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Asian Market Update: Uncertainty Remains On US Healthcare Legislation As White House Calls The Vote For Friday

Uncertainty remains on US healthcare legislation as White House Calls the vote for Friday

US Session Highlights

(US) INITIAL JOBLESS CLAIMS: 258K V 240KE; CONTINUING CLAIMS: 2.00M V 2.04ME

BHP.AU Escondida Union spokesperson: no wage agreement reached last night; likely to revert to old contract; no more wage talks are scheduled – press

F Guides Q1 $0.30-0.35 v $0.45e – filing ahead of analyst event

(US) Rep Brady (R-TX): There is 95% agreement on healthcare bill as of this morning; there is still work to do to get the necessary votes

(US) Mar Kansas City Fed Manufacturing Activity: 20 v 14e

US markets on close: Dow flat, S&P500 -0.1%, Nasdaq -0.1%

Best Sector in S&P500: Real Estate

Worst Sector in S&P500: Healthcare

Biggest gainers: PVH +8.5%, TRIP +2.7%, CBT +2.7%, NKE +2.7%, AAL +2.6%

Biggest losers: FTR -8.1%, ACN -4.5%, CNC -4.0%, FDX -3.4%, HRB -2.5%

At the close: VIX 13.1 (+0.3 pts); Treasuries: 2-yr 1.28% (+2bps), 10-yr 2.42% (+2bps), 30-yr 3.03% (+2bps)

US movers afterhours

MU: Reports Q2 $0.90 v $0.81e, R$4.65B v $4.65Be; Guides Q3 $1.43-1.57 v $0.88e, R$5.2-5.6B v $4.65Be; +10.3% afterhours

SPWH: Reports Q4 $0.25 v $0.27e, R$221.4M v $229Me;Guides Q1 -$0.08 to -$0.06 v -$0.03e, R$150-155M v $160Me, SSS -11% to -9%; -6.6% afterhours

OXM: Reports Q4 $0.63 (adj) v $0.91e, R$261M v $267Me; -8.7% afterhours

GME: Reports Q4 $2.38 v $2.29e, R$3.05B v $3.12Be; Guides initial FY17 $3.10-3.40 v $3.72e, SSS -2% to +2%; -11.3% afterhours

Politics

(US) CNBC’s Harwood: Freedom Caucus source sees "no way" the healthcare bill passes tomorrow morning

(US) CBO releases new scoring on amended GOP healthcare bill; shows less savings over next 10 years than March 13th estimate but will maintain same coverage losses

(US) White House chief strategist Bannon: Feel good about progress made in Congress negotiations – CNN

(US) Congressman Chris Collins (R-NY): Message from White House is that if healthcare legislation does not pass, it will move on to tax reform and keep Obamacare in place; Freedom Caucus attaching amendment that will keep 0.9% Medicare surcharge tax on high earners and repeal "essential benefits" requirements.

(US) House Speaker Ryan: We intend on passing the bill tomorrow (does not respond to whether he thinks GOP has the votes).

(US) House Minority leader Pelosi: Time to pull the plug on healthcare bill; Latest CBO score shows it is crueler to Medicaid recipients

Asia Key economic data:

(JP) JAPAN MAR PRELIMINARY PMI MANUFACTURING: 52.6 V 53.3 PRIOR (7th month of expansion)

(JP) Japan Jan Final Leading Index: 104.9 v 105.5 prelim; Coincident Index: 115.1 v 114.9 prelim

(NZ) NEW ZEALAND FEB TRADE BALANCE (NZ$): -18M V +180ME (8th month of deficit)

(KR) South Korea Mar Consumer Confidence: 96.7 v 94.4 prior

(SG) Singapore Feb Industrial Production M/M: -3.7% v +1.2%e; Y/Y: 12.6% v 10.0%e

Asia Session Notable Observations, Speakers and Press

Asian indices are mixed, tracking late-day caution in US markets as GOP leadership pulled the vote on US healthcare reform to hold more meetings with holdout Freedom Caucus. Late in the evening, White House announced it was ending the negotiations and scheduled the vote for Friday afternoon. There is still lack of clarity on whether Speaker Ryan and Pres Trump were able to appease the hard-right opponents with an amendment that does away with "essential benefits" clause while preserving the support of the moderates. White House has also reportedly threatened Congressional lawmakers that they would have to live with Obamacare if the bill does not pass, as it plans to shift its focus to tax reform.

