Asian Mid-session Update: BOJ's Kuroda backtracks from comments on FX; RBA policy minutes match the statement's data dependent outlook
***Economic Data***
- (AU) AUSTRALIA MAY NEW MOTOR VEHICLE SALES M/M: -1.3% V -1.5% (second decline M/M) PRIOR; Y/Y: 0.8% V 2.8% PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.5 v 112.1 prior
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -0.6%, S&P/ASX +0.3%, Kospi -1.3%, Shanghai Composite -2.1%, Hang Seng -0.4%, Sep S&P500 -0.1% at 2,072
***Commodities/Fixed Income***
- Aug gold -0.1% at $1,185/oz, Jul crude oil +0.8% at $59.98/brl, Jul copper flat at $2.65/lb
- GLD: SPDR Gold Trust ETF daily holdings decline 3.1 tonnes to 701.9 tonnes; lowest since Sept 2008
- JGB: (JP) Japan MoF sells ¥2.30T in 0.1% coupon 5-year JGB bonds; Avg yield: 0.122% v 0.100% prior; Bid-to-cover: 2.87x v 2.80x prior
***Market Focal Points/FX***
- Asia equity markets are generally lower with the exception of Australia, as headwinds from Greek uncertainty and selloff on Wall St going into Wednesday's FOMC weighed on sentiment. China markets were hit particularly hard, falling as much as 2.5% in the morning session before paring some of those losses by midday break. Ongoing clampdown on margin trading activity along with another active week of IPO issuance are widely attributed to renewed pressure on the mainland and the swoon in Shanghai Composite to 1-week lows.
- Among the most notable developments from China, NEA announced May power consumption of 456.7B kwh, up just 1.6% y/y but higher than 1.3% in April and 2nd straight month of increase. Recall this indicator is one of Premier Li's top 3 preferred measures of economic activity. China's CASS also forecasted 2015 energy output to grow but consumption to dip this year. Separately, China Nuclear Power was limit up again by 10% after Premier Li said the govt will promote nuclear power on a larger scale, and that nuclear technology developed by China has a place abroad.
- Reserve Bank of Australia released the minutes of its June 2nd meeting where it surprised the investors with a more neutral policy stance against expectations of renewed easing bias. RBA minutes straddled both sides of the fence, stating the "Board's assessment was that the stance of monetary policy should be accommodative" and also adding "members judged that it was appropriate to leave the cash rate unchanged and to assess information on economic and financial conditions as it became available." AUD/USD initially sold off some 20pips below 0.7750 but then whipsawed to 0.7780 in the aftermath, with traders favoring a more hawkish interpretation.
- USD/JPY saw pronounced volatility on clarification from BOJ Gov Kuroda regarding exchange rates. Recall on June 10th, Kuroda said that real effective exchange rate showed yen was weak and might not weaken further. Today, Kuroda said those comments were unrelated from the nominal exchange rate, and that as long as FX moved in a stable manner the level of Japanese currency was not of concern. USD/JPY spiked up over 40pips on the remarks toward 123.80, though it has given back some of the gains. BOJ is headed for a policy decision later this week, and a Nikkei report suggested there may be a rift developing within the policy board regarding the sustainability of open ended policy easing.
- In Europe, Germany's Bild cited comments from Greek Fin Min Varoufakis who said Athens does not intend to present a new list of reform proposals at the upcoming Eurogroup meeting on Thursday. This is in line with the hardline stance taken by Syriza politicians expressed over the weekend, and the subsequent downside in EUR/USD on those comments was marginal. For the session, EUR/USD traded in a 20pip range above $1.1260.
***Equities***
US equities / ADRs:
- GPS: Announces Strategic Initiatives; To close about 175 stores in N America; Affirms FY15 EPS $2.75-2.80 v $2.78e; +1.3% afterhours
- AAVL: Announces Top-Line Phase 2a Results for AVA-101; -41.1% afterhours
- EXR: To acquire SmartStop Self Storage, Inc. for $1.4B in cash
Notable movers by sector:
- Consumer discretionary: Kao Corp 4452.JP -0.8% (H1 result speculation)
- Financials: CITIC Securities 6030.HK -0.7% (to issue new shares); Ping An Insurance 601318.CN +0.3% (exec comment); HTSC 601688.CN +2.1% (raises margin finance ceiling); China Pacific Insurance Group 2601.HK -2.6% (YTD premium income); Westpac Banking Corp WBC.AU +1.4% (intention to sell stake in BTIM); Insurance Australia IAG.AU +5.1%(Berkshire Hathaway to invest)
- Industrials: Tianjin Jinbin Development Co 000897.CN +0.9%, Langfang Development Co Ltd 600149.CN +3.7% (Beijing-Tianjin-Hebei regional development); Yamaha Motor 7272.JP -2.1% (to jointly build fuel cell powered ships); Fujitsu General Ltd 6755.JP -1.4% (profit target); Korean Air Lines 003490.KR +0.7% (cuts flights due to MERS)
- Materials: Anhui Conch Cement 914.HK -1.7% (to acquire cement assets); CITIC Dameng 1091.HK -6.7% (share placement)
- Energy: China Coal Energy 1898.HK -0.6% (May result); China Shenhua Energy 1088.HK -1.8% (May result)