Asian Mid-session Market Update: BOJ on hold as USD/JPY falls to 21-month low near ¥104
***Economic Data***
- (AU) AUSTRALIA MAY EMPLOYMENT CHANGE: +17.9K V +15.0KE; UNEMPLOYMENT RATE: 5.7% V 5.7%E
- (AU) AUSTRALIA MAY NEW MOTOR VEHICLE SALES M/M: -1.1% v -2.8% PRIOR; Y/Y: +1.7% v +2.2% PRIOR
- (AU) AUSTRALIA JUNE CONSUMER INFLATION EXPECTATION: 3.5% V 3.2% PRIOR
- (NZ) NEW ZEALAND Q1 GDP Q/Q: 0.7% V 0.5%E; Y/Y: 2.8% V 2.6%E
- (US) APR TOTAL NET TIC FLOWS: +$80.4B V -$98.3B PRIOR; NET LONG-TERM TIC FLOWS: -$79.6B V $78.1B PRIOR; China Total holding of US Treasuries: $1.243T v $1.245T prior (2nd straight month of decline)
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -2.1%, S&P/ASX -0.1%, Kospi -0.7%, Shanghai Composite flat, Hang Seng -1.9%, Sep S&P500 -0.3% at 2,056
***Commodities/Fixed Income***
- Aug gold +1.3% at $1,304/oz, Jul crude oil -1.0% at $47.52/brl, Jul copper -0.4% at $2.08/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 2.1 tonnes to 900.8 tonnes; highest since Oct 2013
- (AU) Australia 10-year bond yield falls to record low below 2.00%
- (NZ) New Zealand sells NZ$150M in 2.25% Apr 2020 bonds; avg yield 2.0867% v 2.2018% prior; bid-to-cover 5.5x
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5739 V 6.6001 PRIOR; strongest Yuan setting since June 8th
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- (JP) Japan investors bought net ¥868B in foreign bonds v bought ¥894B in prior week; Foreign investors bought net ¥128B in Japan stocks v sold ¥97.8B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian equity markets have resumed their slide in spite of the somewhat more dovish FOMC policy statement with implications of lower interest rates in the near-to-medium term. Nikkei225 is particularly under heavy selling pressure after BOJ decision that did not delivery any new policy easing as had been expected by about a quarter of analysts surveyed. Losses in Tokyo are exacerbated by the cratering USD/JPY pair, which fell about 150pips in the wake of BOJ statement to 104.10. AUD/USD and GBP/USD are both down about 30pips heading into the close of Asian trade at 0.7390 and 1.4160, though NZD/USD is holding its gains of over 40pips above $0.7070 on stronger than expected New Zealand GDP.
- Going into the BOJ decision today, a Nikkei QUICK survey said over 80% of market watchers expect BOJ to delay further easing as investors continue to gauge the effectiveness of negative rate policy. Report did note however that some 50% still expect more easing in July, and this is perhaps behind the violent move lower in USD/JPY. Not only did the BOJ stay on hold on both interest on excess reserves at -0.1% and annual monetary base expansion at ¥80T, the central bank also maintained its overall economic assessment of "continued moderate recovery trend" and also upgraded its view of housing investment and public spending. On inflation, the BOJ still saw core CPI at about 0%, but revised its outlook for inflation to allow for "slightly negative" CPI vs prior view of "about 0%". The changes in the statement are not deemed as indicative of the BOJ being less reluctant to add to its policy stimulus, putting July easing into question even if economic data continue to deteriorate. Rhetoric from Tokyo should become particularly noteworthy over the next 24 hours in terms of any possibility of intervention to curb JPY strength - thus far, cabinet Sec Suga reiterated that sudden moves in FX market are undesirable.
- Outside of central bank decisions, economic data from Down Under have been more constructive. Australia employment change beat slightly despite participation rate falling to a 12-month low and most of the job gains coming in the part-time sector. Closely watched Hours Worked component rose 27.7M - a 16-month high. In New Zealand, Q1 GDP topped consensus by 0.2pts on both q/q and y/y basis. Private consumption component growth slowed to 0.4% v 1.0% prior, but fixed capital rose by an impressive 4.2% v +1.6% prior. Exports saw a modest decline against the prior month's slightly gain. Earlier, New Zealand global dairy trade auction results came in flat, though the average winning auction price hit a 5-month high.
- Among notable speakers, China Academy of Social Science (CASS) researcher remarked that China govt debt is controllable and not in crisis state, with a number of high-profile investors recently focusing on the rise in non-performing loans of mainland banks. China cabinet also announced it will accelerate reduction of overcapacity in non-ferrous sector and also control newly added production capacity. Overnight, China Yuan loans were higher than expected at 986B V 750BE, but analysts with ANZ pointed to disappointing total social financing of 0.700T V 1.000TE, concluding that "weaker TSF highlights the potential poor economic prospects, consistent with the fall in the fixed-asset investment data in May."
***Equities***
US equities / ADRs:
- CTRP: Reports Q1 -$0.54 v -$0.67e, R$648M v $633Me; +5.4% afterhours
- NUS: Announces $210M strategic investment from Ping An ZQ China Growth Opportunity Limited; +4.5% afterhours
- DVN: Enters agreement to sell non-core midland assets for $858M; raises FY16 production outlook and upstream capital program; +2.0% afterhours
- JBL: Reports Q3 $0.17 v $0.16e, R$4.31B v $4.17Be; -1.0% afterhours
- PXD: Acquires ~28K Midland Basin acres for $435M; to add 5 horizontal rigs during H2; -1.9% afterhours
- AMSG: Confirms merger agreement with Envision in all-stock transaction; AMSG -0.7%; EVHC -8.9% afterhours
- QLGC: Cavium to acquire QLogic for $1.36B or $15.50/shr ($11/shr in cash and 0.098 of a share of Cavium common stock); QLGC +11.9%; CAVM -7.3% afterhours
Notable movers by sector:
- Consumer discretionary: China Eastern Airlines 670.HK -1.0% (May result); Crown Resorts CWN.AU +13.1% (confirms to spinoff some operations); Hyundai Department Store Co 069960.KR +1.2% (earnings expected to rise); Toridoll Corp.3397.JP -9.2% (food poisoning case)
- Industrials: Mitsubishi Motors 7211.JP -1.9% (fuel testing fraud); Daewoo Shipbuilding & Marine 042660.KR -6.7% (accounting fraud report)
- Technology: Hermes Microvision 3658.TW +9.9% (acquisition)
- Materials: Hanwha Chemical 009830.KR +4.1% (expects earnings surprise)
- Healthcare: Primary Healthcare PRY.AU -2.6% (regulator accepts divestitures)