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Market Update – Asian Session: USD Rallies As Trump-Xi Talks Viewed As Successful

Friday US Session Highlights

(US) MAR CHANGE IN NONFARM PAYROLLS: +98K V +180KE (lowest since May 2016)

(US) MAR UNEMPLOYMENT RATE: 4.5% V 4.7%E (lowest since April 2007); Underemployment Rate: 8.9% v 9.2% prior

(US) MAR AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; Y/Y: 2.7% V 2.7%E; AVERAGE WEEKLY HOURS: 34.3 V 34.4E

(US) Feb Wholesale Inventories (Final) M/M: 0.4% V 0.4%E; wholesale Trade Sales M/M: +0.6% v -0.1% prior

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

Best Sector in S&P500: Consumer Staples

Worst Sector in S&P500: Utilities

Biggest gainers: VMC +3.9%; INCY +3.4%; FMC +3.1%

Biggest losers: UA -3.2%; KMX -2.6%; CBT -2.3%

At the close: VIX 12.9 (+0.5pts); Treasuries: 2-yr 1.29% (+4bps), 10-yr 2.37% (+3bps), 30-yr 3.00% (+1bps)

Politics

(HU) About 60K marchers in Budapest protested PM Orban’s targeting of Central European University – press

(US) KT McFarland has been asked to step down at deputy National Security Advisor to Pres Trump; Expected to be nominated as ambassador to Singapore – press

(US) Trump Chief Economic Advisor Gary Cohn: Not sure that Mnuchin’s Aug forecast will be reachable for tax reform – financial press

(US) Reminder: US Congress is on break for the next two weeks (starting April 10th), which leaves little time to pass spending bill and avoid a govt shutdown

Weekend US/EU Corporate Headlines

TSLA Said to be planning a factory in Guangdong, China – Southern Metropolis Daily

Key economic data:

(JP) JAPAN FEB BOP CURRENT ACCOUNT TOTAL: ¥2.81B V ¥2.51TE; ADJ CURRENT ACCOUNT TOTAL: ¥2.21T (multi-year high) V ¥1.79TE; TRADE BALANCE BOP BASIS: ¥1.08T V + ¥982BE

(AU) AUSTRALIA FEB HOME LOANS M/M: -0.5% V 0.0%E (biggest decline in 4 months)

Asia Session Notable Observations, Speakers and Press

Asian equity markets are mixed and US futures are higher on expectation of renewed risk appetite to start the new week. Investors are shrugging the miss in non-farm payrolls as a one-off due to weather impact and buying the recent dip. Nikkei225 is the best performer as USD/JPY hit a 1-week high above 111.50, while Australia miners have helped that index hit a 2-year high after positive broker commentary. In other FX majors, AUD/USD slid to January lows below 0.7480 and NZD/USD was at a 3-week low around 0.6920. Broad USD strength is derived from momentum on Friday as comments from Fed’s typically more dovish voter Dudley are perceived to be increasingly more hawkish. Fed’s Bullard also spoke in Australia, noting the underwhelming jobs report is in line with the view of 2% inflation and modest growth, urging a wait and see for Trump’s fiscal policy combined with just one more rate hike by the Fed this year.

Geopolitical risk remains a hot topic in the wake of Syria strikes last week. Russian press has reported that communications in Syria have been disrupted after the US actions, while other reports noted new bombing on the rebel town that suffered the chemical attack. ISIS also waged an attack on a joint coalition forces base in the south of the country. Separately, US reports noted that a strike force led by US destroyer is approaching the Korean peninsula. State Sec Tillerson however said that a regime change is not the objective for North Korea

Florida meeting between China Pres Xi and US Pres Trump is viewed as a success. China has reportedly offered improved market access for US financial sector investments and beef exports in a move to avert a trade war, while Xi has extended Trump an invitation to visit Beijing in the near future. China State Media also said the meeting marks the start of a relationship based on cooperation and respect instead of conflict.

In notable economic data, Australia home loans saw their biggest m/m decline in 4 months, though most analysts are focusing on this week’s employment data as a key driver for RBA bias going forward. Morgan Stanley however has already revised its prior view of a rate cut this year to expect neutral stance through 2017 on housing inflation concerns.

