Asian Mid-session Market Update: BOJ disappoints with only marginal expansion of ETF program easing
***Economic Data***
- (JP) JAPAN JUN RETAIL SALES M/M: 0.2% V 0.3%E; RETAIL TRADE Y/Y: -1.4% V -1.2%E
- (JP) JAPAN JUN PRELIMINARY INDUSTRIAL PRODUCTION M/M: 1.9% V 0.5%E; Y/Y: -1.9% V -2.9%E
- (JP) JAPAN JULY TOKYO CPI Y/Y: -0.4% (3-month high) V -0.5%E; CPI EX-FRESH FOOD Y/Y: -0.4% (3-month high) V -0.4%E; CPI Ex Food/Energy Y/Y: 0.3% v 0.3%e; 1-year low
- (JP) JAPAN JUN OVERALL HOUSEHOLD SPENDING Y/Y: -2.2% V -0.4%E; biggest decline in 3 months
- (JP) JAPAN JUN NATIONAL CPI Y/Y: -0.4% V -0.4%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.5% (3-year low) V -0.4%E
- (JP) JAPAN JUN JOBLESS RATE: 3.1% V 3.2%E; 8-month low
- (AU) Australia Jun Private Sector Credit M/M: 0.2% (3-year low) v 0.5%e; Y/Y: 6.2% (11-month low) v 6.5%e
- (AU) Australia Q2 PPI Q/Q: +0.1% v -0.2% prior; Y/Y: 1.0% v 1.2% prior
- (NZ) New Zealand July ANZ Activity Outlook: 31.4 v 35.1 prior; Business Confidence: 16.0 v 20.2 prior
- (NZ) New Zealand Jun Building Permits M/M: 16.3% v -0.9% prior
- (UK) JULY GFK CONSUMER CONFIDENCE: -12 V -8E; 2-year low
- (KR) SOUTH KOREA JUN INDUSTRIAL PRODUCTION M/M: -0.2% V -0.6%E; Y/Y: 0.8% V 0.3%E
- (KR) SOUTH KOREA AUG BUSINESS MANUFACTURING SURVEY: 71 V 72 PRIOR; NON-MANUFACTURING SURVEY: 70 V 72 PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 -0.8%, S&P/ASX -0.1%, Kospi +0.1%, Shanghai Composite flat, Hang Seng -0.9%, Sep S&P500 -0.3% at 2,157
***Commodities/Fixed Income***
- Dec gold +0.2% at $1,343/oz, Sep crude oil -0.2% at $41.05/brl, Sep copper +0.1% at $2.21/lb
- (CN) PBOC to inject CNY70B in 7-day reverse repos; Injects net CNY325B this week v injected CNY265.3B prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6511 V 6.6597 PRIOR; 4th straight firmer Yuan fix;; strongest Yuan fix since July 4th
- (AU) Australia MoF (AOFM) sells A$900M in 4.25% 2026 Bonds; avg yield: 1.8412%; bid-to-cover: 2.58x
***Market Focal Points/FX***
- Asian equity markets are lower as Bank of Japan has effectively kicked the can down the road on deciding to implement further large-scale stimulus, allowing the govt to do more heavy lifting with its fiscal plan instead. Against expectations of deeper cut in negative rates to -0.15% from -0.10% and a large minority view of expansion of annual monetary base beyond the current ¥80T, the BOJ merely boosted its ETF buying program to ¥6T from ¥3.3T and doubled the size of USD lending program to $24B. Inaction at this meeting - one that coincided with an update on BOJ's forecasts for GDP and CPI as well as more soft economic data in household spending and nationwide CPI - underscores the reluctance that Gov Kuroda has shown ever since that initial foray into negative rates back in January. It mattered little that the progress of Abenomics has slowed, JPY has strengthened, and that politically the Abe cabinet has been bolstered by the recently achieved super majority in the upper house of Parliament and thus a perceived mandate to do more on economy. USD/JPY was hit the hardest among the FX majors, falling nearly 200pips on the decision below 102.80. AUD/USD and NZD/USD were up a modest 25pips at 0.7530 and 0.7110 respectively despite the risk-off seen in Japan equities and a downtick in US equity futures.
