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Asian Market Update: Gold Rises As investors Question Reflation Trump Trade After Healthcare Reform Bill Failed

Gold rises as investors question reflation Trump trade after healthcare reform bill failed

Asia Mid-Session Market Update: Stocks and Dollar fall, Gold rises as investors question reflation Trump trade after healthcare reform bill failed

Friday US markets on close: Dow -0.3%, S&P500 -0.1%, Nasdaq +0.2%

Best Sector in S&P500: Utilities

Worst Sector in S&P500: Materials

Biggest gainers: FTR +7.7%; MU +7.4%; CNC +5.2%

Biggest losers: MLM -2.9%; FLR -2.5%; NUE -2.5%

At the close: VIX 12.9 (-0.2pts); Treasuries: 2-yr 1.24% (-4bps), 10-yr 2.40% (-2bps), 30-yr 3.00% (-3bps)

Politics

(US) On Saturday, President Trump tweeted to "Watch @JudgeJeanine on @FoxNews tonight", whose opening segment called for House Speaker Ryan to step down because of failed healthcare bill vote

(US) Rep Ted Poe (R-TX) resigns from House Freedom Caucus because of its opposition to healthcare legislation – CNN

(HK) Hong Kong electoral committee picked pro-China candidate Carrie Lam over John Tsang to be the next leader – financial press

(DE) Chancellor Merkel’s CDU party was victorious in Saarland state regional election with 41% of the vote vs 29.5% for SPD; Far-right AfD party received 6% – press

Weekend US/EU Corporate Headlines

MGI: Enters into confidentiality agreement with Euronet Worldwide to further consider Euronet’s unsolicited proposal

Key economic data:

(CN) CHINA JAN-FEB INDUSTRIAL PROFITS Y/Y: 31.5% V 2.3% PRIOR

(JP) JAPAN FEB PPI SERVICES Y/Y: 0.8% V 0.5%E (2-year high)

Asia Session Notable Observations, Speakers and Press

Risk-off sentiment is heating up as S&P500 emini futures fell nearly 20 handles, USD/JPY came in by over 100 pips, and Gold rallied over $15 from Friday close. Political risk is the primary culprit as investors worry that GOP failure to get the healthcare bill across the finish line will dampen other pro-business reform agenda items for the Trump White House, namely tax reform and fiscal spending measures. Pundits suggest that the rift between POTUS and GOP congressional leadership may still widen, considering that Trump promised to lower individual middle class taxes and has remained ambivalent on border adjustment tax, while House Speaker Ryan and Ways and Means chair Brady view tax reform as a catalyst for growth and could prioritize tax cuts for the top 1% as well as considering border adjustment as essential.

Nikkei225 is the worst peforming index, dragged down by stronger JPY weighing on exports. Dollar decline against EUR is also noteworthy, with single currency hitting a 3-month high, helped by constructive result for the European Union in German regional elections. Chancellor Merkel’s CDU party took 41% of the vote in Saarland, up from 35% in 2012 elections and above 29.5% for SPD and 6% for euro-skeptic AfD.

BOJ Summary of Opinion from the most recent meeting underscored entrenched policy stance for the central bank. Despite progress on growth and inflation, BOJ said there is still a long way to go to achieve the price stability target of 2%. Separately, PM Abe also remarked that it was too early to consider monetary stimulus exit strategy.

In notable economic data, China Jan-Feb industrial profits rose a healthy 31.% v just 2.3% in Dec. Stats Bureau said the growth in profits was mostly due to faster growth in prices of coal, steel, and crude oil, though the overall trend is still one of recovery in the industry. Among top corporates, China’s property developer Vanke posted strong profit and sales growth, but also noted some housing price cooling due to govt curbs.

China

(CN) China State Information Center research fellow Fan Jianping: Chinese govt must target badly run financial institutions, or will only make things go from bad to worse

(CN) PBoC Gov Zhou: monetary policy may have reached an end to the quantitative easing path – Boao Forum panel discussion

(CN) China may start carbon trading in July – Chinese press

(CN) China approved 10 IPOs on Friday worth CNY6.1B – Chinese press

Japan

(JP) Japan PM Abe: Too early to consider monetary stimulus exit strategy

Australia

(AU) According to Australia Bureau of Stats, underemployment in 15-24 year old range is at 31.5%, highest in 40 years – Australian press

(NZ) New Zealand PM English: Signed agreement on the Belt and Road Initiative with China; FTA to start in April