China

(CN) China’s 21 listed property developers saw combined Q1 sales of CNY621.6B, +69% y/y – Chinese press

(CN) China NDRC: Will gradually reduce planned power output of existing coal fire power plants

(CN) China Premier Li Keqiang calling on cabinet to remain vigilant for risks related to bad assets, bond defaults, shadow banking and online finance – press

(CN) China State Information Center researcher Zhu Baoliang: Economic growth may stabilize at slower place in Q2 as the world economy remains sluggish and domestic auto, home sales cool – Chinese press

(CN) Goldman Sachs sees China Q1 GDP at 6.8% v 6.8% in Q4; 2017 GDP seen at 6.6% v "around 6.5%" official target – Chinese press

(CN) Chairman of China Securities Regulatory Commission (CSRC) urging listed companies in China to pay out more dividends – Chinese press

(CN) China State Media calls Trump/Xi meeting the start of a relationship based on cooperation and respect instead of conflict

Japan

(JP) Bank of Japan (BOJ) Amamiya: BOJ unrealized losses could be ¥24T if yield rises to 1%

(JP) Bank of Japan (BOJ) Gov Kuroda: Japan CPI to rise toward 2% target

(JP) IMF may raise Japan’s 2017 GDP target above 1% from 0.8% in its upcoming World Economic Outlook report amid continued growth in exports – Japan press

Australia / New Zealand

(AU) Morgan Stanley: No longer expect RBA to cut rates this year; Expect rates to remain unchanged – Australian press

(AU) Moody’s: Australia home prices forecast to rise 5.6% in 2017 before falling 0.6% in 2018 – press

(AU) CBA economist: RBA seems comfortable with inflation below target, but they would be sensitive to deterioration in the labor market – SMH

(AU) UBS: Rise in commodity prices may strengthen Australia’s AAA rating – press

(NZ) Westpac: Recent rise in New Zealand inflation may not be sustainable – press

Korea

(US) Sen Markey (D-MA): Pres Trump should engage in direct negotiations with North Korea’s Kim Jong Un as part of combined efforts with China – US press

(KR) US has ordered an aircraft carrier group to move closer to the Korean Peninsula in response to recent provocations from North Korea – US press

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.7%, Hang Seng flat, Shanghai Composite -0.3%, ASX200 +0.5%, Kospi -0.8%

Equity Futures: S&P500 +0.2%; Nasdaq +0.1%, Dax +0.3%, FTSE100 flat

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

EUR 1.0570-1.0590; JPY 111.00-111.60; AUD 0.7480-0.7510; NZD 0.6920-0.6945; GBP 1.2365-1.2385

June Gold -0.2% at 1,255/oz; May Crude Oil +0.3% at $52.40/brl; May Copper -0.9% at $2.62/lb

(US) Weekly Baker Hughes US Rig Count: 839 v 824 w/w (+1.8%) (12th straight weekly rise)

ANZ: Oil market looks finely balanced; While US production is up, demand is also relatively strong – press

SPDR Gold Trust ETF daily holdings fall 0.3 tonnes to 836.5 tonnes

iShares Silver Trust ETF daily holdings fall to 9,862 tonnes from 10,208 tonnes prior; 6th straight decline, lowest since Mar 2016

(CN) PBOC SETS YUAN MID POINT AT 6.9042 V 6.8949 PRIOR; weakest Yuan setting since Mar 21st; 3rd straight weaker setting

(CN) PBoC skips open market operations for 11th straight session; drains net CNY10B

(AU) Australia MoF sells A$400M v A$400M indicated in 4.5% 2033 bonds; avg yield 3.008%; bid-to-cover 3.81x

(KR) South Korea MoF sells 5-yr Govt bonds at 1.915%

Asia equities / Notables / movers

Australia

Tabcorp (TAH) +0.9%; NSW wagering partnership

South32 (S22) +1.9%; Raised at CLSA

BHP (BHP) +1.0%; Raises at CLSA

Oz Minerals (OZL) +0.9%; exploration agreement

Worley Parsons (WOR) +4.0%; Block trade

Cimic (CIM) +1.1%; Leighton contract in India

Mesoblast (MSB) +8.2%; endpoint in phase 3 trial

Japan

Toshiba (6502) +6.3%; May sell TV business; Additional reports of Hon Hai intereest

Dentsu (4324) +2.8%; March sales

Hisamitsu Pharmaceutical (4530) -9.5%; FY16 results

Hong Kong

Skyworth Digital Holdings (751) -7.5%; Q1 guidance

Gemdale Properties (535) +1.8%; Mar sales

China Overseas Grand Oceans (81) +2.2%; Mar sales

Agile Group Holdings (3383) -2.7%; Mar sales

Greenland Hong Kong (337) -3.6%; Mar sales

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