- To delve deeper into today's BOJ decision, the quarterly forecasts saw inflation for current year cut to 0.1% from 0.5%, but the next 2 years maintained at 1.7% and 1.9% respectively. On growth, the current year was cut to 1.0% from 1.2%, but next year was raised dramatically to 1.3% from 0.1% - presumably thanks in part to expected pause in consumption tax increase. BOJ added it still views the current monetary measures and the latest €28T fiscal stimulus from the govt would have the needed impact to shock the economy, but also said there is still considerable uncertainty over outlook for prices, vowing to conduct a "comprehensive assessment of developments in economic activity and policy effects at the next policy meeting." Overall economic assessment, the view of business investment, private consumption, and industrial output were unchanged, but assessment of exports was cut to "more or less flat" and inflation has been acknowledged to be slightly negative vs prior view of about 0%. BOJ also added Brexit to its list of external uncertainties, while still monitoring risks related to emerging economies, US monetary policy, and debt problems in Europe.
***Equities***
US equities / ADRs:
- PFG: Reports Q2 $1.15 adj v $1.06e; Rev $3.04B v $3.5Be; Increases dividend 5% to $0.41 (implied yield 3.7%); +7.4% afterhours
- GOOGL: Reports Q2 $8.42 v $8.07e, R$21.5B (includes $B TAC) v $20.8B; +4.1% afterhours
- AMZN: Reports Q2 $1.78 v $1.14e, R$30.4B v $29.7Be; +2.1% afterhours
- HIG: Reports Q2 $0.54 v $0.77e (unclear if comp), R$4.68B v $4.69B y/y; +1.1% afterhours
- MAN: Announces New 6M Share Repurchase Authorization (8.3% of shares outstanding); flat afterhours
- CBS Reports Q2 $0.93 v $0.86e, R$3.29B v $3.22Be; -0.1% afterhours
- BIDU: Reports Q2 $1.22 v $0.94e, R$2.75B v $2.59Be; Guides Q3 Rev $2.71-2.80B v $2.86Be; -1.0% afterhours
- WYNN: Reports Q2 $1.07 v $0.97e, R$1.06B v $1.01Be; -6.1% afterhours
- WDC: Reports Q4 $0.79 v $0.72e, R$3.50B v $3.44Be; -6.3% afterhours
- EXPE: Reports Q2 $0.83 v $0.73e, R$2.20B v $2.24Be; Raises dividend; explores potential Trivago IPO; -6.5% afterhours
Notable movers by sector:
- Consumer discretionary: Wynn Macau 1128.HK -4.2% (Q2 result); Anta Sports Products 2020.HK -1.0% (Q2 result); Bega Cheese BGA.AU +6.7% (won contract from Woolworths ); Murray Goulburn MGC.AU -6.0% (loses Woolworth contract); Kao Corp 4452.JP -2.1% (H1 result)
- Industrials: Great Wall Motor 2333.HK +5.6% (H1 result)
- Technology: Denso Corp 6902.JP +3.4% (Q1 result)
- Materials: Lotte Chemical Corp.011170.KR +2.2% (Q2 result); OceanaGold Corp OGC.AU -2.5% (H1 result); Nippon Steel & Sumitomo Metal Corp 5401.JP -4.3% (Q1 result)
- Energy: CNOOC 883.HK -2.4% (profit warning); AWE AWE.AU -2.2% (quarter result); Origin Energy ORG.AU -1.9% (Q4 result)
- Healthcare: Wuyi International Pharmaceutical Co 1889.HK -1.6% (profit warning); Fosun International 656.HK -1.0% (acquisition); Yuhan Corp 000100.KR +4.6% (contract awarded)
- Telecom: Softbank Corp 9984.JP +2.2% (Q1 result)
- Utilities: Mitsubishi Electric Corp 6503.JP +2.4% (Q1 result)