Asian Mid-session Market Update: China industrial production and slower retail sales indicate pressure on growth
***Economic Data***
- (CN) CHINA JULY INDUSTRIAL PRODUCTION M/M: 0.5% V 0.5% PRIOR; Y/Y: 6.0% V 6.2%E; YTD Y/Y: 6.0% V 6.0%E
- (CN) CHINA JULY FIXED URBAN ASSETS YTD Y/Y: 8.1% V 8.9%E
- (CN) CHINA JULY RETAIL SALES M/M: 0.8% V 0.9% PRIOR ; Y/Y: 10.2% V 10.3%E; YTD Y/Y: 10.3% V 10.3%E
- (CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED
- (KR) SOUTH KOREA JULY IMPORT PRICE INDEX M/M: -2.8% V +0.7% PRIOR; Y/Y: -7.1% V -4.9% PRIOR
- (NZ) NEW ZEALAND JULY MANUFACTURING PMI: 55.8 V 57.6 PRIOR
- (NZ) NEW ZEALAND Q2 RETAIL SALES (EX-INFLATION): 2.3% V 1.0%E
- (PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%, AS EXPECTED
- (AU) AUSTRALIA JUN CREDIT CARD BALANCES: A$52.2B V $A51.9B PRIOR; CREDIT CARD PURCHASES: A$25.5B V $A26.0B PRIOR
- (MY) Malaysia Q2 Current Account (MYR): 1.9B v 3.4Be
- (MY) Malaysia Q2 GDP Q/Q: 0.7% v 1.2%e; Y/Y: 4.0% v 4.0%e
- (JP) Japan investors bought net ¥891.8B in foreign bonds v bought ¥312B in prior week; Foreign investors sold net ¥492.2B in Japan stocks v sold ¥95.5B in Japan stocks in prior week; Foreign investors sold ¥266.3B in Japan bonds v bought ¥1.09T in prior week
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +1.0%, S&P/ASX +0.7%, Kospi 0.0%, Shanghai Composite +0.2%, Hang Seng +0.7%, Sep S&P500 -0.1% at 2,181
***Commodities/Fixed Income***
- Dec gold -0.4% at $1,345/oz, Sep crude oil +0.4% at $43.91/brl, Sep copper 0.0% at $2.18/lb
- (CN) PBOC to inject CNY90B in 7-day reverse repos; Injects net CNY90B for the week v drains CNY161.5B last week
- (CN) PBOC SETS YUAN MID POINT AT 6.543 V 6.6255 PRIOR
- (AU) AMOF sells A$900M in 5.50% 2023 Bonds, avg yield 1.7096%; bid to cover 2.39x
***Market Focal Points/FX***
- Asian equities trading positive following all 3 major US indices closing at record levels, for the first time since 1999. AUD/USD declined near 0.7669, after Australia's 7-yr bond auction indicated weaker demand and rate expectations, which indicates there is belief that the RBA could cut rates further. USD/JPY traded in a 45pip range 102.22/101.75, with Japan's major exporters rising in the morning session.
- China July data was the main event risk for the session, with industrial production and retail sales both a bit weaker than expected, raising the question, will China need QE to meet GDP target of >6.5%? China Stats Bureau (NBS) spokesman Sheng noted that the economy is structurally slow but trending stable, affirming that China will expand overall demand, but new growth drivers are not ready to replace traditional ones. Sheng went on to say July surveyed unemployment remains ~5.0%, with employment in the northeast being even higher.
- NBS's Sheng also said that property sales remain strong (+41% July YTD) even with slower growth and that the property market will remain stable and healthy in the long term. This follows that Chinese press report that two cities in East China's Jiangsu province announced new measures to contain rising house prices.
- PBoC research director Yao Yudong, expects that the yuan will now appreciate over a longer term. He notes the current situation of excess liquidity will eventually give way to a long period of declining global liquidity as the Fed normalizes rates and other central banks exit their ultra-loose monetary policies.
***Equities***
US equities / ADRs:
- JWN: Reports Q2 $0.67 v $0.55e, R$3.65B v $3.65Be; +10.6% after hours
- NVDA: Reports Q2 $0.53 v $0.37e, R$1.43B v $1.35Be; +2.4% after hours
- FLO: Reports Q2 $0.26 adj v $0.26e, R$935M v $949Me; +2% after hours
- DDS: Reports Q2 $0.35 v $0.34e, R$1.45B v $1.45Be; -3% after hours
Notable movers by sector:
- Consumer discretionary: WorleyParsons, WOR.AU, +4.2% (may cut exec pay 30-40% or lay off)
- Consumer Staples: Golden Agri-Resources, GGR.SG, -2.7% (cautious comments with Q2)
- Financials: Ping An Bank, 000001.CN, +0.4% (sees signs that NPLs are decreasing)
- Industrials: UGL, UGL.AU, +6.5% (awarded A$100m contract)
- Technology: Sharp, 6753.JP, +15.7% (China to allow Hon Hai to invest); Toshiba, 6502.JP, +4.3% (expectations will report first Op profit in 6 quarters)
- Telecom: China Mobile, 941.HK, +2% (H1 results beat expectations)