Asian Mid-session Market Update: Sterling spikes as more polls show growing Stay camp support; Japan June PMI remains in contraction
***Economic Data***
- (JP) JAPAN JUNE PRELIM MANUFACTURING PMI : 47.8 V 47.7 PRIOR; 4th straight contraction
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.5%, S&P/ASX +0.1%, Kospi -0.5%, Shanghai Composite -0.8%, Hang Seng +0.2%, Sep S&P500 +0.4% at 2,085
***Commodities/Fixed Income***
- Aug gold -0.1% at $1,268/oz, Aug crude oil +0.6% at $49.40/brl, Jul copper -0.3% at $2.13/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 3.6 tonnes to 915.9 tonnes; highest since Sept 2013
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5658 V 6.5935 PRIOR
- (CN) PBOC to inject CNY60B in 7-day reverse repos
- JGB: (JP) Japan's MoF sells ¥1.00T in 0.2% (0.4% prior) 20-year JGBs; Avg yield: 0.218% (record low) v 0.288% prior; bid-to-cover: 3.61x v 3.36x prior
- (JP) Japan investors sold net ¥458B (first net sale since Mar 26th) in foreign bonds v bought ¥868B in prior week; Foreign investors sold net ¥231B in Japan stocks v bought ¥128B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian equity markets are mixed as traders hunker down for a whirlwind of volatility over the next 24 hours. UK voters are finally going to the polls to decide on the fate of UK's EU membership - polls will close and some early exit data will be available by about 17:00ET on Thursday. The 11th hour survey from both COMRES and YouGov are tilting in favor of the Stay camp - YouGov saw 51% for remain, 49% for leave (prior was 42% for remain, 44% for leave) and COMRES was 48% for remain, 42% for leave (prior 46% for 'Remain', 45% for 'Leave'). GBP/USD spiked up some 120pips above 1.4840 on the release - a 2016 high - while S&P futures rallied 10pts or 0.5%, and USD/JPY rose over 50pips toward ¥105. Risk-on AUD/USD and NZD/USD were also bid slightly higher on those poll results, rising 25pips each to 0.7525 and 0.7180 respectively. In the event of an adverse surprise, a statement from G7 finance leaders has indicated they will issue a joint statement to calm the markets.
- Early economic data for June out of Japan is showing few signs of recovery. Prelim manufacturing PMI edged up to 47.8 from 47.7 but remains in contraction for the 4th straight month. Among key components, deterioration in backlog, output/input prices, and inventories is on the rise. New orders, exports, and employment are still falling but at a slower rate. Markit economist commentary noted a sharp drop in international demand and April earthquake impact as factors weighing on Japan economy, underscoring employment growth easing to its worst rate in 9 months and calling for further govt stimulus. However, commentary from BOJ dissenter Kiuchi is questioning whether any further benefit can be gained from more monetary easing, adding that the struggle to achieve 2% inflation is because of inadequate structural changes in the economy. Kiuchi added Capex conditions are unlikely to improve and that negative rate policy is a detriment to financial market stability.
- After yesterday's report from Moody's warning about the impact of banks' investment in loans, today's note focused on the risk to China from SOE-contingent liabilities. Specifically, Moody's noted a split in expectations "whether or not China will face a financial crisis over the coming years", acknowledging high debt load of Chinese entities connected with the government that raises contingent liability risk for the sovereign but not prepared to forecast an imminent financial crisis. SOE leverage stabilisation - Moody's notes - is unlikely in the near term, but only 15% of business leaders anticipate financial crisis in 1-2 years and 27% are looking at 3-5 year horizon for deeper strain to materialize.
***Equities***
US equities / ADRs:
- MLHR: Reports Q4 $0.67 v $0.52e, R$583M v $567Me (2 est); Raises dividend 15% to $0.17 (implied yield 2.2%); +5.9% afterhours
- BKS: Reports Q4 -$0.24 adj v -$0.24e, R$877M v $889Me (1 est); +4.9% afterhours
- FUL: Reports Q2 $0.67 v $0.69e, R$533M v $543Me; -2.6% afterhours
- BBBY: Reports Q1 $0.80 v $0.86e, R$2.74B v $2.78Be; -4.3% afterhours
- RHT: Reports Q1 $0.50 v $0.50e, R$568M v $563Me; Announces $1.0B Stock Repurchase Program (6.9% of market cap); -6.7% afterhours
- SCS: Reports Q1 $0.18 v $0.16e, R$718.8M v $699Me (2 est); -14.5% afterhours
Notable movers by sector:
- Consumer discretionary: Trinity 891.HK -1.7% (profit warning); SEEK SEK.AU -4.4% (affirms guidance); Shun Tak Holdings 242.HK +4.2% (Macau asset sale plan)
- Consumer staples: Anhui Kouzi Distillery Co 603589.CN -5.1% (shareholder to sell stake)
- Financials: Bank of Communications 3328.HK +0.2% (approval for preferred share sale plan)
- Industrials: Hitachi 6501.JP +2.1% (guidance)
- Technology: Alibaba Health Information Technology 241.HK -2.1% (FY16 result); Sharp Corp 6753.JP +8.0% (job cut speculation, to start OLED shipment)
- Materials: Dongbu Steel 016380.KR -3.1% (in talks on plant sale); Fortescue Metals Group FMG.AU +5.4% (to repay loans before maturity)
- Energy: Sundance Energy Australia SEA.AU -2.5% (guidance)