• Asian equity markets traded mostly lower despite the positive Wall Street lead with the ASX notably hampered by losses in gold and iron ore
• FX markets were relatively uneventful overnight with USD/JPY largely guided by fluctuating risk sentiment
• Looking ahead, highlights include US Building Permits and Housing Starts, Fed’s George and Rosengren

ASIA

Asian equity markets failed to keep up the positive momentum from Wall St. where stocks rebounded as focus shifted to earnings and financials outperformed. ASX 200 (-1.0%) declined to a 2-week low, as recent losses in iron ore and gold weighed on mining names. Conversely, Nikkei 225 (+0.3%) was positive as exporter names benefited from a weaker JPY, while the financial sector performed similarly to its US counterparts. Shanghai Comp. (-0.2%) and Hang Seng (-1.1%) were subdued despite the PBoC resuming liquidity operations and firm Chinese Property Prices, as a continued rampant property sector could attract funds away from stocks. 10yr JGBs traded lower amid spillover selling from USTs and a somewhat positive risk tone in Japan, although losses were stemmed following a 5yr auction in which the b/c and accepted prices were higher than prior.

Chinese House Price Index (Mar) Y/Y 11.3% (Prev. 11.8%). (Newswires)

- China house prices increased M/M in 62 out of 70 cities (Prev. 56) and increased Y/Y in 68 out of 70 cities (Prev. 67).

PBoC injected CNY 40bln in 7-day reverse repos, CNY 20bln in 14-day reverse repos and CNY 20bln in 28-day reverse repos.

PBoC set CNY mid-point at 6.8849 (Prev. 6.8785). (Newswires)

EUROPE/UK

Elabe poll: 1^st round – Macron 24% (+0.5), Le Pen 23% (+0.5), Fillon 19.5% (-0.5) and Melenchon 18% (-0.5). 2^nd round – Macron 62% vs. Le Pen 38%. (Elabe)

FX

A lack of data and news flow resulted to uneventful trade across most majors. However, AUD was pressured by the recent slump in iron ore prices with EUR/AUD eyeing 1.4100 and AUD/NZD declining below the 1.0800 level. USD/JPY initially continued its rebound and reclaimed 109.00 amid an early unwinding of safe-haven flows and following comments from US Treasury Secretary Mnuchin that over long periods of time the strength of the USD is a good thing. However, JPY crosses then pulled off their highs as sentiment soured, while CNY saw marginal losses after the PBoC set a 3rd consecutive weaker fix.

RBA minutes from April 4th meeting stated that conditions in the labour market had been somewhat weaker than had been expected. RBA minutes also stated that members judged steady rates consistent with growth and inflation targets, while CPI is expected to pick up above 2% this year. (Newswires)

COMMODITIES

Price action across commodities was subdued overnight as the greenback held onto the prior session’s gains which were triggered by comments from Mnuchin. This saw WTI Crude futures languish at yesterday’s lows, while copper was pressured amid the dampened sentiment in China. Elsewhere, gold (-%) and silver were also lower, albeit marginally with the firmer greenback the main pressuring factor.

US total shale regions oil production in May is seen up 123K BPD at 5.193mln BPD (April rise was 101K BPD), according to the EIA. (Newswires)

GEOPOLITICAL

North Korea Ambassador warned UN that US has created a situation that could cause thermonuclear war to break out at any time. (Newswires)

US

Weakness was seen in US Treasuries in a low volume day. Informa noted that flows were quiet and there was little new buying which emboldened defensive-minded, fast money and professional accounts to press lower. Jun’17 10y T-note futures settled at 125.29, down 5+ ticks.

Fed's Fischer (Voter, Neutral) he doesn't believe the Fed is being influenced by market expectations, adds the lack of liquidity in the market is not currently a concern for reducing the balance sheet. (Newswires)

US Treasury Secretary Mnuchin warned of a delay to tax reform, as he commented that the timeline to get it complete by August is "highly aggressive to not realistic at this point". Mnuchin added that over long periods of time the strength of the USD is a good thing. (FT)