Asian Mid-session Market Update: Australia unemployment ticks higher as Moody's warns on election risks; BOK on hold in unanimous decision
***Economic Data***
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
- (AU) AUSTRALIA JUNE EMPLOYMENT CHANGE: +7.9K V +10.0KE; UNEMPLOYMENT RATE: 5.8% (4-month high) V 5.8%E
- (AU) AUSTRALIA JULY CONSUMER INFLATION EXPECTATION: 3.7% V 3.5% PRIOR; 7-month high
- (AU) AUSTRALIA JUNE NEW MOTOR VEHICLE SALES M/M: 3.1% v -1.0% PRIOR; Y/Y: 2.1% v 1.8% PRIOR
- (NZ) NEW ZEALAND JUNE BUSINESS MANUFACTURING PMI: 57.7 V 57.2 PRIOR; 5-month high
- (NZ) NEW ZEALAND JULY ANZ CONSUMER CONFIDENCE INDEX: 118.2 V 118.9 PRIOR; M/M: -0.6% V +2.3% PRIOR
- (NZ) NEW ZEALAND JUNE ANZ JOB ADVERTISEMENTS M/M: 0.5% V 0.5% PRIOR; 5th straight increase
- (SG) SINGAPORE Q2 ADVANCED GDP Q/Q: 0.8% V 0.9%E; Y/Y: 2.2% V 2.2%E
- (UK) JUNE RICS HOUSE PRICE BALANCE: 16% V 10%E
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +0.8%, S&P/ASX +0.3%, Kospi -0.1%, Shanghai Composite -0.4%, Hang Seng +0.1%, Sep S&P500 flat at 2,145
***Commodities/Fixed Income***
- Aug gold -0.4% at $1,340/oz, Aug crude oil +1.5% at $45.40/brl, Sep copper +0.2% at $2.24/lb
- SLV: iShares Silver Trust ETF daily holdings rise to 10,842 tonnes from 10,679 tonnes prior; multi-year high
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6846 V 6.6891 PRIOR; 2nd straight firmer Yuan setting
- (CN) PBOC to inject CNY20B in 7-day reverse repos
- (JP) Japan investors bought net ¥2.5T (record high) in foreign bonds v bought ¥427B in prior week; Foreign investors sold net ¥307B in Japan stocks v bought ¥114B in Japan stocks in prior week
- JGB: (JP) Japan MoF sells ¥2.20T in 0.1% (0.1% prior) 5-year JGBs; Avg yield: -0.365% v -0.232% prior; Bid-to-cover: 3.45x (9-month low) v 4.66x prior
***Market Focal Points/FX***
- Asian equity markets have turned more mixed, even though cash indices made new record highs and treasuries retreated further in US trading. Shanghai Composite is under modest pressure, weighed down by soft components of June China trade data that showed import decline in both USD and CNY terms falling by a wider than expected margin. S&P futures are flat, WTI crude oil is off the lows after Wednesday's plunge, while gold prices are little changed. In FX majors, AUD/USD was especially volatile with a 30pip spike above $0.7630 on mixed-positive jobs data, USD/JPY remains range-bound in 104-105 band for the 3rd straight day, and NZD/USD fell about 80pips late in the day after reports that RBNZ will release an economic assessment next week that may potentially pave the way to August easing.
- Australia unemployment rate ticked up to a 4-month high of 5.8% - in line with estimates. Employment change was just shy of consensus at +7.9K, but markets reacted positively given that the full-time component increase was a robust 38.4K, as part-time fell 30.6K. Participation rate also reached a 3-month high of 64.9%. Elsewhere, credit agencies continue to weigh in on Australia political gridlock, even though the ruling Coalition has already claimed victory. Today, Moody's noted the election result is a credit negative as it puts into question the govt's promises to cut the budget deficit.
- In China, after yesterday's trade data that showed disappointing declines in Imports, China Customs official added that exports may also face big downward pressure in Q3 due to soft global demand. The official also pointed to the risks from Brexit, tighter Fed policy, geopolitical risks, and terrorism activity impacting consumer sentiment and weighing on trade. Investors are awaiting tomorrow's critical Q2 GDP and June industrial/retail/investment data. Meanwhile, state planner NDRC remarked that the economy is basically stable, with regulators on track to meet 2016 target for coal and steel capacity reduction.
- Japan PM Abe advisor Hamada cast a shadow over expectations of BOJ announcing further policy stimulus at the end of the month. Expectations for more easing have been building after a strong showing of ruling LDP in upper house of Parliament elections, but Hamada hinted that corporate Japan should not rely too much on the central bank for help. Overnight, Abe's advisor Honda was more willing to call for more easing, noting deflation cannot be addressed with Yan at 100 levels while also recommending expanded bond buying over a deeper cut in already negative interest rates.
- After last month's surprise rate cut, Bank of Korea left its 7-day repo rate on hold at 1.25%. Analysts were unanimous in expectation of a hold, and the policy board also did not produce any dissent. BOK did revise its 2016 targets for GDP and CPI to the downside by 0.1pt to 2.7% and 1.1% respectively. The policy statement noted high uncertainties to Korea's growth and sluggish sentiment, but also pointed to improvement in consumption and expectation of a gradual rise in inflation.
***Equities***
US equities / ADRs:
- CY: Working with Goldman Sachs on strategic options after receiving interest from private equity firms; Said to be holding out for a $15/shr deal - Betaville blog; +6.5% afterhours
- NVCR: Receives FDA Approval for second generation Optune System; +5.7% afterhours
- YUM: Reports Q2 $0.75 (adj) v $0.74e, R$3.01B v $3.10Be; Raises FY16 core operating profit to +14% from +12%; +4.6% afterhours
- HSY: Mondelez may raise its offer if it sees an opening; Has not dropped its pursuit of the company - financial press; +0.7% afterhours
- AMZN: ChannelAdvisor final estimates for US 'Prime Day' SSS -3% y/y
Notable movers by sector:
- Consumer discretionary: Treasury Wine Estates TWE.AU +5.0% (JPMorgan raises to overweight); Sapporo Holdings Ltd 2501.JP +1.9% (H1 result speculation)
- Consumer staples: China Modern Dairy 1117.HK -1.8% (profit warning); Luk Fook Holdings 590.HK -1.7% (Q1 result)
- Financials: Poly Real Estate Group Co 600048.CN +2.3% (in talks with AVIC for property business)
- Industrials: Incitec Pivot IPL.AU -7.8% (UBS cuts to neutral); Hyundai Motor Co 005380.KR -2.6% (union workers vote in favor of strike)
- Technology: Nintendo Co. 7974.JP +16.6% (Gaming Pokeman momentum; partnership with McDonald's); LG Innotek 011070.KR +7.7% (JPMorgan raises to overweight)
- Materials: Iluka Resources ILU.AU +2.1% (Q2 result); Maanshan Iron & Steel 323.HK % (H1 guidance); Alumina AWC.AU +0.7% (Goldman raises to Buy); Fortescue Metals Group FMG.AU -4.0% (FY16 iron ore shipment)
- Energy: Woodside Petroleum WPL.AU -1.3 (to acquire ConocoPhillips' Senegal interests)
- Healthcare: Daiichi Sankyo Co 4568.JP -0.9% (to commercialize biosimilars)
- Utilities: Transurban TCL.AU -0.8% (Q4 result)