Asian Mid-session Market Update: Nikkei225 leading the rally higher on speculation over helicopter money as markets await details on stimulus
***Economic Data***
- (AU) AUSTRALIA JULY WESTPAC CONSUMER CONFIDENCE INDEX: 99.1 V 102.2 PRIOR, M/M: -3.0% (2nd straight decline) V -1.0% PRIOR
- (KR) SOUTH KOREA JUNE UNEMPLOYMENT RATE: 3.6% V 3.7%E
- (KR) SOUTH KOREA JUNE IMPORT PRICE INDEX M/M: +0.7% V +3.5% PRIOR; Y/Y: -4.9% V -5.1% PRIOR
- (NZ) New Zealand June Food Prices M/M: +0.4% v -0.5% prior; 4-month high
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +1.0%, S&P/ASX +0.5%, Kospi +0.4%, Shanghai Composite +0.4%, Hang Seng +0.5%, Sep S&P500 -0.1% at 2,143
***Commodities/Fixed Income***
- Aug gold +0.2% at $1,337/oz, Aug crude oil -0.6% at $46.54/brl, Sep copper +2.5% at $2.27/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 16.1 tonnes to 965.2 tonnes
- (US) Weekly API Oil Inventories: Crude: +2.2M v -6.7M prior; first build in 4 weeks
- (CN) China MoF sells 5-year bonds at 2.65%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6891 V 6.6950 PRIOR
- (JP) BOJ offers to buy ¥430B in 5-10yr JGBs, ¥200B in 10-25yr JGBs, and ¥120B in JGBs with maturity over 25-yr
- (AU) Australia MoF (AOFM) sells A$800M in 3.25% 2029 Bonds; avg yield: 2.1922%; bid-to-cover: 2.96x
***Market Focal Points/FX***
- Asian equity markets are in rally-mode yet again, tracking another round of solid gains on Wall St where S&P500 and Dow Industrials both closed at record highs. The melt-up from reduced political uncertainty in UK and Japan and strong start to the earnings season have helped risk-on flows pick up steam, and overnight session also produced some of the more typical outflows from safe-haven Treasuries, Gold, and Yen. While stocks continued to rally in the Asian hours, high-beta currencies have seen some profit-taking. AUD/USD and NZD/USD are down about 40pips below 0.7590 and 0.7260 respectively, Gold rallied over $10 from the lows above $1,340, and USD/JPY briefly fell over 80pips below ¥104. Crude Oil, which rallied over 4% in US hours, came in nearly 1% after API inventories showed their first build in 4 weeks.
- Super majority in Japan's upper house for the ruling LDP party after last weekend's elections has continued to provide fodder for speculation over Japan's monetary and fiscal efforts to facilitate reaching 2% inflation objective. Overnight, Econ Min Ishihara clarified that the govt will compile fiscal stimulus package by the end of the month while still maintaining 2020 fiscal reform goals. Today, a report in Sankei press speculated the BOJ would consider a "helicopter money" approach to target more spending for small business, household, and infrastructure projects. Later however, Cabinet Sec Suga said there was no truth to that speculation, though he did state the govt's agenda to defeat deflation will be bold. PM Abe's advisor Hamada also noted that helicopter money would be a gamble but also offered support to have a coordinated stimulus package blending monetary and fiscal measures. USD/JPY, which approached 105 in US hours, retreated below 104 on refuted "helicopter" stimulus reports.
- In China, investors await economic data for June on Trade Balance, money supply, and New Yuan loans figures during European session. In the mean time, China Premier Li has expressed confidence the economy can achieve annual GDP target of at least 6.5%, noting that Q2 growth maintained steady momentum. Q2 GDP, along with the bulk of June economic figures, will be released early on Friday (local China time).
- In Australia, Westpac Consumer Confidence index fell for the 2nd straight month as the July survey included the risks Brexit for the first time, but resident economist has stated that by now the focus has shifted on "implications for the UK economy rather than the initial reaction which speculated on some disastrous contagion for the whole of Europe." Fitch also warned that the narrow victory for Coalition does pose more of a challenge in terms of policy implementation, but added that Australia's "credit profile remains consistent with its 'AAA' rating, with relatively low public debt and high growth compared with its peers."
***Equities***
US equities / ADRs:
- JUNO: To resume JCAR015 Phase II ROCKET trial after FDA removes clinical hold; +24.2% afterhours
- TEVA: Raises Q2 $1.19-1.22 v $1.19e, R$4.9-5.0B v $4.83Be (prior $1.16-1.20, R$4.7-4.9B); +0.7% afterhours
- AIR: Reports Q4 $0.32 adj v $0.45e, R$458.2M v $459Me (1 est); -10.3% afterhours
- LEDS: Reports Q3 -$1.06 v -$0.77 q/q, R$2.4M v $2.9M q/q; -16.3% afterhours
Notable movers by sector:
- Consumer discretionary: Samsonite 1910.HK +2.7% (Tumi stockholders Adoption of the Merger Agreement)
- Industrials: Weiqiao Textile 2698.HK -0.4% (H1 guidance); China Railway Construction Corp 1186.HK +3.1% (YTD result); Yamaha Motor 7272.JP +11.1% (to replace Sharp; Obic Co.4684.JP +2.1% (Q1 result speculation)
- Materials: West China Cement 2233.HK +5.5% (H1 guidance); Hyundai Steel 004020.KR +8.2%, Posco 005490.KR +5.7% (China plans restructuring steel sector)