Asian Mid-session Market Update: Risk rally turns sour as BOJ downplays stimulus expectations; China premier Li calls for countries to maintain accommodative policy stance
***Economic Data***
- (JP) JAPAN JUL PRELIM PMI MANUFACTURING: 49.0 V 48.1 PRIOR (5th consecutive month of contraction)
- (SG) Singapore Q2 final Private Home Prices Q/Q -0.6% v -0.4% prelim; Homes sold 2,256 v 1,419 q/q - URA
- (US) NORTH AMERICA June SEMI BOOK/BILL RATIO: 1.00 V 1.09 PRIOR
- (US) NPD June Video Games Sales -26% y/y at $652.2M
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.9%, S&P/ASX -0.4%, Kospi flat, Shanghai Composite -0.6%, Hang Seng -0.4%, Sep S&P500 flat at 2,158
***Commodities/Fixed Income***
- Aug gold -0.4% at $1,326/oz, Aug crude oil +0.1% at $44.80/brl, Sep copper -0.6% at $2.24/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 2.1 tonnes to 963.1 tonnes
- (CN) PBOC SETS YUAN MID POINT AT 6.6669 V 6.6872 PRIOR (3rd consecutive firmer fix, strongest setting since July 5th)
- (CN) China MoF sells 30-year bonds at 3.426%
- (CN) PBOC to inject CNY70B in 7-day reverse repos; Injected CNY265.3B for the week v CNY65B drained in prior week
- (JP) Japan investors net ¥1.7T in foreign bonds v ¥2.5T in prior week; Foreign investors net buyers ¥444.6B in Japan stocks v sold ¥306.8B in Japan stocks in prior week
- (JP) BOJ offers to buy ¥1.5T in T-bills
- (AU) Australia MoF (AOFM) sells A$600M in 4.50% 2020 Bonds; avg yield: 1.454%; bid-to-cover: 3.86x
***Market Focal Points/FX***
- Asian equity markets are heading lower, tracking the first declining session in US indices in 10 days. Outside of the less dovish than expected commentary from BOJ Gov Kuroda overnight, there is still little to latch on to in terms of new macro oriented developments, but the US earnings season is ramping up steadily and results are increasingly more mixed. While tech and financials have been generally impressive, consumer discretionary stalwarts have hit a wall - Starbucks, Skechers, Chipotle, Pandora are all down afterhours on their results. On the earngins call, Starbucks CEO went as far as to cite deteriorating global conditions - terrorism, and Brexit included - as driving a cooling in consumer confidence. S&P futures and oil are flat in electronic session, while FX majors were generally rangebound - USD/JPY continues to trade around 106 handle, AUD/USD was down about 40pips from the highs below $0.7470, and NZD/USD traded about 20pips on either side of $0.70.
- Against a buildup of expectations for more policy stimulus from Japan - both fiscal and monetary - BOJ Gov Kuroda overnight reiterated that there is neither need, nor possibility of helicopter money in Japan, sending USD/JPY down by over 150pips back below 106. Speculation over the extent of the fiscal measures remained heavy, with another local press report suggesting fiscal stimulus may be in ¥20-30T range if it includes govt guarantees and other off-budget measures, while adding that PM Abe has recently agreed to increase the package. Cabinet Sec Suga later confirmed that he is working with fiscal authorities on economic stimulus. Japan also produced the only economic datapoint of note in the session, with July preliminary manufacturing PMI improving from the prior month but remaining in contraction for the 5th month in a row. Export orders, input/output prices, and inventories decreased at a faster rate - a poor sign of external demand and price trends - but employment outlook was surprisingly improved. Resident Markit economist also admitted that "beginning of the third quarter signaled worsening operating conditions in the Japanese manufacturing sector."
- In China, Premier Li spoke from the joint press conference after meetings with IMF's Lagarde and World Bank President Jim Yong Kim. Li called for countries to maintain monetary stability and proactive fiscal policies as part of global economic recovery process. On China, Li said economic structure is optimizing and economy is growing steadily despite continued downward pressure headwinds. Also of note, PBOC strengthened Yuan fix for the 3rd straight day, as Goldman Sachs estimated FX outflows in June doubling m/m in explaining the recent trend behind stronger CNY fixes.
***Equities***
- AMD: Reports Q2 -$0.05 v -$0.09e, R$1.03B v $955Me; +7.3% afterhours
- V: Reports Q3 $0.69 v $0.67e, R$3.63B v $3.63Be; Authorizes $5B share repurchase (2.7% of market cap); +0.1% afterhours
- T: Reports Q2 $0.72 v $0.72e, R$40.5B v $40.7Be; -0.9% afterhours
- PYPL: Reports Q2 $0.36 v $0.36e, R$2.65B v $2.59Be; Guides Q3 $0.33-0.35 v $0.36e; R$2.62-2.67B v $2.63Be; -2.1% afterhours
- CMG: Reports Q2 $0.87 v $1.05e, R$998M v $1.04Be; July comp sales trends have improved significantly; -2.1% afterhours
- SBUX: Reports Q3 $0.49 v $0.49e, R$5.24B v $5.35Be; Guides Q4 $0.54-0.55 v $0.55e; SSS +5%; -2.7% afterhours
- COF: Reports Q2 $1.76 adj v $1.86e, R$6.25B v $6.25Be; -3.0% afterhours
- SYK: Reports Q2 $1.39 v $1.36e, R$2.80B v $2.80Be; Guides Q3 $1.33-1.38 v $1.41e; -4.0% afterhours
- FLEX: Reports Q1 $0.27 v $0.27e, R$5.88B v $5.71Be; -5.6% afterhours
- P: Reports Q2 -$0.12 v -$0.14e, R$343M v $352Me; Cuts FY16 Rev $1.385-1.405B v $1.42Be; -7.4% afterhours
- SKX: Reports Q2 $0.48 v $0.51e, R$877.8M v $878Me; Guides Q3 Rev $950-975M v $981Me; -15.3% afterhours
- RRL.AU: Reports Q4 gold production 78.5K oz v 75.7K q/q; AISC A$951/oz v A$856/oz q/q; +6.8%
- OZL.AU: Reports Q2 production: copper 27.4K tons v 24.8K y/y; gold 30.1K oz; +0.7%
- STO.AU: Reports Q2 Production 15.5 MMBOE v 14.3 y/y; Sales 19.6 MMBOE v 15.7 y/y; -1.2%
- OSH.AU, BPT.AU: -1.6% on lower oil prices
- 3323.HK: Issues H1 profit warning; -1.6%
- 1150.HK: Issues H1 profit warning; -4.9%