Political risk continues to weigh on overall sentiment as investors second-guess market conviction of pro-business policies coming down the pike amid the apparent GOP infighting. Vix spiked up to close above 13 for the first time since early January after the healthcare vote was pulled, even though Treasuries were slightly lower across the curve. In FX, USD strengthened throughout the Asia session with risk-on USD/JPY lifting some 50pips off the lows above 111.40 once the talks on healthcare broke for the night. GBP/USD was also a notable mover to the downside, as BOE’s Vlieghe suggested rates may not necessarily rise after the latest CPI data saw inflation hit above BOE target for the first time since Dec 2013, stating evidence of wage growth would be needed while attributing the CPI boost to GBP devaluation.

Also of note, BOJ Gov Kuroda deflected expectations of adjustment to long-term yield target, noting inflation recovery is still lacking strength and risks to economy and prices are still skewed to downside. Recall the latest BOJ policy statement was somewhat more optimistic on inflation achieving 2% objective in the medium term, and Kuroda said he would be prepared to discuss long-term rate target adjustment if inflation picks up. In Japan’s economic data, March preliminary PMI remained in expansion for the 7th straight month at 52.6, down from 53.3 in Feb. New Export orders and Backlog both increased but at a slower pace, while Output Prices declined in a change of trend. Local economist said "latest PMI data again point to a Japanese manufacturing economy expanding at a decent clip and new order books remain in solid growth territory."

New Zealand trade numbers were a miss with 8th month of deficit against expected return to surplus. Exports missed consensus at 4.01B v 4.20Be, while Imports were in line around 4.0B. Shipments to China were strong, rising 6.3% y/y as exports to US declined again.

China

(CN) China Vice Premier Zhang: China long-term positive economic fundamentals unchanged

(CN) PBoC Beijing branch announces measures to control home risks; To tighten mortgage rules on some divorced couples

(CN) US financial press warns about risks to China banking liquidity on expected maturity of CNY1.53T in negotiable certificate of deposits (NCDs)

Japan

(JP) BOJ Gov Kuroda: Easing program has been working smoothly; Will discuss LT rate target if inflation picks up

Australia/New Zealand

(NZ) RBNZ: Feb new residential mortgage lending fell 14% to NZ$4.38B – press

Korea

(KR) South Korea Fin Min Yoo: North Korea appears all set for nuclear test – Korean press

Asian Equity Indices/Futures (01:00ET)

Nikkei +0.9%, Hang Seng -0.2%, Shanghai Composite -0.1%, ASX200 +0.8%, Kospi -0.2%

Equity Futures: S&P500 +0.3%; Nasdaq +0.3%; Dax +0.4%; FTSE100 +0.2%

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

EUR 1.0760-1.0785; JPY 110.85-111.40; AUD 0.7610-0.7640; NZD 0.7000-0.7035

Apr Gold -0.3% at $1,244/oz; May Crude Oil +0.4% at $47.89/brl; May Copper -0.7% at $2.63/lb

(CN) PBoC skips open market operations for today’s session v injecting CNY30B yesterday; PBoC drains net CNY30B this week v drained CNY120B prior

(CN) PBOC SETS YUAN MID POINT AT 6.8845 V 6.8856 PRIOR; 3rd straight stronger setting

(JP) Japan investors bought net ¥149B in foreign bonds v sold ¥696B in prior week; Foreign investors sold net ¥580B in Japan stocks v sold ¥723B in prior week

(AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 2.0563%; bid-to-cover: 6.25x

Asia equities / Notables / movers by sector

Consumer discretionary: 1958.HK BAIC Motor Corp +1.7% (FY16 result); CKF.AU Collins Foods -8.8% (Deutsche Bank cuts rating); 3865.JP Hokuetsu Kishu Paper Co +3.9% (annual result speculation)

Financials: 2628.HK China Life Insurance -1.7% (annual result); NAB.AU National Australia Bank +1.3%, ANZ.AU ANZ Bank +2.0% (raises mortgage rate); 8354.JP Fukuoka Financial +4.5% (SMBC raises rating)

Industrials: DOW.AU Downer EDI -25.1% (trading resumes); 6324.JP Harmonic Drive Systems -1.3% (Okasan cuts rating)\

Technology: 6502.JP Toshiba Corporation +7.8% (govt plans full review of chip unit sale)

Materials: 2600.HK Aluminum Corporation of China -2.1%, 914.HK Anhui Conch Cement -3.0% (annual result); 2168.HK Yingde Gases -3.8% (profit warning); SYR.AU Syrah Resources +5.8% (maintains budget); FMG.AU Fortescue Metals -0.6% (to repay debt); EVN.AU Evolution Mining -4.0% (block trade)

Energy: 1165.HK Shunfeng Photovoltaic International -4.9% (FY16 guidance); 883.HK CNOOC +4.2% (annual result)

Utilities: 2380.HK China Power International -3.9% (annual result)

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