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Asia Mid-Session Market Update: China CPI rises to 3-month highs while PPI growth slows; Australia banks pare losses after 6bps budget levy

US Session Highlights

(US) Apr NFIB Small Business Optimism: 104.5 v 104.0e

(US) Goldman Economist Chain Store Sales w/e May 6th w/w: -0.7%; Y/Y: +0.7%

(US) MAR JOLTS JOB OPENINGS: 5.74M V 5.73ME

(US) May IBD/TIPP Economic Optimism: 51.3 v 51.7 prior

(US) Fed's George (hawk, non-voter): supports gradual interest rate increases; Fed should start reducing balance sheet this year

US stock market euphoria died down today as investors began to evaluate geopolitical risk again in the Korean peninsula. Major indices closed nearly flat, with the exception being NASDAQ showing a small gain. Global stocks continued to rally as the French election extended the course of bullish sentiment. The DAX reached a new all-time high at 12,783 before closing slightly lower.

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

Best Sector in S&P500: Consumer Discretionary

Worst Sector in S&P500: Energy/Utilities

Biggest gainers: MAR +6.4%; UAL +4.8%; AAL +4.8%

Biggest losers: SEE -8.7%; TGNA -6.8%; FTR -6.5%

At the close: VIX 10.0 (+0.2pts); Treasuries: 2-yr 1.34% (+1bps), 10-yr 2.41% (+3bps), 30-yr 3.04% (+3bps)

US movers afterhours

NVDA Reports Q1 $0.85 v $0.67e, R$1.94B v $1.91Be- Guides Q2 Rev $1.91-1.99B v $1.89Be; +10.5% afterhours

COHR Reports Q2 $2.91 v $2.55e, R$422.8M v $404Me; +8.7% afterhours

EA Reports Q4 $1.81 v $0.75e (unclear if comp), R$1.53B v $1.09Be; +7.3% afterhours

TRIP Reports Q1 $0.24 v $0.28e, R$372M v $379Me; +6.0% afterhours

DIS Reports Q2 $1.50 v $1.45e, R$13.3B v $13.5Be; Media networks rev +3% y/y (cable networks rev +3%, operating income -3% y/y); -2.6% afterhours

PCLN Reports Q1 $9.88 v $8.83e, R$2.42B v $2.43Be; -3.5% afterhours

ACIA Reports Q1 $0.86 v $0.66e, R$114.7M v $112Me; Guides Q2 $0.22-0.35 v $0.76e, R$85-95M v $134Me; -15.0% afterhours

FOSL Reports Q1 -$1.00 v -$0.21e, R$582M v $596Me; Guides Q2 GAAP -$0.40 to +$0.30 v -$0.06e; -21.5% afterhours

YELP Reports Q1 +$0.19 v -$0.08e (unclear if comp), R$197.3M v $198Me; Guides Q2 adj EBITDA $32-35M, Rev $202-206M v $215Me; -28.3% afterhours

ANF: Said to field takeover interest from other retailers - financial press

WSTC: To be Acquired by Certain Funds Affiliated With Apollo Global Management for $23.50/shr cash, enterprise value $5.1B

Key economic data

(CN) CHINA APR PPI Y/Y: 6.4% V 6.7%E; 8th consecutive y/y increase; slowest increase in 4-months

(CN) CHINA APR CPI M/M: +0.1% V -0.3% PRIOR; Y/Y: 1.2% V 1.1%E (both readings at 3-month highs)

Asia Session Notable Observations, Speakers and Press

Asian equity markets are marginally positive despite the declines in US indices, with Hang Seng among the best performers and Korea's Kospi lagging on the first day of trade after presidential elections. Australia opened lower following overnight release of FY17/18 budget that featured a 6bp levy on bank client deposits but then bounced on fiscal stimulus expectations of govt projections. In FX, AUD and NZD are slightly higher in late session, while USD/JPY is rangebound.

China inflation data has also propped up sentiment, with CPI rising to 3-month highs and beating expectations on m/m and y/y basis thanks to smaller decline in the food component. PPI was positive for the 8th straight month, but the rate of increase was smallest in 4 months as the recent freefall in metals is reflected in the results.

Among notable speakers, South Korea's new president Moon said he will focus on security in the region and allowed for possibility of his trip North if it complies with conditions. BOJ Gov Kuroda also spoke extensively, reiterating the need to continue current easing policy while also acknowledging recent improvement in exports. Kuroda also said the recent headwinds in CPI were in part attributed to lower telecom prices.

