Asian Market Update: RBNZ stability review maintains housing leverage; Australia Westpac confidence improves
***Economic Data***
- (AU) AUSTRALIA MAY WESTPAC CONSUMER CONFIDENCE INDEX: 103.2 V 95.1 PRIOR, M/M: +8.5% (highest since Jul 2010) V -4.0% PRIOR
- (AU) AUSTRALIA MAR HOME LOANS M/M: -0.9% V -1.5%E; Investment Lending: 1.5% v 4.1% prior
- (JP) JAPAN APR OFFICIAL RESERVE ASSETS: $1.26T v $1.26T PRIOR
- (NZ) New Zealand Apr REINZ median home price +7.7% y/y v +4.2% prior; Home sales y/y +18.4% v +8.2% prior; Home sales 8.6K v 9.5K prior
- (KR) SOUTH KOREA APR UNEMPLOYMENT RATE: 3.7% V 3.8%E
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +0.3%, S&P/ASX +0.7%, Kospi -0.5%, Shanghai Composite +0.4%, Hang Seng -0.6%, Jun S&P500 -0.2% at 2,074
***Commodities/Fixed Income***
- June gold +0.5% at $1,271/oz, June crude oil -0.5% at $44.43/brl, Jul copper +0.8% at $2.11/lb
- (US) Weekly API Oil Inventories: Crude: +3.4M v +1.3M prior; 2nd straight build; largest build in 4 weeks
- GLD: SPDR Gold Trust ETF daily holdings rise 2.4 tonnes to 839.3 tonnes; 5th straight increase; highest since Dec 2013
- SLV: iShares Silver Trust ETF daily holdings fall to 10,421 tonnes from 10,454 tonnes prior
- (CN) China MoF sells 5-yr bonds at 2.69% v 2.58% prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5209 V 6.5233 PRIOR
- (CN) PBOC to inject CNY80B in 7-day reverse repos
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥450B in 5-10yr JGBs
- (AU) Australia sells A$7B in 2.25% 2028 bonds at 2.525%; Largest bond sale ever by AOFM
***Market Focal Points/FX***
- Asian equity markets are mixed despite the biggest rally on Wall St in weeks as investors remain unconvinced that slowdown in China can be contained. Nikkei225 started out strongly with a rally of over 1% above 16,800 but retreated in afternoon session when JPY buyers re-emerged. USD/JPY fell as much as 70pips from the highs to 108.60 without any notable fundamental catalysts. S&P/ASX 200 hit a 9-month high above 5,400 early on as well, but retreated to 5,380 as Moody's warned on Australia banks. NZD/USD was also very volatile, spiking up some 60pips above $0.68 on New Zealand financial stability review that did not introduce any new macroprudential measures on housing as speculated by Fin Min English overnight.
- Among notable speakers, Japan PM advisor Fuji called on the govt to postpone the sales tax and offer as much as ¥10T in fiscal spending measures. Earlier, Abe's advisor Hamada remarked on FX, stating intervention will become necessary if USD/JPY falls to 90-95 range. In Chinese press, the govt had posted a plan for "zombie companies" to help reduce capacity in oversupplied sectors.
- Down under, AUD/USD hit a high of 0.7390 after Westpac consumer sentiment index rose by the biggest margin since mid-2010. Westpac economist attributed much of the improved confidence to the latest easing measure by the RBA. Aussie dollar moved off those highs abruptly as Moody's said major banks face increased challenges for rest of 2016 on expected "moderate weakening in asset quality and a slowdown in earnings growth over the rest of 2016" as well as negative impact on margins from a prolonged period of low interest rates.
- NZD/USD fell overnight after comments from Fin Min English who speculated that RBNZ will unveil new macroprudential measures to control housing inflation. This would, in turn, give greater leeway to the RBNZ in lowering rates. However, today's semiannual Financial Stability Report only stated that imbalances in the property sector are on the rise and that the central bank would closely watch the housing market but did not produce any new steps, sending NZD sharply higher. Later in the day, Gov Wheeler spoke in Parliament, clarifying that the RBNZ is "seriously" looking at further measures in Auckland or nationwide given the central bank's increasing concern. However, there was no specific timing for new measures and no decisions on further steps have been made.
***Equities***
US equities / ADRs:
- EA: Reports Q4 $0.50 v $0.42e, R$924M v $886Me; +7.7% afterhours
- PLNT: Reports Q1 $0.15 v $0.13e, R$83.3M v $77.9Me; +2.9% afterhours
- NUAN: Reports Q2 $0.38 v $0.35e, R$479M v $491Me; -5.5% afterhours
- DIS: Reports Q2 $1.36 (ex-items) v $1.40e, R$13.0B v $13.3Be; -5.5% afterhours
- SPLS: JUDGE BLOCKS MERGER WITH OFFICE DEPOT, CALLING IT ANTICOMPETITIVE; Initiating new $300M cost reduction plan; To pay Office Depot $250M break-up fee; Committed to dividend program, will close 50 stores; SPLS -10.1%, ODP -26.3% afterhours
- FOSL: Reports Q1 $0.20 v $0.18e, R$659.8M v $668Me; -30.8% afterhours
Notable movers by sector:
- Financials: China Galaxy Securities Co 6881.HK -1.3% (Apr result)
- Industrials: Suzuki Motor Corp 7269.JP +5.0% (FY15/16 result); GrainCorp GNC.AU -1.1% (H1 result); CSR CSR.AU +5.8% (FY16 prelim result)
- Technology: Pegatron Corp 4938.TW +0.3% (Q1 result); Taiwan Semiconductor Manufacturing Co 2330.TW +0.7% (Apr result); LG Electronics Inc 066570.KR -3.7% (relocation of mobile division speculation)
- Materials: Marubeni Corp 8002.JP -2.0% (FY15/16 result); Mitsubishi Corp 8058.JP +1.1% (FY15/16 result)
- Telecom: Softbank Corp 9984.JP +2.8% (FY15/16 result)