Asian Mid-session Market Update: Cable crashes below 1.28 for new 31-year lows after BOE warning as Bonds and Gold continue to rally
***Economic Data***
- (HK) HONG KONG JUNE PMI: 45.4 V 47.2 PRIOR (16th consecutive month of contraction; lowest level since Aug 2015)
- (UK) JUNE BRC SHOP PRICE INDEX Y/Y: -2.0% V -1.8% PRIOR (38th month of decline)
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -3.0%, S&P/ASX -1.4%, Kospi -2.0%, Shanghai Composite -0.3%, Hang Seng -1.9%, Sep S&P500 -0.5% at 2,071,
***Commodities/Fixed Income***
- Aug gold +0.9% at $1,370/oz, Aug crude oil -0.7% at $46.28/brl, Sep copper -0.1% at $2.18/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 28.8 tonnes (3.0%) to 982.7 tonnes; Highest since June 2013
- SLV: iShares Silver Trust ETF daily holdings rise to 10,471 tonnes from 10,374 tonnes prior
- (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -0.4% vs. 0.0% (unchanged) prior; first decline in 2 months
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6857 V 6.6594 PRIOR (lowest setting since Nov 2010, 2nd consecutive multi-year low)
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- (JP) BOJ offers to buy ¥375B in 1-3yr JGBs, ¥440B in 3-5yr JGBs, ¥430B in 5-10yr JGBs, and ¥25B in floating-rate JGBs
- (AU) Australia MoF (AOFM) sells A$700M in 2.25% 2028 Bonds; avg yield: 2.021%; bid-to-cover: 3.54x
***Market Focal Points/FX***
- Asian equity markets are tracking the losses in US hours, tumbling across the board as investors flee to the safety of bonds and gold. Brexit fears are fully blown yet again after the latest BOE financial stability report released overnight underscored risks from Brexit beginning to materialize, with worries over deterioration in demand for UK assets becoming more acute. GBP/USD extended its losses with an even steeper plunge in Asian hours as Cable pierced the 1.30 handle on its way to session low of 1.2790 - down about 250pips from session's highs. The safe haven demand of bonds took Australia 10-year yield to record low below 1.85% and the yield on Japan's 20-yr JGB to negative territory for the first time. In other dollar majors, USD/JPY was down over 100pips below 100.70, dragging Nikkei225 down by over 3%. Gold is also bid up by nearly $15 in Aug contract above 1,370 - a 2-year high. Cautious sentiment is exacerbated by Fed-speak unwilling to pivot toward a more accommodative - Fed's Williams said his personal view of US economy has not changed based on Brexit, adding that a hike this year may still be appropriate if economic forecasts hold.
- In Australia, the election uncertainty may drag on until next week as absentee ballot counting to determine the victor of Saturday's polls continues. NSW premier Baird noted that the threat to Australia's AAA rating is a real prospect on concerns over budget gridlock, calling for the new govt to make it a priority. A note from Morgan Stanley also estimated that systemic risk in domestic banking industry could force Australia's top-4 banks to raise about A$17.5B to reach CET1 ratio of 15%. AUD/USD was down about 50pips around 0.7410.
- In economic data, Hong Kong PMI contracted for the 16th straight month as conditions deteriorated to their worst level since Aug 2015. Markit saw sharp reduction in purchasing activity and a big drop in inputs and backlog. New orders decline was also faster, with clients said to be more unwilling to commit to spending. Elsewhere, despite recent evidence to the contrary, China's PBoC adviser Fan Gang said the economic downturn has stabilized, even as Dep Gov Chen called for a closer look into companies' leverage ratio to facilitate changes in corporate debt structure.
***Equities***
US equities / ADRs:
- MDVN: Confirms confidentiality agreements, including with Sanofi; +1.2% afterhours
- TWTR: Appoints Bret Taylor (CEO of Quip) to Board of Directors; effective immediately; +0.1% afterhours
- VTR: To acquire life science and medical real estate leased by leading universities, academic medical centers and research companies for $1.5B in cash; -1.2% afterhours
Notable movers by sector:
- Consumer discretionary: Kewpie Corp. 2809.JP +8.5% (H1 result); Fantastic Holdings Ltd FAN.AU -4.9% (operations changes); Lawson 2651.JP -2.5% (Q1 result speculation)
- Financials: China Vanke Co 000002.CN -3.1% (Baoneng increased its stake); China New Energy Power Group 1041.HK -8.8% (profit warning)
- Industrials: Great Wall Motor 2333.HK -1.2% (June result); Boer Power Holdings 1685.HK -7.0% (profit warning); Hubei Aviation Precision Machinery Technology Co 002013.CN +7.5% (raises guidance); Virgin Australia VAH.AU +3.5% (guidance)
- Technology: i-Cable Communications 1097.HK +11.4% (statement on CME segment); Largan Precision Co.3008.TW -1.0% (June result)
- Materials: St Barbara SBM.AU +5.7% (Q4 result); Evolution Mining EVN.AU +7.6%, Newcrest Mining NCM.AU +3.3% (gold price rises)