Asian Mid-session Market Update: Japan fiscal stimulus tipped to top ¥20T; RBNZ offers more hints of easing
***Economic Data***
- (AU) AUSTRALIA Q2 NAB BUSINESS CONFIDENCE: 2 V 4 PRIOR
- (NZ) NEW ZEALAND JUN CREDIT CARD SPENDING M/M: -0.8% V 0.1% PRIOR; Y/Y: 4.1% V 6.0% PRIOR
- (NZ) New Zealand June Net Migration: 5.7K v 5.5K prior
- (BR) BRAZIL CENTRAL BANK (BCB) LEAVES SELIC RATE UNCHANGED AT 14.25%; AS EXPECTED
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +1.0%, S&P/ASX +0.5%, Kospi -0.2%, Shanghai Composite +0.7%, Hang Seng +0.7%, Sep S&P500 flat at 2,168
***Commodities/Fixed Income***
- Aug gold -0.4% at $1,314/oz, Aug crude oil +0.4% at $45.92/brl, Sep copper +0.7% at $2.26/lb
- (NZ) New Zealand sells 2.75% in Apr 2025 bonds; avg yield 2.1243%
- USD/CNY: (CN) SWIFT: CNY use in international transactions: 1.72% of total in June v 1.90% prior
- (CN) PBOC SETS YUAN MID POINT AT 6.6872 V 6.6946 PRIOR; 2nd straight firmer fix
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- JGB: (JP) BoJ offers to buy ¥375B in 1-3 yr JGBS, ¥440B in 3-5 yr, ¥200B in 10-25 yr, and ¥120B in 25 yrs and over
***Market Focal Points/FX***
- Asian equity markets are once again mixed in the wake of continued melt-up of US indices to fresh record highs. Japan is outperforming after local press reports that the post-Parliament election victory for PM Abe would produce an even larger than anticipated fiscal stimulus. Korea's Kospi is slightly negative after comments from Fin Min Yoo that the economy is still weak and external uncertainties like Brexit are advancing. In FX, USD was under pressure across the board, with EUR/USD rising about 40pips toward 1.1050, USD/JPY down 50pips from the highs below 107, and AUD/USD up some 40pips toward $0.75.
- Kiwi dollar was once again the most volatile among USD majors, falling some 70pips in early trade toward 0.6950. In its latest assessment of the economy, RBNZ gave its clearest indication that further policy easing will be required and high NZD is making it difficult for the central bank to reach its inflation objectives, particularly given the significant downside risks to global growth. RBNZ also balanced the concerns of policy becoming too easy with assessment of long term inflation as balanced. Recall earlier this week, the consideration by the central bank to expand its macroprudential LVR restrictions nationwide from Auckland has also served to remove a barrier toward more easing as soon as next month. Some of the analysts have started to price in 2 more moves on rates before the end of 2016.
- With the super-majority in the upper house of Parliament after the latest elections, Japan PM Abe and his cabinet continue to craft a fiscal stimulus that would seek to make a deeper dent in deflation then the efforts of monetary policy and negative interest rates. Today's Japanese press reports now anticipate the fiscal package to reach at least ¥20T - up from over ¥10T forecast after the elections - given that some of the projects will be long term and run into FY17 and beyond. The package also includes at least ¥9T in govt spending and fiscal loans.
- Australia's quarterly production results in Materials and Energy continued with top oil producers Woodside Petroleum and Oil Search. Both were modestly higher on evidence of ongoing overseas investment. Oil Search went as far as to raise its output forecast for FY16 while also confirming it was stepping away from the InterOil deal.
***Equities***
US equities / ADRs:
- URI: Reports Q2 $2.06 v $1.83e, R$1.42B v $1.41Be; +8.8% afterhours
- QCOM: Reports Q3 $1.16 (adj) v $0.98e, R$6.0B v $5.55Be; +7.0% afterhours
- EBAY: Reports Q2 $0.43 v $0.42e, R$2.2B v $2.17Be; Approves $2.5B stock repurchase (8.1% of market cap); +6.9% afterhours
- MAT: Reports Q2 -$0.02 v -$0.06e, R$957.3M v $940Me; +3.5% afterhours
- FFIV: Reports Q3 $1.81 v $1.79e, R$496.5M v $495Me; +2.6% afterhours
- NEM: Reports Q2 $0.44 v $0.28e, R$2.04B v $1.86Be; +1.2% afterhours
- AXP: Reports Q2 $2.10 v $1.92e, R$8.24B v $8.21Be; -0.5%
- TSCO: Reports Q2 $1.16 v $1.16e, R$1.85B v $1.85Be; -2.3% afterhours
- INTC: Reports Q2 $0.59 v $0.53e, R$13.5B v $13.5Be; Restructuring efforts on track; -3.3% afterhours
- TSLA: Announces "Master Plan": To integrate energy generation and storage through a solar roof with an integrated battery
Notable movers by sector:
- Consumer discretionary: IMAX China Holding 1970.HK +6.7% (H1 result); Ajisen China Holdings 538.HK -5.4% (profit alert); China Travel Intl 308.HK -5.7% (profit warning)l; 361 Degrees International 1361.HK +2.2% (Q2 result); McDonald's Holdings Co Japan 2702.JP +1.1% (pact with Pokemon Go)
- Financials: Gemdale Properties and Investment Corp 535.HK +5.3% (profit alert)
- Industrials: Minebea 6479.JP +13.5% (Q1 result); Qube Logistics QUB.AU +3.6% (regulator not oppose to transaction)
- Materials: South32 S32.AU -1.8% (Q4 production result); Evolution Mining EVN.AU -3.6% (Q4 production result)
- Energy: Woodside Petroleum WPL.AU +1.0% (Q2 result); Shunfeng Photovoltaic International 1165.HK +2.0% (profit warning); Oil Search OSH.AU +1.7% (Q2 result, no revised offer for InterOil)
- Utilities: Yaskawa Electric 6506.JP +3.9% (Q1 result)