Asian Mid-session Market Update: RBA cuts to 1.50% as expected amid deteriorating trade and housing data; Japan Fin Min signals FX focus in response to recent JPY strength
***Economic Data***
- (AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.50% (record low); AS EXPECTED
- (AU) AUSTRALIA JUNE TRADE BALANCE (A$): -3.2B V -2.0BE; 26th consecutive deficit; biggest deficit in 6 months
- (AU) AUSTRALIA JUNE BUILDING APPROVALS M/M: -2.9% (2nd straight decline) V +0.8%E; Y/Y: -5.9% (2nd straight decline) V -2.4%E
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 118.0 v 115.5 prior
- (NZ) NEW ZEALAND Q3 2-YEAR INFLATION EXPECTATION SURVEY Q/Q: 1.65% V 1.64% PRIOR (3-quarter high)
- (NZ) NEW ZEALAND JULY QV HOUSE PRICES Y/Y: 14.1% V 13.5% PRIOR (4th consecutive increase)
- (JP) JAPAN JULY MONETARY BASE Y/Y: 24.7% v 25.4% PRIOR; MONETARY BASE END OF PERIOD: ¥403.9T v ¥403.9T PRIOR
- (KR) SOUTH KOREA JULY CPI M/M: 0.1% V 0.2%E; Y/Y: 0.7% V 0.8%E; CPI CORE Y/Y: 1.6% V 1.7%E
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.7%, S&P/ASX -0.4%, Kospi -0.5%, Shanghai Composite flat, Hang Seng closed, Sep S&P500 +0.2% at 2,168
***Commodities/Fixed Income***
- Dec gold -0.3% at $1,355/oz, Sep crude oil +0.3% at $40.19/brl, Sep copper +0.3% at $2.20/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 5.9 tonnes to 964.0 tonnes; highest since July 20th
- SLV: iShares Silver Trust ETF daily holdings rise to 10,915 tonnes from 10,877 tonnes prior; multi-year high
- JGB: (JP) Japan MoF sells ¥2.18T in 10-yr 0.1% JGBs; Avg yield: -0.047% v -0.243% (record low) prior; bid to cover: 3.16x v 3.64x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6451 V 6.6277 PRIOR; first weaker setting in 6 sessions
- (CN) PBOC to inject CNY60B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets are softer as investors note the loss of upward momentum and disappointing ISM data stateside along with the slide in oil prices back to $40/brl. Hang Seng is closed due to typhoon and Shanghai Composite is flat in the wake of the mixed PMI data out overnight. Japan is underperforming ahead of the formal release of PM Abe's fiscal package, while Australia index is off its lows after the RBA decision to cut rates. In FX majors, AUD/USD fell around 50pips to 0.75 following RBA, NZD/USD traded in a 30pip range below $0.72, and USD/JPY rose about 40pips to session-high of 102.80 after Fin Min Aso warned the govt is monitoring FX volatility.
- Reserve Bank of Australia heeded expectations of a 25bp rate cut to 1.50%, though traders already fret that little change in the accompanying statement suggests this may a one-and-done easing. RBA reiterated global economy continues to grow, Australia growth remains at moderate pace, and near term indicators for employment show modest expansion. Inflation is also deemed to be "quite low" and stay that way for some time. RBA did add that growth in lending for housing has slowed this year, which suggests that "the likelihood of lower interest rates exacerbating risks in the housing market has diminished." Note that earlier released Australia building approvals was worse than expected, showing 2nd straight month of decline on both m/m and y/y basis. Australia terms of trade also registered a bigger deficit as exports fell 1% after 1% rise previously, while shipments of iron ore hit a 4-month low.
- Ahead of PM Abe's official unveiling of the ¥28T stimulus package today, early indications suggest the plan will include ¥6.2T for infrastructure, ¥2.7T for disaster relief, ¥1.3T to manage Brexit risks and help SMEs, and ¥3.4T to improve demographics. Soft US data has added to pressure in USD/JPY pair following underwhelming BOJ decision last week, and today Fin Min Aso had to prop up the yen rate by noting the govt is uncomfortable with "nervous movements" in FX markets, sending USD/JPY up over 40pips. Separately, a Nikkei report today citing a govt official expressed skepticism that the BOJ 2% inflation target can be achieved anytime soon, underscoring the optimistic CPI projections in the latest central bank statement (1.7% in FY17) relative to less rosy cabinet estimates.
- In China, state planner NDRC expressed confidence in reaching the official annual targets even though the economy is still facing many challenges. Reports on the property sector have also been more upbeat as China Index Academy saw avg price of new residential properties in 100 major cities in July rising 1.6% m/m v 1.3% in June.
***Equities***
US equities / ADRs:
- AMKR: Reports Q2 +$0.02 v -$0.08e, R$917.3M v $875Me (1 est); +14.4% afterhours
- TEX: Reports Q2 $0.64 adj v $0.53e, R$1.30B v $1.60Be; +0.2% afterhours
- THC: Reports Q2 $0.38 adj v $0.49e, R$4.87B v $4.80Be; -5.9% afterhours
- IDTI: Reports Q1 $0.36 v $0.36e, R$192.1M v $191Me; -16.4% afterhours
Notable movers by sector:
- Consumer discretionary: Seven West Media SWM.AU -15.5% (FY16 prelim result); Japan Tobacco Inc 2914.JP +1.1% (H1 result); Navitas NVT.AU +0.3% (Fy16 result)
- Financials: Credit Corp CCP.AU +11.3% (guidance); Mitsubishi UFJ Financial Group 8306.JP -3.1% (Q1 result)
- Industrials: Qube Logistics QUB.AU +1.0% (acquisition); Ibiden 4062.JP -3.7% (Q1 result); NSK 6471.JP +6.8% (Q1 result); Teijin 3401.JP -0.3% (cuts guidance)
- Technology: Itochu Techno Solutions 4739.JP +4.4% (Q1 result); GMO internet 9449.JP +2.8% (Q1 result); Otsuka Corp 4768.JP -10.1% (H1 result); Sumitomo Electric Industries 5802.JP -3.2% (Q1 result); Asahi Glass Co 5201.JP +4.4% (H1 result)
- Materials: Nippon Soda Co 4041.JP+4.2% (Q1 result); Resolute Mining RSG.AU -4.3% (FY16 result); BC Iron BCI.AU +7.1% (FY16 result)
- Energy: Sundance Energy Australia SEA.AU -3.5% (Q2 result)