Asian Mid-session Market Update: Australia records trade deficit for 25th month, keeps rates on hold; China likely to fine tune policy in H2
***Economic Data***
- (AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.75%; AS EXPECTED
- (AU) AUSTRALIA MAY TRADE BALANCE (A$): -2.22B V -1.70BE (25TH CONSECUTIVE MONTHLY DEFICIT)
- (AU) AUSTRALIA MAY RETAIL SALES M/M: 0.2% V 0.3%E
- (CN) CHINA JUN CAIXIN SERVICES PMI: 52.7 V 51.2 PRIOR; 11-month high
- (JP) JAPAN JUN SERVICES PMI: 49.4 (first contraction in 2 months) V 50.4 PRIOR; COMPOSITE PMI: 49.0 V 49.2 PRIOR
- (SG) SINGAPORE JUN PMI: 52.3 V 50.1 PRIOR
- (AU) Australia JUN AiG Performance of Service Index: 51.3 v 51.5 prior; 2nd month of expansion
- (NZ) New Zealand Jun QV House prices y/y: 13.5% v 12.4% prior (3rd consecutive increase); New Zealand PM Key: RBNZ should look into tightening property investor rules
- (NZ) NEW ZEALAND JUN ANZ COMMODITY PRICE M/M: 3.7% V 1.1% PRIOR (largest increase in 8-months)
- (KR) South Korea Jun Foreign Reserves: $369.9B v $370.9B prior
- (NZ) New Zealand Treasury 11-month to May 31st operating surplus NZ$2.3B v NZ$1.98B forecast in May
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.8 v 116.8 prior
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.9%, S&P/ASX -0.9%, Kospi -0.4%, Shanghai Composite +0.4%, Hang Seng -0.8%, Sep S&P500 -0.2% at 2,092
***Commodities/Fixed Income***
- Aug gold +0.6% at $1,346/oz, Aug crude oil -1.4% at $48.32/brl, Sep copper -0.8% at $2.20/lb
- (CN) PBOC to inject CNY40B in 7-day reverse repos
- (CN) PBOC SETS YUAN MID POINT AT 6.6594 V 6.6472 PRIOR (weakest Yuan setting since Dec 2010)
- (KR) South Korea MoF sells 30-yr bonds at avg yield 1.505%
- (CN) China Ministry of Commerce (MOFCOM) Spokesperson: Hope to see stability in global steel market; do not encourage steel product exports
- (JP) Japan MoF sells ¥2.4T v ¥2.4T offered in 10-yr 0.1% JGBs; Avg yield: -0.243% (record low) v -0.094% prior; bid to cover: 3.64x v 4.10x prior
***Market Focal Points/FX***
- Asian equity markets mostly opened lower and maintained a more muted tone for the session following European markets' lead (US markets were closed for a holiday), as profit taking winds down and continued Brexit economic worries reign. Asian regional heads assure that any Brexit impact is expected to be short term, though investors do not seem assuaged.
- Australia PM Turnbull said 70% of the votes have been counted in the federal election vote from the weekend, he warned there would be a few more days of counting. This follows a warning late in yesterday's session from the S&P, that if parliamentary gridlock on the budget continues and budgetary performance does not improve, Australia could lose its AAA rating. Australia May retail sales came in weaker than expected and April figure was revised lower. AUD/USD remained under pressure 0.7515, falling to a low of 0.7492 after Australia recorded its 25th consecutive trade deficit. Crude exports came in at 1 year low, which China exports were at an 8 year high. RBA as expected, kept rates unchanged at 1.75%, policy statement was also left similar to last meeting.
- USD/JPY around 102.65, touch 102 level, put pressure on exporters, Sony -1%, Sharp -5% and Panasonic -0.5%. Japan 10-yr JGB auction saw a record low yield of -0.243%. There is little economic data out of Japan until later in the week.
- According to China Securities Journal reporter Ren Xiao, China is likely to fine tune monetary policy in H2 of the year, with targeted RRR cuts or possible across the board cuts if needed. Saying Chinese economic growth still faces relatively large pressure in H2 PBOC could deal with liquidity shortages through reverse repos and medium-term lending facilities.
***Equities***
US equities / ADRs:
WDC: Toshiba and Western Digital to commit $14.6B over 3-yrs to increase production of flash memory at a joint plant in Japan - Nikkei
Notable movers by sector:
- Consumer discretionary: Hainan Airlines Co 600221.CN +2.2% (bid for Gategroup); Fast Retailing Co 9983.JP -4.3% (June Uniqlo result); ABC-MART 2670.JP -6.9% (June sales result); Lifestyle International Holdings 1212.HK -11.5% (H1 result)
- Financials: Evergrande Real Estate Group 3333.HK +0.8% (June result);Country Garden Holdings Co 2007.HK -1.8% (raises annual sales target); Hysan Development 14.HK -1.7% (CEO to step down); Vanke 000002.CN -10.0%(returns from trading halt, momentum)
- Technology: Feiyu Technology International 1022.HK -10.2% (profit warning)
- Materials: China Sunshine Paper Holdings Co 2002.HK +5.0% (profit alert); Citic Resources 1205.HK +5.3% (profit alert); NHN 035420.KR +3.0% (Line app increases IPO price range); Japan Display 6740.JP +11.6% (Effissimo holds stake); Western Areas WSA.AU +5.9% (stronger nickel prices)
- Telecom: CJ Hellovision Co 037560.KR -10.0%, SK Telecom 017670.KR -1.4% (regulator not approve merger)
- Healthcare: MMJ Phytotech MMJ.AU +12.8% (Has license for marijuana in Canada, Canada regulator to explore legalization for recreational use)