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Market Update – Asian Session: North Korea Saber-Rattling, Russian Role In Syria Continue To Spook Investors

US Session Highlights

(CA) CANADA MAR ANNUALIZED HOUSING STARTS: 253.7K V 215.5KE

(MX) Mexico Mar Nominal Wages Y/Y: 4.7% v 4.6% prior

(US) Mar Labor Market Conditions Index Change: 0.4 v 1.0e

Equities started the week with the same sentiment as they finished the last, with stocks trending mostly sideways and major indices closing flat to slightly higher. Markets are still treading cautious ground. Higher crude prices helped the S&P, with energy the best performing sector, gaining 0.9% on the day.

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

Best Sector in S&P500: Energy

Worst Sector in S&P500: Telecom

Biggest gainers: WFM +10.0%; FSLR +4.3%; HES +4.0%

Biggest losers: MU -3.1%; NVDA -2.6%; INCY -2.3%

At the close: VIX 14.1 (+1.2pts); Treasuries: 2-yr 1.26% (-1bps), 10-yr 2.36% (-1bps), 30-yr 2.99% (-1bps)

US movers afterhours

SALE: Acquired for $11.60/shr in cash by Harland Clarke Holdings; +49.0% afterhours

SVU: To acquire Unified Grocers for $384M in cash and stock deal; +9.8% afterhours

SEAC: Reports Q4 -$0.06 v -$0.05e, R$23.8M v $23.1Me; -3.3% afterhours

Politics

(US) Alabama Gov Bentley (R) resigns after pleading guilty to campaign finance violations – press

(US) Full Virginia Court to hear Pres Trump’s appeal of his overturned travel ban executive order – press

(FR) France IFOP daily presidential poll: Second round poll: Macron 58% (-1.0pts), Le Pen 42% (+1pts)

Key economic data

(AU) AUSTRALIA MAR NAB BUSINESS CONFIDENCE: :6 V 7 PRIOR; CONDITIONS: 14 V 9 PRIOR

(NZ) NEW ZEALAND MAR CARD SPENDING M/M: -0.3% V +0.5%E (2nd consecutive decline); TOTAL M/M: +0.5% V -0.7% PRIOR

Asia Session Notable Observations, Speakers and Press

Asian equity markets are largely lower, led by near 1% drop in Hong Kong where sentiment soured on energy, tech, and gaming sectors. Australia is resilient with a modest gain, as most mining and financials names turned higher. US and European futures are also lower, while FX majors appear to be succumbing to renewed risk-off flows – USD/JPY is down over 30pips from the highs below 110.60, while AUD and NZD were slightly lower against the greenback late in the day.

In the absence of regional catalysts, renewed profit-taking has been attributed to ongoing geopolitical uncertainty on the Korean peninsula and in the Middle East. In North Korea, Kim Jong Un said to have vowed the "toughest" counteraction against the United States in response to US dispatching USS Carl Vinson aircraft carrier over the weekend. In Syria, there is chatter that Russia may have known about Assad’s intentions to carry out a chemical attack against the rebels. Note that US State Sec Tillerson is set to travel to Moscow this week, but will only meet with his counterpart since Putin did not extend his audience to US official.

Traders tuned in to Fed Chair Yellen’s discussion at University of Michigan mostly to hear familiar rhetoric. Yellen said the Fed’s estimate of neutral fed funds rate is not very high, reiterating intentions to continue to gradually raise interest rates. Fed chair added that unemployment of 4.5% is now below where most of her colleagues would consider to be full employment. On inflation she said she would prefer that it does not linger above or below the 2% target, adding that it is close to objective.

Ahead of Australia’s critical employment report later this week, NAB Business Conditions data hit post-GFC highs, briefly sending AUD/USD about 0.75. NAB economist said "Conditions have improved almost across the board to levels that suggest a strong economy in the near term."

China

(CN) China Premier Li: China hopes for progress in investment treaty negotiations with US – Xinhua

(CN) China Q1 railway cargo volume +15.3% y/y

(CN) US may punish China companies that are involved with North Korea weapons

Japan

(JP) Bank of Japan (BOJ) Gov Kuroda: Japan is out of the deflationary situation of falling prices

(JP) Japan Fin Min Aso: Need to create economic conditions to allow sales tax hike

Australia/New Zealand

(NZ) New Zealand opposition Labour party’s finance spokesman Robertson: Expanding RBNZ focus to inflation and employment would bring New Zealand in line with Australia and US – NZ Press

Korea

(KR) North Korea vows to take the "toughest" counteraction against the United States; We will hold the US wholly accountable for the catastrophic consequences to be entailed by its outrageous actions

(KR) South Korea acting President Hwang: Have asked military to expand monitoring over North Korea

(KR) US, South Korean and Japanese envoys to hold six-party talks – Japanese press

Asian Equity Indices/Futures (00:00ET)

Nikkei -0.6%, Hang Seng -0.8%, Shanghai Composite -0.5%, ASX200 +0.4%, Kospi -0.6%

Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.2%, FTSE100 -0.1%

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

EUR 1.0580-1.0605; JPY 110.60-110.90; AUD 0.7495-0.7515; NZD 0.6940-0.6970

June Gold +0.3% at 1,257/oz; May Crude Oil flat at $53.09/brl; May Copper +0.2% at $2.61/lb

SPDR Gold Trust ETF daily holdings rise 1.8 tonnes to 838.3 tonnes; highest since Mar 15th

(CN) PBoC skips open market operations for 12th straight session; drains net CNY20B

(CN) PBOC SETS YUAN MID POINT AT 6.8957 V 6.9042 PRIOR; first stronger setting in 4 sessions

(JP) Japan MoF sells 10-yr 0.1% inflation linked bonds; bid-to-cover 3.64x v 2.61x prior

(AU) Australia MoF (AOFM) sells A$150M in 3.0% 2025 Bonds; avg yield: 0.5408%; bid-to-cover: 3.00x

Asia equities / Notables / movers

Australia

AHY.AU Asaleo Care -8.0% (Credit Suisse downgrades)

SAR.AU Saracen Mineral Holdings -4.5% (Q3 result)

AAD.AUArdent Leisure Group -1.7% (UBS downgrades)

VLA.AU Viralytics +2.3% (Q3 result)

CDV.AU Cardinal Resources +1.7% (Namdini Gold Project)

Japan

6502.JP Toshiba -2.5% (may release earnings this week w/out auditor approval)

3769.JP GMO Payment Gateway -5.5% (Goldman Sachs downgrades)

6758.JP Sony -1.0% (To split off battery operations to Murata)

4631.JP DIC Corp -2.4% (Q1 results speculation)

Hong Kong

489.HK Dongfeng Motor -0.7% (Mar result)

1238.HK Powerlong Real Estate Holding -1.3% (Mar result)

568.HK Shandong Molong Petroleum Machinery +6.3% (to cut costs)

2611.HK Guotai Junan Securities Co -1.2% (H share debut)

China

300104.CN Leshi Technology -2.4% (to cut US jobs)

000725.CN BOE Technology Group Co -2.4% (annual result)

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