China

(CN) China regulators may publish Bitcoin regulations in June - Chinese press

(CN) Moody's: Credit profiles of China non-property companies improving moderately - press

Japan

(JP) BoJ Gov Kuroda: Reiterates there's still distance to hit 2% inflation; Pace of JGB buys is now around ¥60T

(JP) Former BoJ official/ President of currency think tank Institute for International Monetary Affairs (IIMA) Watanabe: Markets concerned over trade issues - press

Australia/New Zealand

(AU) Australia Govt to impose major bank levy on ADIs with licensed entity liabilities of at least A$100B as part of new budget

Korea

(KR) New president Moon: Plan to address security issues immediately; Will go to N Korea when preconditions are met - press

(KR) Moody's: Possibility of conflict on Korea peninsula is a credit negative for South Korea Govt

Asian Equity Indices/Futures (00:30ET)

Nikkei +0.2%, Hang Seng +0.8%, Shanghai Composite +0.3%, ASX200 +0.5%, Kospi -1.0%

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

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

EUR 1.0870-1.0900; JPY 113.60-114.00; AUD 0.7335-0.7370; NZD 0.6890-0.6910

June Gold +0.6% at 1,223/oz; June Crude Oil +0.8% at $46.25/brl; July Copper +0.2% at $2.50/lb

(US) Weekly API Oil Inventories: Crude: -5.8M v -4.2M prior; 2nd straight draw and largest draw since Jan 4th

(SA) Saudi Arabia said to supply full contractual amount of crude oil to one Asia buyer in June, which is also steady from May levels - press

(CN) PBOC SETS YUAN MID POINT AT 6.9066 V 6.9037 PRIOR; 3rd straight weaker fix and weakest level since Mar 21st

(CN) PBOC to inject combined CNY110B v skipped prior

(CN) China MoF sells 5-yr bonds; avg yield 3.6602% v 3.60%e; bid-to-cover 1.83x

(AU) Australia MoF (AOFM) sells A$600M in 4.5% 2020 Bonds; avg yield: 1.8406%; bid-to-cover: 4.84x

Asia equities notable movers

Australia

CSR Ltd (CSR) -11.7%; FY 17 result

South32 (S32) -2.9%; FY17 production guidance cut

Fairfax Media (FXJ) +1.1%; Fairfax board urging TPG to raise offer and bid for entire company - The Australian

Japan

Isetan Mitsukoshi Holdings (3099) -6.0%; FY16 results

Toray (3402) -3.5%; FY16 result

Hong Kong

HKEX (388) +1.4%; Q1 result

Skyworth Digital (751) -2.7%; profit warning

Sun Art (6808) -3.6%; Q1 result

Daily Pivots: (S1) 1.4755; (P) 1.4816; (R1) 1.4867; More...

Intraday bias in EUR/AUD is turned neutral with a temporary top formed at 1.4909. Some consolidations would be seen first. But downside of retreat is expected to be contained by 1.4442 support and bring another rally. Break of 1.4909 will extend whole rise from 1.3624 to next medium term fibonacci level at 1.5455.

In the bigger picture, price actions from 1.6587 medium term top are viewed as a corrective pattern. Such correction should be completed after defending 1.3671 key support. Rise from 1.3642 is now expected to target 61.8% retracement of 1.6587 to 1.3624 at 1.5455 and above. In any case, outlook will now stay cautiously bullish as long as 1.4309 resistance turned support holds.

Daily Pivots: (S1) 1.0907; (P) 1.0942; (R1) 1.0990; More...

Intraday bias in EUR/CHF remains on the upside for 1.0999 resistance first. As noted before, the consolidative pattern from 1.1198 should be completed. Break of 1.0999 will pave the way for a retest on 1.1198 high. On the downside, below 1.0872 minor support will turn bias neutral and bring consolidation. But retreat should be contained by 1.0791 support to bring another rally.

In the bigger picture, the price actions from 1.1198 are seen as a corrective move. Current strong rebound is raising the chance that it's completed after defending 38.2% retracement of 0.9771 to 1.1198 at 1.0653. Decisive break of 1.0999 resistance will target a test on 1.1198 high. For now, this will be the preferred case as long as 1.0791 support holds.

Daily Pivots: (S1) 1.0846; (P) 1.0890 (R1) 1.0916; More....

The breach of 1.0874 minor support suggests short term topping at 1.1020, on bearish divergence condition in 4 hour MACD. Intraday bias in EUR/USD is turned back to the downside for 55 day EMA (now at 1.0757) first. As noted before, rise from 1.0339 is seen as a corrective move. Break of 55 day EMA will affirm the case that such correction is completed and bring deeper decline to 1.0569 for confirmation. Above 1.1020 will extend such corrective rise instead.

In the bigger picture, as long as 1.1298 key resistance holds, whole down trend from 1.6039 (2008 high) is still expected to continue. Break of 1.0339 low will send EUR/USD through parity to 61.8% projection of 1.3993 to 1.0461 from 1.1298 at 0.9115. However, considering bullish convergence condition in weekly MACD, break of 1.1298 will indicate long term reversal.

Daily Pivots: (S1) 1.2904; (P) 1.2932; (R1) 1.2962; More...

Despite diminishing upside momentum as seen in 4 hour MACD, with 1.2830 minor support intact, further rally is still expected in GBP/USD. Current rise could target 161.8% projection of 1.2108 to 1.2614 from 1.2365 at 1.3184. At this point, price actions from 1.1946 are still interpreted as a correction pattern. Therefore, we'd expect strong resistance below 1.3444 to bring larger down trend resumption. On the downside, break of 1.2830 support will indicate short term topping. In such case, intraday bias will be turned back to the downside for 1.2614 support.

