Asian Mid-session Market Update: China CPI decelerates for 3rd straight month; AUD falls as NAB forecasts more aggressive RBA easing
***Economic Data***
- (CN) CHINA JULY CPI Y/Y: 1.8% V 1.8%E; 6-month low
- (CN) CHINA JULY PPI Y/Y: -1.7% V -2.0%E (53nd consecutive month of decline)
- (JP) JAPAN JULY M2 MONEY STOCK Y/Y: 3.3% V 3.3%E; M3 MONEY STOCK Y/Y: 2.9% V 2.9%E
- (AU) AUSTRALIA JULY NAB BUSINESS CONFIDENCE: 4 V 5 PRIOR; CONDITIONS: 8 V 11 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.7 v 118.0 prior
- (NZ) NEW ZEALAND JULY CARD SPENDING M/M: 0.3% V 0.1%E; TOTAL M/M: 0.4% V +1.0% PRIOR
- (NZ) New Zealand ANZ July non-tradable inflation m/m: -0.3%; first decline since May 2015
- (NZ) New Zealand July ANZ Truckometer Heavy M/M: -5.7% v +4.7% prior
- (UK) JULY BRC LFL SALES Y/Y: +1.1% V -0.7% PRIOR; 6-month high
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.4%, S&P/ASX +0.2%, Kospi +0.6%, Shanghai Composite +0.3%, Hang Seng -0.2%, Sep S&P500 flat at 2,176
***Commodities/Fixed Income***
- Dec gold -0.1% at $1,340/oz, Sep crude oil -0.9% at $42.66/brl, Sep copper -0.1% at $2.16/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 6.5 tonnes to 973.8 tonnes; first decline since Aug 3rd
- SLV: iShares Silver Trust ETF daily holdings rise to 10,941 tonnes from 10,911 tonnes prior; multi-year high
- JGB: (JP) Japan's MOF sells ¥725B in 0.3% 30-year bonds; Avg yield: 0.424% v 0.120% prior; Bid to cover: 3.07x v 2.64x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6594 V 6.6615 PRIOR
- (CN) PBOC to inject CNY70B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$150M in 2.5% 2030 Indexed Bonds; avg yield: 0.3921%; bid-to-cover: 2.63x
***Market Focal Points/FX***
- Asian equity markets are gaining modestly despite incremental declines on Wall St as expectations of policy accommodation in the region continue to run high. China consumer inflation has met consensus estimates but slowed for the 3rd straight month to 1.8%, remaining well below the 3% target. Likewise, Australia ANZ business confidence slipped further, while New Zealand ANZ inflation and forward-looking heavy trucking sentiment reversed course into the red in July. S&P futures are flat, oil is consolidating US session gains, and FX majors traded with a dollar-positive bias. AUD/USD fell about 40pips toward 0.7620, NZD/USD was down 30pips below 0.7130, and USD/JPY briefly rose about 25pips from the lows above 102.50. GBP/USD tested below 1.30 level for the first time in nearly a month on comments from a BOE hawk McCafferty who acknowledged that further easing is likely to be necessary as it was difficult to forecast the headwinds from the Brexit vote on the economy.
- China CPI hit a 6-month low, but m/m saw a rise of +0.2% v -0.1% prior. Food price inflation slowed to 3.3% v 4.6% prior, while that of non-food goods rose to 1.4% v 1.2% prior. Economists have also continued to digest overnight release of July trade data that showed higher than expected surplus but bigger than expected declines in both exports and imports. ANZ said outbound shipments will remain lackluster "as sluggish growth in Europe and Japan is likely to drag on Chinas exports... Brexit will weigh further on exports to the EU, as the EU and Japan together make up over a fifth of Chinas total exports."
- NAB July business retreated further in July, prompting its economists to revise its RBA forecasts to anticipate more easing. Namely, NAB now sees two additional RBA rate cuts next year to 1.00% rate along with the possibility of "unconventional monetary policy". NAB cited expectation of CPI remaining below target for extended period and structural transition away from mining in the economy weighing on labor in the long run. NAB sees RBA easing again in May and Aug of 2017 to help stabilize the unemployment rate (which is currently a concern for the RBA) at just over 5%.
- Ahead of this week's RBNZ decision, swaps markets have boosted expectations of a more aggressive 50bp cut to 15% from 10%, while ANZ chief economist said NZ banks are unlikely to pass on a full rate cut given the rise in funding costs and slower deposit growth.
***Equities***
US equities / ADRs:
- MCHP: Reports Q2 $0.84 v $0.75e, R$844.0M (adj) v $821Me; raises dividend 0.1% from $0.3595 to $0.36 (implied 2.5% yield); +4.5% afterhours
- NUAN: Reports Q3 $0.38 v $0.37e, R$485M v $490Me; -1 .0% afterhours
- GPS: Reports July SSS -4% v -0.3%e; Guides Q2 $0.58-0.59 (ex $0.28 in store closure and streamlining costs) v $0.47e, R$3.85B v $3.75Be; -5.1% afterhours
- MTW: Reports Q2 $0.04 v $0.03e, R$457.7M v $468Me: -11.9% afterhours
- MXL: Reports Q2 $0.50 v $0.44e, R$102M v $102Me; -15.5% afterhours
Asia Notables by sector:
- Consumer discretionary: Skyworth Digital 751.HK +1.6% (July result); Cochlear COH.AU -1.7% (FY16 result); Mobile Embrace MBE.AU -8.1% (guidance)
- Consumer staples: Cosmax 192820.KR +1.0% (Q2 result)
- Financials: ANZ Bank ANZ.AU +2.8% (9-month result); IOOF Holdings IFL.AU -6.9% (FY16 result)
- Industrials: Great Wall Motor 2333.HK +2.4% (July result); Brother Industries 6448.JP +16.8% (Q1 result); Japan Steel Works 5631.JP +9.7% (Q1 result)
- Technology: Mesoblast MSB.AU +7.9% (phase 2 results show improvements)
- Materials: Aluminum Corporation of China 2600.HK -0.7% (acquisition); Mitsubishi Materials 5711.JP -5.3% (Q1 result)
- Utilities: Transurban TCL.AU -0.5% (FY16 result)