• Asian equity markets traded lower overnight ahead of upcoming risk events with the Nikkei 225 also hampered by a firmer JPY
  • JPY pared some of Friday’s weakness as the cautious tone in the region spurred bids into the safe-haven currency, which dragged USD/JPY towards 111.00
  • Highlights Include German IFO survey and potential comments from ECB’s Constancio and Coeure

ASIA

Asian equity markets began in a lacklustre fashion amid a cautious tone ahead of key policy meetings this week from FOMC, BoJ and RBNZ, while market closures due to ANZAC day also contributed to the lack of buying . Nikkei 225 (-0.8%) snapped its 4-day win streak as JPY recovered from some of Friday’s slump, while Sony shares plunged around 5% in a continuation of the weakness seen after delaying its earnings forecast. Shanghai Comp (-0.80%) is also negative despite the PBoC continuing to inject ample funds into the market as rising debt concerns clouded sentiment with total debt said to have risen to 237% of GDP in Q1. 10yr JGBs are lower as participants booked profits and the BoJ refrained from its bond-buying operations.

Japanese PM Abe ordered the compilation of a supplementary budget for rebuilding areas seriously affected by the recent earthquakes. (Kyodo)

PBoC Vice-Governor Chen said that financial institutions are facing expanding credit risks. (RTRS)

PBoC set the CNY mid-point at 6.5120 vs. last close. 6.5015 (Prev. mid-point 6.4898). (RTRS)
PBoC injected CNY 180bln via 7-day reverse repos. (RTRS)

China's total debt rose to a record 237% of GDP in Q1 which is much greater than emerging-market counterparts and has accumulated significantly from the 148% of GDP at the end of 2007. (FT)

Shanghai-London stock connect is to be announced in September. (HKEJ)

EUROPE/UK

ECB's Nowotny (Neutral), states the priority is preventing Europe from falling into deflation and would welcome a rate hike but only when the economy is stronger, business activity picks up and there is higher inflation. (Der Standard)

S&P affirmed France at AA; outlook negative and affirmed Norway at AAA; outlook stable (BBG) Fitch affirmed Italy at BBB+; outlook stable. (RTRS)

FX

JPY pared some of Friday’s weakness as the cautious tone in the region spurred bids into the safe-haven currency, which dragged USD/JPY towards 111.00and resulted in a pull-back in JPY crosses with AUD/JPY retreating below its 200 DMA at 85.91. Elsewhere, the majority of FX trade has been quiet ahead of the key risk-events, with some profit-taking in USD mildly benefiting its major counterparts, while CNY suffered after a weaker mid-point setting.

COMMODITIES

Oil prices extended on its recent pull-back which saw WTI crude futures decline towards USD 43/bbl . Gold (+0.4’%) was supported after USD came off Friday’s highs with a risk-averse tone in the region also supporting the safe-haven, while copper and iron-ore prices were down amid cautiousness ahead of upcoming key risk events and after Chinese commodity exchanges raised transaction fees late last week to curb speculation.

Iran’s oil minister stated that Iran will support any plan to stabilize the market and that the Doha meeting was a positive step , despite the failure to reach an output freeze deal. The oil minister also added that Iran’s oil output has risen by 1mln bpd vs. January and that it will keep raising output until it regains pre-sanction market share. (RTRS)

The Eastern Libyan government are poised to send their first export of crude oil. (WSJ)

GEOPOLITICAL

North Korea launched what could have been a ballistic missile from a submarine off its north-east coast on Saturday, according to South Korean defence officials. In separate reports, North Korea said it is prepared to stop nuclear tests if the US suspends its military exercises with South Korea, while the South is on high alert for a possible North Korea nuclear test. (Nikkei/Kyodo/Yonhap)

US

Friday saw another tepid day for US paper, as we head into a week of risk; the FOMC rate decision being at the top of the list. RANsquawk sources have noted a NY think tank report suggesting that the Fed will hold fire on hiking this week, with communication in regards to the timing of hikes to come under intense scrutiny. US T-notes closed down 4+ ticks at 129.15