Asian Market Update: Expectation for an RBA rate cut tomorrow building following retail sales decline



Economic Data


- (AU) AUSTRALIA MAR RETAIL SALES M/M: -0.4% V +0.1%E (first decline in 3 months)


– (AU) AUSTRALIA Q1 RETAIL SALES EX INFLATION Q/Q: 2.2% V 1.7%E


– (AU) AUSTRALIA APR ANZ JOB ADVERTISEMENTS: -1.3% V -0.5% PRIOR (3-month low)


- (AU) AUSTRALIA APR TD SECURITIES INFLATION M/M: 0.3% V 0.2% PRIOR; Y/Y: 2.1% V 2.1% PRIOR


- (CN) CHINA APR HSBC SERVICES PMI: 51.1 V 54.3 PRIOR (lowest reading since Aug 2011)


– (CN) China Mar Leading Index: 99.38 v 99.98 prior


– (TW) TAIWAN APR CPI: 1.0% V 1.3%E; WPI: -3.7% V -3.0%E


– (KR) SOUTH KOREA APR FOREIGN EXCHANGE RESERVES: $328.8B V $327.4B PRIOR (3-month high)



Markets Snapshot (as of 02:30 GMT)


– Nikkei225 closed


– S&P/ASX +1.0%


– Kospi +0.4%


– Shanghai Composite +0.8%


– Hang Seng +1.0%


– Jun S&P500 +0.1% at 1,610


– Jun gold +0.9% at $1,477/oz


– Jun Crude Oil +1.0% at $96.56/brl



Observations/Insights


– Asian stock markets and currencies were rallying following better than expected non-farm payroll data out of the US on Friday, with US markets closing at new highs. SP500 breached above 1,600 while Dow Industrials approached 15K level. Regionally, Australian stocks advanced early in the session led by resource and financial stocks. S&P/ASX got up as high as 5,200 – a technically pivotal level in the past. Investors remain focused on the Reserve Bank of Australia (RBA) rate decision tomorrow – fixed income markets are pricing in a greater than 50% chance that the RBA will cut rates, even as majority of analysts are still more reserved the RBA would act without first signalling an easing bias. Australia govt meanwhile reiterated its concern over high AUD as a key headwind to meeting its budget surplus projections.


– In China, HSBC Services PMI data for April fell to 51.1 from 54.3 in the prior month, registering the slowest rate of expansion since August of 2011. The data suggested the weakest rate of expansion since last October. In addition, the employment sub-index reading of 49.6 was the first net reduction in staff numbers since Jan 2009.


– In political news, the ruling National Front coalition of Malaysia won a simple majority in parliament with voters turning out in record numbers. The ruling party continues to hold on to power in the nation’s entire independent history. The Ringgit gained on the election results with the Malaysian stocks hitting fresh all time highs, crossing the 1,720 level for the first time.


– Japan markets remained closed for the second straight day, with trading set to resume tomorrow.


- Oil prices gained over $2 amid rising Middle East tensions. Israel confirmed it conducted airstrike in Syria on Thursday targeting a shipment of advanced missiles, with subsequent reports suggesting a 2nd bombing may have taken place. Syria govt officials said the bombing by Israel amounts to declaration of war.


– In the currency markets AUD was the most notable mover, falling about 25pip against the greenback following weak retail sales to a low of $1.0270. EUR/USD, GBP/USD, and USD/JPY were contained to 20-30 pip ranges around $1.3120, $1.5570, and ¥99.10 respectively, with Japan and UK markets closed for holiday.



Fixed Income/Commodities


- GLD: SPDR Gold Trust ETF daily holdings fall by 3.6 tons to 1,065.6 ton (lowest since 1,063.4 in Sept of 2009)


– (CN) China Stats Bureau: Pork prices fall up to 0.9% in late April – financial press


– (KR) South Korea sells 3-yr govt bonds; avg yield 2.51%; sells 30-yr govt bonds, avg yield 3.11%



Speakers/Political/In the Papers


– (JP) Japan warns Taiwan any boats operating outside agreed area will be seized – Kyodo News


– (JP) Japan and Singapore reiterates cooperation in TPP free-trade discussions – Japanese press


– (CN) China State Administration of Foreign Exchange (SAFE): Urges banks to strengthen forex inflow management – Chinese press


– (CN) China Wenzhou City bad loan rate rises to 4.01% – Chinese press


- (CN) China Ministry of Commerce (MOFCOM) researcher: China April export growth may be 10-13% v 10% in Mar


– (CN) China may increase deposit rate ceiling to 120% of benchmark this year – Chinese press


– (CN) China April new yuan loans may be CNY800B v CNY1.05T m/m – Chinese press


– (KR) Bank of Korea (BOK) gov Kim calling for more proactive govt action to spur economic growth – Korean press


– (KR) China govt official reiterating China is opposed to a nuclear-armed North Korea – Korean press


- (MA) Malaysia ruling National Front coalition wins majority in parliament; recent seat count at 133


– (AU) Australia Parliamentary Budget Office (PBO) cuts mining revenue forecast on lower commodity prices


- (AU) Australia PM Gillard: High AUD is squeezing exporters’ profits and undermining govt tax revenues – financial press


– (AU) TD Securities head of Asia-Pac research Beacher: Still prudent for RBA to keep cash rate at 3.00% but signal an easing bias – SMH


– (NZ) New Zealand Fin Min English: Still on track to achieve surplus in FY14/15 – financial press


– (IN) India Foreign Min Khurshid warns he may cancel planned trip to Beijing if the two sides cannot resolve dispute related to alleged China incursion inside Indian-claimed territory at the Himalayan border – financial press


- (IN) India Central Bank Gov Subbarao: “Baseline case is that the possibility of easing is practically non-existent” – financial press


– (SG) Singapore to overtake Switzerland as the biggest offshore wealth center by 2020 – Wealthsight


- (EU) German Fin Min Schaeuble: Decision to allow France two more years to meet EU deficit target of 3% is in line with its ” flexibility in applying the rules” – financial press


– (EU) EC head Barroso: Germany’s Merkel is not to blame for austerity imposed on certain eurozone states – German press


– (FR) France Fin Min Moscovici: Witnessing the end of “dogma of austerity” – European press


– (IT) Italy PM Letta: Reiterates planning to suspend property tax; Will look to modify electoral laws – press



Equities


– Sharp 6753.JP: May report FY12/13 net loss around ¥500B, return to profit in FY13/14 – Nikkei News


- TM: May report FY12/13 op profit around ¥1.3T, up about ¥150B from prior guidance; Group sales seen up 16% y/y at 9.69M units – Nikkei News


- BLD.AU:Lowers Q3 earnings guidance by A$19M due to continuing weakness in Australian housing conditions


– ORI.AU: Reports H1 Net A$266.8M v A$290Me, Rev A$3.33B +1.2% y/y


– AIO.AU: Cut FY13 capital spending outlook to A$575M-A$625M from A$700M-A$800M as rail and ports groups reduces capex to compensate for depressed growth in coal-haulage and container port operations – financial press


– Galaxy Entertainment 27.HK: To buy the Grand Waldo resort in Macau for HK$3.25B – financial press


– SNP: Deal with China Galaxy Securities to launch IPO on Monday, May 6th; plans to raise up to $2.24B – financial press