Asian Mid-session Market Update: AUD rallies to 1-month high on neutral bias in RBA policy hold
***Economic Data***
- (AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 1.75%; AS EXPECTED
- (AU) AUSTRALIA MAY AIG PERFORMANCE OF CONSTRUCTION INDEX: 46.7 V 50.8 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 116.8 v 113.2 prior
- (JP) JAPAN MAY OFFICIAL RESERVE ASSETS: $1.25T v $1.26T PRIOR
- (NZ) New Zealand May ANZ Truckometer Heavy M/M: -1.7% v -2.6% prior
- (TW) TAIWAN MAY CPI Y/Y: 1.2% V 1.7%E; WPI Y/Y: -2.8% V -3.9%E
- (PH) Philippines May CPI M/M: 0.3% v 0.2%e; Y/Y: 1.6% (1-year high) v 1.3%e; CPI Core Y/Y: 1.6% v 1.5%e
- (UK) MAY BRC LFL SALES Y/Y: 0.5% V +0.3%E (First increase in 2 months)
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.4%, S&P/ASX +0.5%, Kospi +0.9%, Shanghai Composite -0.2%, Hang Seng +0.8%, Jun S&P500 flat at 2,108
***Commodities/Fixed Income***
- Aug gold -0.2% at $1,246/oz, Jul crude oil -0.3% at $49.55/brl, Jul copper -0.3% at $2.11/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 0.2 tonnes to 881.2 tonnes
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5618 V 6.5497 PRIOR
- (CN) PBOC to inject CNY50B in 7-day reverse repos
- JGB: (JP) Japan's MOF sells ¥728B in 0.3% 30-year bonds; Avg yield: 0.314% v 0.319% prior; Bid to cover: 3.42x v 3.01x prior
- (KR) South Korea sells 3-yr bonds at 1.385%
***Market Focal Points/FX***
- Asian equity markets are higher, tracking fresh gain in US indices after the latest comments from Fed's Yellen largely confirmed that Friday's disappointing payrolls data puts expectations of policy tightening on hold in the short run. While the Fed chair did her best to straddle both sides of the fence by warning against reading too much into one month of data, investors focused on omission that rate move can be expected "in the coming months". Fed funds futures now assign just a 4% chance of a hike in June, 26% chance of a move in June or July, and just below a 50% chance of rates being higher after September meeting.
- Reversal in expectations of monetary policy divergence are particularly stark in contrast to Australia, where analysts had anticipated RBA to stick to its trend of policy easing coming in sets of pairs. Instead, today's RBA rate hold and accompanying statement seem to pin cash rate at 1.75% for the foreseeable future. RBA reiterated that inflation has been low and elevated exchange rate complicates transition to non-mining sector of the economy, but added that growth continues despite the decline in business investment. RBA also acknowledged recent recovery in trade components, stating that exports, along with other "areas of domestic demand" are expanding above trend. Recall the latest trade balance showed exports rising for the 2nd straight month and the deficit narrowing to 13-month low. On labor, RBA said that while recent indicators have been mixed, they are "consistent with continued expansion of employment in the near term." AUD/USD hit a 1-month high in the wake of RBA statement, rising 60pips above 0.7420, as yields on 3-year Australia govt bond rose 5bps to 1.61%.
- Ahead of this week's RBNZ rate decision, New Zealand Institute of Economic Research (NZIER) Shadow Board recommended a hold thanks to NZ economy showing decent momentum and continued concerns related to appreciation in the property market. NZD also got a slight boost after comments from New Zealand Treasury forecasting 2016 inflation to be slightly higher than expected, bouncing back above the $0.69 level.
- Elsewhere, vast majority of economists expects Bank of Korea to hold rates at 1.5%, but also anticipate another easing as soon as July. Govt think tank KDDI also offered a cautious view in its monthly report, noting the economy is facing slowdown in manufacturing amid sluggish exports and that recovery is unlikely due to the global economic slowdown and external uncertainties.
- Sterling pairs were volatile in late Asian session, as GBP/USD spiked up some 150pips above 1.4640. Those gains were quickly paired on reports that erroneous trade / "fat finger" action distorted the market. A pair of Brexit polls did move the needle slightly back in favor of Stay camp after a flood of surveys supporting Leave case over the weekend.
- Stateside, Hillary Clinton has reportedly secured enough Delegate support to become Democratic Party presumptive nominee, with pledged superdelegate count taking her beyond the 2,383 threshold. Bernie Sanders reiterated his weekend remarks that Superdelegate numbers dont count until the convention. Democratic primaries in California and New Jersey later today should clarify the state of the race further and may produce more concessions from the underdog Vermont senator.
***Equities***
US equities / ADRs:
- SRPT: Announces FDA Request For Dystrophin Data Prior To Making A Decision on Eteplirsen NDA; +25.8% afterhours
- UNFI: Reports Q3 $0.76 v $0.66e, R$2.13B v $2.17Be; +11.4% afterhours
- Z: Zillow to pay $130M to settle trade secret lawsuit brought by Newscorp's Move.com - filing; +8.0% afterhours
- FDX: RAISES DIVIDEND 60% TO $0.40 FROM $0.25; implied yield 1.0%; +0.5% afterhours
- THO: Reports Q3 $1.51 v $1.45e, R$1.28B v $1.29Be; +0.3% afterhours
- CASY: Reports Q4 $1.19 v $1.21e, R$1.58B v $1.55Be; -2.6% afterhours
- ALXN: Topline results from Phase 3 REGAIN Study of Eculizumab (Soliris) in patients with Refractory Generalized Myasthenia Gravis (gMG) did not reach statistical significance; -10.5% afterhours
- YHOO: Said that Verizon $3.0B bid is for web assets only, excludes patents and real estate - financial press
Notable movers by sector:
- Consumer discretionary: Le Saunda Holdings 738.HK -1.8% (Q1 result); Suning Appliance Co 002024.CN -2.6% (to acquire Inter Milan); Gome Electrical Appliances Holdings 493.HK +1.1% (share buyback)
- Financials: CITIC Securities 6030.HK +0.5% (May result); Evergrande Real Estate Group 3333.HK +1.9% (May result)
- Industrials: Great Wall Motor 2333.HK +4.5% (May result)
- Energy: Fortescue Metals Group FMG.AU +3.7%, BHP Billiton BHP.AU +3.4%, Rio Tinto RIO.AU +2.1% (iron ore rises); Origin Energy ORG.AU +1.3% (said to consider additional asset sales)
- Healthcare: Mayne Pharma MYX.AU +3.3% (FDA approval)