Asian Mid-session Market Update: Brexit panic subsides even as GBP falls further on Moody's warning; China industrial profits slow again; Japan officials talk down JPY further
***Economic Data***
- (CN) CHINA MAY INDUSTRIAL PROFITS Y/Y: 3.7% V 4.2% PRIOR
- (NZ) NEW ZEALAND MAY TRADE BALANCE (NZ$): 358M (5th straight surplus) V 182ME; ANNUALIZED: -3.63B V -3.84BE
- (NZ) NEW ZEALAND Q2 WESTPAC EMPLOYMENT CONFIDENCE INDEX: 101.5 v 104.8 PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +1.4%, S&P/ASX +0.6%, Kospi -0.2%, Shanghai Composite +0.9%, Hang Seng -0.8%, Sep S&P500 -0.3% at 2,012
***Commodities/Fixed Income***
- Aug gold +0.5% at $1,329/oz, Aug crude oil -0.4% at $47.43/brl, Jul copper +0.1% at $2.11/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 18.4 tonnes to 934.3 tonnes; highest since July 2013
- (CN) PBOC SETS YUAN MID POINT AT 6.6375 V 6.5776 PRIOR; lowest Yuan setting since Dec 2010
- (CN) PBOC to inject CNY270B in 7-day reverse repos
- (JP) BOJ offers to buy ¥25B in inflation-indexed JGBs, ¥450B in 5-10yr JGBs
- (KR) South Korea Finance Ministry sells 20-yr bonds at 1.56%
- (AU) Australia MoF (AOFM) sells A$600M in 5.75% 2021 Bonds; avg yield: 1.6522%; bid-to-cover: 4.18x
***Market Focal Points/FX***
- Asian equity markets are mixed as investors assess the fallout of the Brexit decision and panic selling on Friday. There are some signs of "buyer's remorse", as over 2 million Britons have signed a petition calling for a do-over of the referendum, claiming too narrow of a victory and below-75% turnout. Survey in the Guardian also saw 1 out of 5 UK companies considering shift in operations and some 2/3 of business leaders conclude that Brexit was bad for their business. Fin Min Osborne is expected to make a statement on Monday, seeking to "provide reassurance about financial and economic stability" in the UK, though one of the leaders behind Brexit - former London mayor Boris Johnson - declared that the negative consequences of Brexit are "wildly overdone" and the upside is being ignored. GBP/USD is still down about 250pips from Friday close, as Moody's changed its outlook on UK sovereign rating to negative from stable due to the impact of Brexit.
- Spain Parliamentary elections were less troublesome for the ruling conservative Popular Party as it took 137 out of 350 seats - up from 123 in December - but still not decisive to give it a ruling Majority. PP is still expected to look for coalition help, while the opposition alliance of left-wing Podemos / United Left only took 91-95 seats - results its leaders deemed as disappointing.
- China May industrial profits slowed to 3.7% V 4.2% prior and YTD slowed to 6.4% v 6.5% prior. China Stats Bureau said the data still demonstrate positive change, with inventory pressures easing and profit slowdown largely attributed to non-operating revenue slide. China Premier Li was a keynote speaker at the World Economic Forum (WEF) in Tianjin, noting that Brexit increases uncertainty in global economy though viewing China maintaining stable growth. Li reiterated the PBoC would continue conducting prudent monetary policy in a flexible way and expressing some flexibility in the way of room for proactive fiscal policy. Li added China economy is still sound, with stable CPI and employment, even though global trade growth is weak.
- Verbal intervention remained heavy in Japan, where PM Abe held a meeting with BOJ Dep Gov Nakaso and and Fin Min Aso. Abe said it was critical to strive for greater market stability amid uncertainty following the Brexit vote, adding he has held phone discussions with BOJ Gov Kuroda and also instructed Finance Ministry to take all necessary measures in FX markets. USD/JPY opened the week lower by about 60pips below 101.50, but remained supported at that level with a session high above 102.40.
***Equities***
US equities / ADRs:
- JPM: CEO: Will maintain a large presence in the UK despite the Brexit vote - financial press
Notable movers by sector:
- Consumer discretionary: Tatts Group TTS.AU +0.7% (divestment)
- Financials: Mirvac Group MGR.AU +1.5% (private placement); Vanke 2202.HK -3.8% (shareholder calls for reshuffle board); Scentre Group SCG.AU +2.8% (reaffirms guidance); Spotless Group SPO.AU +1.1% (receives bid for laundry unit)
- Industrials: ; Takeuchi Manufacturing Co 6432.JP -11.6% (market momentum); Cathay Pacific Airways 293.HK -4.2% (downgrade); Hyundai Motor Co 005380.KR +1.1%, Hankook Tire Co 161390.KR +2.8% (momentum)
- Energy: Woodside Petroleum WPL.AU +1.0% (project approved)
- Utilities: Taiyo Nippon Sanso Corp 4091.JP +9.4% (acquisition)