Asian equity markets mostly higher amid outperformance in tech names and after the inter-Korean summit
USD remained firm as EUR/USD hovers around 1.2100
Looking ahead, highlights include UK & US GDP, ECB’s Mersch & Lautenschlaeger and BoE’s Carney
ASIA
Asia equity markets traded mostly higher as the region got an uplift from the momentum in US where all majors extended on gains amid tech outperformance after strong Facebook results, which was later followed after-market by Amazon, Intel, Microsoft and Western Digital which all beat on earnings forecasts. As such, ASX 200 (+0.2%) and Nikkei 225 (+0.5%) traded positive although gains were relatively mild as participants also digested a flurry of data releases and earnings, while KOSPI (+0.6%) benefited from a warming of ties amid the historic inter-Korean summit. Elsewhere, Shanghai Comp. (-0.7%) and Hang Seng (+0.2%) were mixed with underperformance in the mainland following a neutral position by the PBoC in today’s open market operations, while data also showed a slowdown in the pace of Chinese Industrial Profit growth. Finally, 10yr JGBs were marginally higher with prices underpinned at the open to track the upside in USTs and with gains then held throughout the session including after an uneventful BoJ announcement in which it kept policy unchanged but removed the wording on reaching inflation goal around FY19.
BoJ kept monetary policy unchanged as expected with NIRP held at -0.10% and the 10yr JGB yield target at around 0%.
The decision was made by 8-1 vote with Kataoka the dissenter again, while the central bank removed its reference to achieving 2% CPI target around FY19. Furthermore, BoJ stated that risks to economy were balanced for FY2018 but are skewed to downside for FY2019. (Newswires)
Japanese Industrial Production (Mar P) M/M 1.2% vs. Exp. 0.5% (Prev. 2.0%). (Newswires)
Japanese Industrial Production (Mar P) Y/Y 2.2% vs. Exp. 2.0% (Prev. 1.6%)
Japanese Tokyo CPI (Apr) Y/Y 0.5% vs. Exp. 0.8% (Prev. 1.0%)
Japanese Tokyo CPI Ex. Fresh Food (Apr) Y/Y 0.6% vs. Exp. 0.8% (Prev. 0.8%)
Japanese Tokyo CPI Ex. Fresh Food & Energy (Apr) Y/Y 0.3% vs. Exp. 0.5% (Prev. 0.5%)
PBoC injected CNY 40bln via 7-day reverse repos and were net neutral for the day. (Newswires)
PBoC set CNY mid-point at 6.3393 (Prev. 6.3282)
Chinese Industrial Profits (Mar) Y/Y 3.1% (Prev. 10.8%). (Newswires)
UK/EU
UK GfK Consumer Confidence (Apr) -9 vs. Exp. -7 (Prev. -7). (Newswires)
UK Parliament voted in favour to urge the government to pursue customs union, as expected. (Newswires)
EU Chief Brexit Negotiator Barnier repeated that the UK transition is not certain until a Brexit deal is reached, adding that market participants should prepare for a ‘no transition’ outcome. (Newswires)
ECB sources stated that policymakers are keen not to upset market expectations regarding an end of QE this year and a rate hike in mid-2019, while sources suggested a decision is seen in June or July with chance of a delay to September. (Newswires)
FX
In FX markets, the DXY remained firm and held near the prior day’s best levels as its major counterparts EUR and GBP consolidated from yesterday’s swings with EUR/USD stuck near the 1.2100 level. USD/JPY and JPY-crosses were also lacklustre amid mixed releases including softer than expected Tokyo CPI and Retail Sales data, although Industrial Production was more encouraging and topped estimates, while an unchanged BoJ policy announcement also ensured price action was uneventful. Elsewhere, KRW strengthened overnight amid the inter-Korean summit in which North Korea Leader Kim became his nation’s first leader to step on South Korea territory since 1953.
NAFTA countries are aiming for a May 1st agreement although big issues remain, according to sources familiar with the matter. However, Mexico’s Foreign Minister Videgaray stated they are reasonably near to a NAFTA deal and that an agreement is definitely possible in a few days. (Newswires)
COMMODITIES
Commodities saw lacklustre trade during Asia hours in which WTI crude futures slightly retreated below the USD 68/bbl level to marginally extend on the prior day’s weakness which was triggered by reports that suggested Genscape forecast a 1.3mln build for Cushing stocks from 20th April. Elsewhere, gold languished as the greenback held onto the prior day’s advances, while copper also lacked demand alongside underperformance in Chinese riskier assets.
GEOPOLITICAL
North Korea Leader Kim met with South Korean President Moon in which the leaders shook hands and stepped on both sides of the border together holding hands, before they held talks. Following the talks, a South Korean presidential official said that North Korea leader Kim suggested to meet more often and is willing to visit South Korea’s Presidential Palace, while Kim also said he attended the summit to put an end to history of conflict. (Newswires)
US
Most of the Treasuries action was concentrated in the belly and long end of the curve on Thursday with 10yr and 30yr yields falling by c.3bps, the former extending losses and pushing below 3% following the strong auction results. Thursday’s auction of 7-year debt was solid, stopping through the screens by 0.6bps, and the yield was the highest since April 2010. The bid-to-cover of 2.56x was also well above recent averages and the highest since January. Primary dealers were awarded the smallest share since the beginning of 2018, directs’ coverage was in close proximity to recent averages whilst indirects, a proxy for foreign demand, took the largest portion since January. US 10yr T-Notes futures settled 7+ ticks higher at 119-10.
Source: RANsquawk
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