Asian Mid-session Market Update: Brexit relief rally continues despite tough talk from EU leaders
***Economic Data***
- (AU) AUSTRALIA MAY HIA NEW HOME SALES M/M: -4.4% V -4.7% PRIOR; 2nd consecutive decline
- (NZ) New Zealand revises Q1 jobless rate from 5.7% to 5.2%; Participation rate from 69.0% to 68.7%
- (JP) JAPAN MAY RETAIL SALES M/M: 0.0% V 0.0%E; RETAIL TRADE Y/Y: -1.9% (3rd straight decline) V -1.6%E
- (CN) China June Westpac Consumer Confidence Index: 115.9 v 114.2 prior
- (KR) SOUTH KOREA JULY BUSINESS MANUFACTURING SURVEY: 72 v 74 PRIOR; NON-MANUFACTURING SURVEY: 72 v 73 PRIOR
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +1.8%, S&P/ASX +0.9%, Kospi +1.5%, Shanghai Composite +0.5%, Hang Seng +0.7%, Sep S&P500 +0.2% at 2,033
***Commodities/Fixed Income***
- Aug gold +0.3% at $1,321/oz, Aug crude oil +0.7% at $48.18/brl, Jul copper -0.6% at $2.17/lb
- (US) Weekly API Oil Inventories: Crude: -3.9M v -5.2M prior; 2nd straight draw
- SLV: iShares Silver Trust ETF daily holdings rise to 10,374 tonnes from 10,350 tonnes prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6324 V 6.6528 PRIOR
- (CN) PBOC to inject CNY210B in 7-day reverse repos
- (JP) BOJ offers to buy ¥350B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥220B in 10-25yr JGBs and ¥140B in JGBs with maturity over 25-yr
***Market Focal Points/FX***
- Asian equity markets were on the upswing, tracking the solid gains made in US indices, as post-Brexit worries continue to subside. The duration of the rebound remains unclear however, with quarter-end window-dressing and short-covering cited for this rally. Outside of the improved US consumer confidence and an uptick in Q1 GDP, there was little in terms of positive catalysts behind the gains. EU gathering in Brussels underscored the uncertainty over Brexit proceedings - PM Cameron reiterated invoking Article 50 is the matter for the next PM in Sept and expressed confidence in maintaining close relationship through negotiations, just as EU's Juncker called for quicker submission of the withdrawal. The "redo-Brexit-vote" movement is also gathering steam with protests in London. Outside of Brexit uncertainty, an explosion attributed to ISIS suicide bombers rocked a Turkish airport, killing over 35 people.
- Japan govt and BOJ held another joint meeting to help reverse sentiment behind the recent rally in JPY. PM Abe called for Fin Min Aso and BOJ Gov Kuroda to continue watching markets and also making sure that there is sufficient liquidity to support economy. BOJ's Kuroda also reiterated the central bank can add funds to the market if needed. Japan retail sales for May were in line m/m but disappointed y/y, with the 3rd straight decline and the biggest fall since early 2015.
- In China, local press speculated the govt is considering measures to boost private investment and may announce some new plans in H2. Report noted govt should reduce regulatory costs and increase financial support for private companies. In another sign of easing strain, PBoC's Yuan fix was set stronger for the first time since the Brexit vote.
- Down under, Australia's May HIA new home sales fell for the 2nd straight time, though resident economist noted the unfolding pullback will be mild by historical standards. NZD got a lift from a downward revision in unemployment and also RBNZ report that long term inflation expectations are still well anchored.
- In FX majors, USD/JPY traded toward the lower end of its 102.30-80 range late in the day despite the risk-on rally. AUD/USD was up about 40pips from the lows around 0.7420, while NZD/USD nearly reached 0.71 handle - up about 50pips from the lows. GBP/USD was also volatile, initially rising to about 1.3370 before a slide to as low as 1.3290 later in the day.
***Equities***
US equities / ADRs:
- NKE: Reports Q4 $0.49 v $0.48e, R$8.24B v $8.26Be; Exec: Sees outlook for FY17 largely in line with prior guidance; Guides Q1 Rev up mid-single digit pct; Affirms FY17 Rev ex-FX up high single digits to low double digits; -4.0% afterhours
- AVAV: Reports Q4 +$0.23 v -$0.08e, R$84.8M v $85.8Me; -7.4% afterhours
- ESPR: Provides update for Bempedoic Acid; Plans phase 3 trials for 4Q; FDA did not provide clarity for LDL-C lowering Indication; -26.6% afterhours
Notable movers by sector:
- Consumer discretionary: Midea Group Co 000333.CN -1.1% (acquisition); APN News APN.AU +2.3% (UBS cuts to neutral)
- Financials: National Storage REIT NSR.AU +2.5% (acquisition, guidance)
- Industrials: UGL UGL.AU +12.6% (awarded order)
- Technology: Sony Corp 6758.JP +3.8% (revises mid-term ROE target)
- Materials: LG Chem 051910.KR +7.6%, Samsung SDI Co 006400.KR +5.4% (South Korea asks China to help on EV battery producers)
- Energy: Idemitsu Kosan Co 5019.JP -7.5% (founding family oppose to Showa Shell merger); Caltex Australia CTX.AU +3.2% (guidance)
- Healthcare: Australian Pharma API.AU +7.5% (Goldman raises to neutral)