Asia Mid-Session Market Update: China trade surplus narrows as imports rise for the first time in nearly 2 years; Japan final GDP revised higher on less weak CapEx
***Economic Data***
- (CN) CHINA AUG TRADE BALANCE CNY TERMS: CNY346B v CNY372BE (7-month high); USD TERMS: $52.1B V $58.4BE
- (CN) CHINA AUG FOREIGN RESERVES: $3.185T V $3.190TE (lowest level since Dec 2011)
- (JP) JAPAN Q2 FINAL GDP Q/Q: 0.2% V 0.0%E (2nd straight expansion); ANNUALIZED GDP: 0.7% V 0.2%E (2nd straight expansion)
- (JP) JAPAN JULY CURRENT ACCOUNT BALANCE: ¥1.94T V ¥2.07TE; ADJUSTED CURRENT ACCOUNT: ¥1.45T V ¥1.57TE; TRADE BALANCE: ¥613.9B V ¥571BE
- (JP) JAPAN AUG BANK LENDING (INC TRUSTS) Y/Y: 2.0% v 2.1% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.0% V 2.0%E
- (JP) JAPAN AUG TOKYO AVG OFFICE VACANCIES: 3.9% v 3.9% PRIOR
- (JP) Japan investors sold net ¥1.3T in foreign bonds v bought ¥108B in prior week; Foreign investors bought net ¥1.9B in Japan stocks v sold ¥6.8B in Japan stocks in prior week
- (AU) AUSTRALIA JULY TRADE BALANCE (A$): -2.4B V -2.7BE; 27th consecutive deficit
- (NZ) New Zealand ANZ Aug non-tradable inflation m/m: +0.1% v -0.3% prior
- (UK) AUG RICS HOUSE PRICE BALANCE: 12% V 2%E
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.5%, S&P/ASX -0.9%, Kospi -0.1%, Shanghai Composite flat, Hang Seng +0.4%, Sep S&P500 +0.1% at 2,185
***Commodities/Fixed Income***
- Dec gold +0.1% at $1,350/oz, Oct crude oil +1.7% at $46.28/brl, Dec copper +0.3% at $2.10/lb
- (US) Weekly API Oil Inventories: Crude: -12.1M v +0.9M prior (multi-year high draw)
- (IR) Iran State Oil Co (NIOC)'s Ghamsari: Too early to discuss freeze at Algiers OPEC meeting; Iran has possibility to top pre-sanction level of output in 2017; Oil price in $40-50/brl range is "somewhat reasonable" - financial press
- GLD: SPDR Gold Trust ETF daily holdings fall 0.3 tonnes to 951.8 tonnes
- SLV: iShares Silver Trust ETF daily holdings rise to 11,281 tonnes from 11,246 tonnes prior; multi-year high
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6620 V 6.6555 PRIOR
- (CN) CICC economists Yu Xiangrong: It is a misperception that China will devalue yuan after SDR inclusion
- (CN) PBOC to inject CNY60B in 7-day reverse repos and CNY20B in 14-day reverse repos
- JGB: (JP) Japan MoF sells ¥2.18T in 5-year bonds; avg yield -0.175% v -0.165% prior; bid-to-cover 3.03x (lowest in 11 months) v 3.57x prior
- (NZ) New Zealand sells NZ$100M in 2.5% 2035 inflation-indexed bonds
***Market Focal Points/FX***
- Asian equity markets are trading mixed, with Australia index underperforming on weakness in Materials and Hang Seng trading moderately higher on strength in financials / property developers. Volatility is still compressed however, tracking subdued sentiment in US hours, where stronger than expected JOLTS jobs data and more upbeat Beige Book produced little market impact. Oil prices were a notable exception, with Oct WTI crude oil contract up nearly 2% in electronic trade on a multi-year high draw in API inventories, though the demand may have been skewed by tropical storm Hermine. Economic data in Asia were also reasonably positive, with Japan Q2 final GDP revised higher and China trade components featuring a rebound in imports. In FX majors, AUD/USD rose about 15pips on China trade release to 0.7685 and NZD/USD was up 25pips off the lows above 0.7470. USD/JPY pair initially rose 25pips above 101.90 following GDP data and then tested below 101.50 in afternoon trade on comments by BOJ Gov Nakaso.
- China August trade surplus missed consensus, but still registered a 7-month high in Yuan terms. Trade components were better than expected in both CNY and USD, with imports particularly impressive - in Yuan terms imports rose +10.8% v +0.7%e, and in USD imports rose for the first time since Oct 2014 at +1.5% v -5.0%e. Economists with BNP remarked that this set of trade numbers is likely to reduce expectations of further PBoC easing.
- Japan's Q2 final GDP marked the 2nd straight expansion on sequential and annualized basis. Most notable component was the corporate CAPEX decline of -0.1%, better than -0.4%e and -0.4% prelim, while the private consumption component growth was in line and unchanged from prelim at +0.2%. Japan chief cabinet secretary Suga said the figures show the economy continued its moderate recovery. Later in the session, Bank of Japan Deputy Governor Nakaso straddled both sides of the fence in terms of market uncertainty related to this month's policy review ahead of the upcoming BOJ meeting. Initially, USD/JPY hit session lows as Nakaso said the economy is no longer in deflation and reiterated Gov Kuroda's increased focused on the impact of NIRP on financials. Nakaso then remarked however that ruling out further cuts to negative rates would not be the right approach, sending USD/JPY back above 101.50.
- Australia's July trade deficit was more narrow than expected but still marked the 27th straight month of negative print. Exports improved to +3% from -1% prior, while imports came in flat after last month's +2%. Gold shipments were especially impressive with a record high in value, but exports of Iron Ore and Coal hit 5-month and 3-month lows respectively.
***Equities***
US equities / ADRs:
- TLRD: Reports Q2 $0.99 v $0.92e, R$909M v $893Me; +11.4% afterhours
- HPE: Reports Q3 $0.49 v $0.45e, R$12.2B v $12.6Be; -0.5% afterhours
- GWRE: Reports Q4 $0.39 v $0.32e, R$141.2M v $137Me; -5.8% afterhours
- TSCO: Guides Q3 $0.65-0.67 v $0.72e, $1.54-1.55B v $1.60Be, SSS -1% to flat v +2.9% y/y; -9.3% afterhours
- PIR: Reports prelim Q2 -$0.06 to -$0.05 v -$0.03e, Rev -6.7% y/y (implies R$401M v $426Me); -9.4% afterhours
Notable movers by sector:
- Consumer discretionary: Skyworth Digital 751.HK -2.6% (Aug result); DeNA Co. 2432.JP +10.3% (Super Mario iPhone game); APN Outdoor APO.AU +1.8% (UBS raised to buy)
- Financials: Yuexiu Property 123.HK +1.7% (Aug result); Gemdale Properties and Investment Corp 535.HK -1.9% (Aug result); Longfor Properties 960.HK -5.7% (Aug result)
- Technology: Nintendo Co. 7974.JP +11.6% (Super Mario game on new iPhone); Japan Display Inc 6740.JP +2.7% (expects positives free cash flow for the first time); MediaTek Inc 2454.TW -0.8% (Aug result)
- Energy: Algae.Tec AEB.AU +9.4% (guides initial sales to Gencore)
- Healthcare: Sigma Pharmaceuticals SIP.AU +11.9% (H1 result)
- Materials: Whitehaven Coal WHC.AU -5.2% (NDRC to discuss curbing coal prices)