In the bigger picture, fall from 1.7190 is seen as part of the down trend from 2.1161. There is no sign of medium term reversal yet. Sustained trading below 61.8% projection of 2.1161 to 1.3503 from 1.7190 at 1.2457 will target 100% projection at 0.9532. Overall, break of 1.3444 resistance is needed to confirm medium term bottoming. Otherwise, outlook will remain bearish.

Daily Pivots: (S1) 1.0000; (P) 1.0045; (R1) 1.0118; More.....

Intraday bias in USD/CHF remains on the upside for 1.0107 resistance. Current development revived the case that correction from 1.0342 is already completed at 0.9812. Break of 1.0107 will bring a retest on 1.0342 high. On the downside, below 1.0037 minor support will turn bias neutral and bring consolidation first before staging another rise.

In the bigger picture, we're still maintaining that firm break of 1.0342 key resistance is needed to confirm underlying bullish momentum in the pair. However, the corrective nature of the fall from 1.0342 is starting to give the medium term outlook a bullish favor. Hence, in stead of looking for topping signal around 1.0342, we'd now pay closer attention to upside acceleration as USD/CHF approaches this level again.

Daily Pivots: (S1) 113.30; (P) 113.82; (R1) 114.50; More...

Intraday bias in USD/JPY remains on the upside for 115.49 resistance next. Outlook remains unchanged that correction from 118.65 has completed with three waves down to 108.12. Break of 115.49 will resume larger rally from 98.97 to 125.85 high. On the downside, below 113.04 minor support will turn bias neutral and bring consolidations before staging another rally.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Meanwhile, break of 115.49 resistance will extend the rise from 98.97 to retest 125.85. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Currency pair EUR/USD

The EUR/USD broke the support trend line (dotted blue) of the rising wedge (RW) reversal chart pattern (red/blue). The bearish breakout could be part of a larger reversal, which is reflected in the 1-2 wave count (brown). The alternative scenario would be a bearish retracement within a larger uptrend continuation, which at the moment would require a break above the top.

The EUR/USD wave 4 (blue) respected the shallow Fibonacci level of 23.6% before breaking support (dotted blue) and price has reached the 61.8% Fibonacci target of wave 5 (blue). Price could either retrace as part of wave 2 on 4 hour chart or break the bottom and continue with 5 (blue).

Currency pair GBP/USD

The GBP/USD is moving higher in an uptrend channel which is indicated by the support (green) and resistance (red) trend lines. A bullish break could see price move towards the Fibonacci targets of wave 5 (purple) whereas a bearish break could start a reversal.

The GBP/USD tested the previous top (green) of wave 1 (grey) but did not break and therefore the wave 4 (grey) could still be valid. A break above resistance (orange) could see a bullish break for wave 5 (grey).

Currency pair USD/JPY

The USD/JPY is building an uptrend channel which is indicated by the support (blue) and resistance (red) trend lines and moving towards the Fib targets of wave 5 (brown).

The USD/JPY is extending the bullish 5th wave (brown/orange) with another 5 waves (grey). The wave 4 (grey) is invalidated if price breaks below the 61.8% Fibonacci level.

Daily Pivots: (S1) 0.7315; (P) 0.7357; (R1) 0.7384; More...

Intraday bias in AUD/USD remains on the downside for the moment. Current fall from 0.7748 is expected to target a test on 0.7144/7158 support zone. We'll be cautious on bottoming there as there is no clear sign of larger down trend resumption yet. On the upside, above 0.7425 minor resistance will turn bias neutral and bring consolidations first.

In the bigger picture, we're still treating price actions from 0.6826 low as a correction pattern. And, as long as 38.2% retracement of 0.9504 to 0.6826 at 0.7849 holds, long term down trend from 1.1079 is expected to resume sooner or later. Break of 0.6826 low will target 0.6008 key support level. However, firm break of 0.7849 will indicate that rise from 0.6826 is developing into a medium term rebound, rather than a sideway pattern. In such case, stronger rise should be seen to 55 month EMA (now at 0.8115) and above.

Daily Pivots: (S1) 1.3674; (P) 1.3714; (R1) 1.3757; More....

Intraday bias in USD/CAD remains neutral as it's staying in consolidation below 1.3793 temporary top. Rise from 1.2460 is seen as a corrective pattern. Hence, in case of another rally, we'll be cautious on topping at around 1.3838 fibonacci level. Meanwhile, consider bearish divergence condition in 4 hour MACD, break of 1.3534 support will argue that rise from 1.2968 is already completed. In such case, intraday bias will be turned back to the downside for 1.3222 support.

In the bigger picture, price actions from 1.4689 medium term top are seen as a correction pattern. The first leg has completed at 1.2460. Rise from 1.2460 is seen as the second leg and would end at around 61.8% retracement of 1.4689 to 1.2460 at 1.3838. Break of 1.3222 should indicate the start of the third leg while further break of 1.2968 should confirm. Nonetheless, sustained trading above 1.3838 would pave the way to retest 1.4689 high.