Korea

(KR) Bank of Korea (BOK) Q4 regional survey shows South Korean manufacturers are expected to spend more on capital investment this year than they did last year, although those expenditures will be conservative and mostly geared towards maintaining facilities than expansion

Asian Equity Indices/Futures (00:00ET)

Nikkei -1.3%, Hang Seng -0.3%, Shanghai Composite +0.1%, ASX200 -0.2%, Kospi -0.5%

Equity Futures: S&P500 -0.7%; Nasdaq -0.7%, Dax -0.5%, FTSE100 -0.6%

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

EUR 1.0825-1.0850 (3-month high); JPY 110.25 (4-month low) -111.05; AUD 0.7615-0.7635; NZD 0.7025-0.7050; GBP 1.2490-1.2530

Apr Gold +0.6% at 1,256/oz; May Crude Oil -0.3% at $47.85/brl; May Copper -1.6% at $2.60/lb

OPEC and non-OPEC producers agree to review whether oil output cuts should be extended by 6 months – press

SPDR Gold Trust ETF daily holdings fall 1.8 tonnes to 832.6 tonnes

(CN) PBoC skips open market operations for 2nd straight session; Bank liquidity is high

(CN) PBOC SETS YUAN MID POINT AT 6.8701 V 6.8845 PRIOR; strongest Yuan setting since Feb 24th

(AU) Ausatralia MoF sells A$500M in 3.0% 2047 bonds; bid-to-cover 2.65x

(KR) South Korea sells KRW0.84T v KRW0.84T offered in 20-yr govt bonds; avg yield 2.3% v 2.215% prior

Asia equities / Notables / movers

Australia

FXJ.AU Fairfax Media +2.5%; TPG Capital could make a bid for Fairfax Media’s Domain business as early as this week – AFR

SGP.AU Stockland Corp +1.9; Affirms FY17 FFO +6-7% y/y

BHP.au -2.8%, RIO.au -2.0%, FMG.AU -2.6%; Iron ore falls over 4%

Japan

6502.JP Toshiba -3.5%; Largest creditors are torn over its future strategy as pressure builds for a swift Chapter 11 bankruptcy protection filing by Westinghouse – FT

9602.JP Toho Gas -1.1%; May report FY net profit ¥50B, +23% y/y (prior guidance ¥47B) – Nikkei

1801.JP Taisei +1.0%; Expected to report FY16/17 net profit of ¥100B, +30% y/y and above ¥76B prior forecast; May boost dividend or share buyback program – Nikkei

Hong Kong

1638.HK Kaisa Group Holdings; +62.8%; Resumes trading; Reports FY16 net loss CNY1.29B v profit CNY2.17B y/y; Rev CNY19.6B v CNY19.5B y/y

0842.HK Leoch International Technology +7.0%; Reports FY16 Net CNY232M v CNY106M y/y; Rev CNY6.26B v CNY4.33B y/y

0551.HK Yue Yuen Industrial +5.6%; Reports FY16 Net $534.6M v $390.2M y/y, Rev $8.48B v $8.43B y/y

1114.HK Brilliance China Automotive Holding +4.9%; Reports FY16 Net CNY3.39B v CNY3.28B y/y, Rev CNY5.13B v CNY4.86B y/y

3866.HK Bank of Qingdao Co Ltd +2.5%; Reports FY16 Net CNY2.09B v CNY1.81B y/y; Rev CNY6.0B v CNY5.0B y/y

2202.HK China Vanke -3.3%; Reports FY16 Net CNY21.0B v CNY18.1B y/y, Rev CNY228.9B v CNY184.3B y/y

1072.HK Dongfang Electric Corp -2.4%; Reports FY16 net loss CNY1.8B v profit CNY439M y/y; Rev CNY33.3B v CNY36.0B y/y

0816.HK Huadian Fuxin Energy Corp -4.8%; Reports FY16 Net CNY2.0B v CNY1.9B y/y, Rev CNY15.9B v CNY15.4B y/y

819.HK Tianneng Power International Limited -9.0%; Reports FY16 Net CNY905.5M v CNY627.8M y/y; Rev CNY21.5B v CNY17.8B y/y

951.HK Chaowei Power Holdings Limited -9.1%; Reports FY16 Net CNY619M v CNY488M y/y; Rev CNY21.5B v CNY18.9B y/y

3900.HK Greentown China Holdings -9.9%; Reports FY16 Net CNY1.92B v CNY0.81B y/y; Rev CNY28.9B v CNY26.0B y/y

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