) Japan Finance Ministry said to seek larger JGB bids from primary dealers in effort to avoid risk of undersubscription – Nikkei

Australia/New Zealand

(AU) Australia Trade Min Ciobo: Relationship with China is very strong

(NZ) Westpac: RBNZ statement tone tomorrow may be balanced and policy outlook expected to remain unchanged, leaving markets "roughly unmoved" – press

(NZ) ANZ economist: Prices for New Zealand commodities are holding up better than expected, as highlighted by positive dairy auction overnight – NZ press

Korea

(KR) North Korea may have launched several missiles today; South Korea military says the launches were not successful – Japan press

Asian Equity Indices/Futures (00:30ET)

Nikkei -2.0%, Hang Seng -1.4%, Shanghai Composite -0.7%, ASX200 -1.6%, Kospi -0.6%

Equity Futures: S&P500 -0.3%; Nasdaq -0.2%; Dax -0.2%; FTSE100 -0.2%

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.0790-1.0820; JPY 111.45-111.80; AUD 0.7650-0.7690; NZD 0.7015-0.7045

Apr Gold -0.1% at $1,245/oz; May Crude Oil -0.2% at $48.13/brl; May Copper -0.3% at $2.60/lb

(US) Weekly API Oil Inventories: Crude: +4.5M v -0.5M prior (7th build in the past 9 weeks)

SPDR Gold Trust ETF daily holdings rise 4.1 tonnes to 834.4 tonnes; First rise since Mar 15th

(CN) PBOC SETS YUAN MID POINT AT 6.8889 V 6.9071 PRIOR; first stronger setting in 4 sessions

(CN) PBOC to inject combined CNY90B v CNY80B prior in 7,14, and 28-day reverse repos

(CN) China MoF sells 3-yr upsized bonds; avg yield 3.0289% v 2.91%e; bid-to-cover ratio 1.69x

(JP) Japan MoF sells ¥500B in 0.4% 40-year JGB bonds, bid to cover: 2.95x v 2.99x prior

(AU) Australia MoF (AOFM) sells A$800M in 2.25% 2028 Bonds; avg yield: 2.8595%; bid-to-cover: 2.19x-

(KR) South Korea sells KRW300B in 50-yr govt bonds at 2.225%

Asia equities / Notables / movers by sector

Consumer staples: 168.HK Tsingtao Brewery Co -3.4% (profit warning); FCG.NZ Fonterra -0.5% (H1 result)

Financials: 1628.HK Yuzhou Properties -1.5% (FY16 result); 81.HK China Overseas Grand Oceans Group -3.4% (FY16 result); 7164.JP Zenkoku Hosho Co +7.6% (raises guidance); PMV.AU Premier Investments +4.6% (Deutsche Bank raises rating)

Industrials: 1038.HK Cheung Kong Infrastructure -1.2% (FY16 result); NUF.AU Nufarm +3.1% (H1 result)

Technology: 1070.HK TCL Multimedia Technology Holdings -0.8% (FY16 result)

Materials: FMG.AU Fortescue -5.3%, BHP.AU BHP Billiton -2.6%, RIO.AU Rio Tinto -2.5% (iron ore declines); EVN.AU Evolution Mining +0.9%, SBM.AU St Barbara +2.6%, NCM.AU Newcrest Mining +2.0% (gold price rises)

Energy: 6.HK Power Assets Holdings -1.4% (FY16 result); 2688.HK ENN Energy Holdings -1.9% (FY16 result)

Telecom: TPM.AU TPG Telecom -2.3% (Credit Suisse cuts rating)

Utilities: 902.HK Huaneng Power International -6.1% (FY16 result)

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