Asian Market Update: Australia Retail Sales drop to 14-month lows as RBA Gov Stevens talks down AUD
***Notable Economic Data*** - (CN) CHINA JUN HSBC SERVICES PMI: 53.1 (15-month high) V 50.7 PRIOR; COMPOSITE PMI: 52.4 V 50.2 PRIOR - (CN) CHINA JUN NON-MANUFACTURING PMI: 55.0 V 55.5 PRIOR - (AU) AUSTRALIA MAY RETAIL SALES M/M: -0.5% V 0.0%E (biggest decline since Mar 2013) - (AU) AUSTRALIA MAY BUILDING APPROVALS M/M: 9.9% (8-month high) V 3.2%E; Y/Y: 14.3% V 8.0%E - (AU) AUSTRALIA JUN AIG PERFORMANCE OF SERVICES INDEX: 47.6 V 49.9 PRIOR (4th consecutive contraction, 6-month low) - (JP) JAPAN JUN MARKIT SERVICES PMI: 49.0 (3rd straight month of contraction) V 49.3 PRIOR; MARKIT/JMMA COMPOSITE PMI: 50.0 V 49.2 PRIOR
***Index Snapshot (as of 02:30 GMT)*** - Nikkei225 -0.1%, S&P/ASX +0.6%, Kospi -0.3%, Shanghai Composite -0.2%, Hang Seng +0.1%, Sept S&P500 -0.1% at 1,966
***Commodities/Fixed Income/Currencies*** - Aug gold -0.4% at $1,325, Aug crude oil -0.5% at $104.00/brl, Sept Copper flat at $3.26/lb - SLV: iShares Silver Trust ETF daily holdings fall to 10,038 tonnes from 10,042 tonnes prior (lowest since Feb 19th) - JGB: (JP) Japan MoF sells ¥2.20T in 0.6% (0.6% prior) 10-yr notes; Avg yield: 0.562% v 0.608% prior; Bid to cover: 3.43x v 3.74x prior - (CN) PBoC to drain CNY10B in 28-day repos (2nd consecutive drain); Injects net CNY55B this week v injected CNY12B prior (8th consecutive week of net injection) - USD/CNY: (CN) PBoC sets yuan mid point at 6.1581 v 6.1549 prior setting (weakest Yuan setting since Jun 6th) - (US) S&P: Fundamentals support baseline US GDP forecast of 2.3% in 2014, 3.1% in 2015
***Market Focal Points/Key Themes*** - AUD/USD is once again the most active cross among the dollar majors, falling sharply for the 2nd consecutive session after hitting an 8-month high above $0.95 earlier this week. Mixed China services PMIs have taken a back seat to increasingly more dovish sentiment from RBA Gov Stevens and the biggest drop in retail sales since March of 2013. Stevens stated that while monetary policy is very accommodative, RBA still has ammunition on interest rates, adding that AUD is overvalued by most measures and the troubling property sector inflation may be abating. Recall AUD has received a modest boost from the recent RBA policy statements when the central bank abstained from more aggressive remarks on currency in spite of the deteriorating economic fundamentals.
- China's largest cement maker Anhui is up nearly 5% in Shanghai after guiding H1 net profit to rise 90%. China's Qilu Bank also clarified that the recent missed loan payment was not related to a local government financing vehicle (LGFV). Yesterday, reports noted Qilu Bank sued the vehicle over bad loans, raising the possibility of the first official admission of a default by local govt.
- A research note from S&P reiterated baseline projections for US GDP of 2.3% in 2014, 3.1% in 2015, supported by "steady improvement in manufacturing activity employment numbers and consumer sentiment." That report was also upbeat on the auto sector for the next 12-18 months, given low interest rate environment and recovering property sector.
***Equities*** US markets: - LULU: Founder's advisers said to be sounding out private equity firms about buyout - financial press; +1.5% afterhours - SNX: Reports Q2 $1.52 (adj) v $1.38e, R$3.45B v $3.17Be; -2.7% afterhours - BIND: Announces Completion of Collaboration Agreement with Amgen; -16.2% afterhours - RGDO: Announces Initiation of DSMB review of REGULATE-PCI Data; -40.8% afterhours
Notable movers by sector: - Materials: Anhui Conch Cement 914.HK +4.9% (H1 guidance); Silver Lake Resources SLR.AU -5.4% (FY14 gold sales result) - Technology: Guangzhou Hongli Opto-Electronic 300219.CN +1.9% (H1 guidance); Toshiba 6502.JP +2.5% (may be awarded $4.9B reactor contract) - Healthcare: Shanghai Kehua Bio-Engineering 002022.CN +2.8%, Jilin Zixin Pharmaceutical Industrial 002118.CN +4.3%, Da An Gene Co Ltd Sun Yat-Sen University 002030.CN +10.0%, Hunan China Sun Pharmaceutical Machinery 300216.CN +6.8% (China allows usage of gene sequencing) - Consumer discretionary: ABC-Mart 2670.JP +0.8% (press reports on Q1 results) - Industrials: Hyundai Heavy 000720.KR +1.4% (contract award)