Asian Mid-session Market Update: Markets retreat on profit-taking ahead of US jobs data, Japan elections, and China inflation figures
***Economic Data***
- (JP) JAPAN MAY LABOR CASH EARNINGS Y/Y: -0.2% (first decline in 11 months) V 0.5%E; REAL EARNINGS (EX-INFLATION) Y/Y: 0.2% V 0.4% PRIOR
- (JP) JAPAN MAY CURRENT ACCOUNT BALANCE: ¥1.81T V ¥1.75TE; ADJUSTED CURRENT ACCOUNT: ¥1.41T V ¥1.52TE; TRADE BALANCE: ¥39.9B V ¥56BE
- (JP) JAPAN JUNE BANK LENDING (INC TRUSTS) Y/Y: 2.0% (3-month low) V 2.2% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.0% V 2.2%E
- (UK) GFK CONSUMER CONFIDENCE: -9 V -1 PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -0.4%, S&P/ASX +0.1%, Kospi -0.6%, Shanghai Composite -0.8%, Hang Seng -0.9%, Sep S&P500 -0.1% at 2,091
***Commodities/Fixed Income***
- Aug gold -0.3% at $1,358/oz, Aug crude oil +1.0% at $45.58/brl, Sep copper flat at $2.12/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 4.1 tonnes to 978.3 tonnes; 2nd straight decline
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6853 V 6.6820 PRIOR
- (CN) PBOC to inject CNY20B in 7-day reverse repos; Drains net CNY645B for the week (biggest drain in 4 months) v injection CNY180B last week
- (AU) Australia MoF (AOFM) sells A$800M v A$800M indicated in 1.75% 2020 bonds; Avg yield 1.567%; bid-to-cover 3.02x
***Market Focal Points/FX***
- Asian equity markets are modestly lower and sentiment is subdued with key risk events out of the US and regionally headed into the weekend. Non-farm payrolls will be the biggest one in light of soft data in the prior month. Most recent tertiary indicators of US employment have also been mixed - ADP, weekly claims, and Employment component of ISM have posted decent findings while online job ads surveyed by the Conference Board in June hit new multi-year lows. A very strong number could potentially build on the hawks' case that US economy is insulated from Brexit and other overseas challenges - sentiment expressed by Fed's Mester in late US session that US policy is not behind the curve and Brexit isn't the only factor with risks to economy balanced. In USD majors, USD/JPY was down about 60pips from the highs below 100.90, AUD/USD traded in a 40pip range above 0.7480, and NZD/USD a 60pip range below 0.7280. Risk-off flows materialized in afternoon Asia session as USD/JPY saw its lows and S&P futures fell 5pts on reports of targeted shootings of police officers in Dallas, TX by snipers.
- China released its June foreign reserves overnight that showed the biggest increase in 14 months to $3.21T, leading to speculation that PBoC has exited its regular currency market intervention and allowing Yuan to weaken. PBoC was also less active in repo operations this week, with a net drain of CNY645B - the biggest drain in 4 months. Among notable Chinese press reports and commentary, NDRC researchers speculated PBoC may have to cut rates again if Q2 data miss expectations, while an op-ed report in China Securities Journal warned of a large risk of more bond defaults in H2.
- USD/JPY was back within 30pips of the psychological 100 handle, which was briefly breached 2 weeks ago on Brexit Leave vote panic and subsequently held unchallenged. FX volatility prompted comments from Vice Fin Min / FX chief Asakawa, noting the govt is closely watching FX markets with urgency and will act promptly if there are speculative moves. With political risks in the UK and Australia dominating the headlines as of late, Japan's upper house election on Saturday also bears close watching, even though the opposition is not particularly mobilized despite the growing discontent toward the slow progress of Abenomics policies. Wage growth in particular has been sorely lacking, as evidenced by today's disappointing wage inflation figure that fell into negative for the first time in nearly a year.
- In Australia, govt ministry lowered slightly its outlook for iron ore prices to $44.20/tonne from $45.00, with 2017 seen at $44.80. Iron ore miners were little changed on the report. With election ballot counting continued, an AFR note saw the ruling Conservative's with 73 Parliament seats vs 66 for opposition Labor - 76 are needed to form a govt. After yesterday's cut in Australia sovereign outlook, S&P said it will pay close attention to the govt mid-year fiscal update in Dec and next year's budget. In New Zealand, ANZ saw its Q2 estimate of non-tradable inflation reach 2.5% y/y as it no longer expects RBNZ to cut rates at its upcoming Aug meeting, sending NZD/USD to session highs.
***Equities***
US equities / ADRs:
- CUDA: Reports Q1 $0.20 v $0.11e, R$86.7M v $83.8Me; CFO steps down effective Aug 1; +15.1% afterhours
- GPS: Reports June SSS +2.0% v -3.5%e; +4.0% afterhours
- HELE: Reports Q1 $1.27 v $1.12e, R$347.9M v $361Me; -2.6% afterhours
- PSMT: Reports Q3 $0.55 v $0.70 y/y, R$704.2M v $706Me (1 est); -3.9% afterhours
- WDFC: Reports Q3 $0.88 v $0.86e, R$96.4M v $99.3Me (2 est); -4.1% afterhours
Notable movers:
- Nintendo 7974.JP: New Pokemon game top app in US and Australia; +9.1%
- Mitsubishi Motors 7211.JP: Reports June China new car sales -25.6% y/y - Nikkei; +1.6%
- 3382.JP: Reports Q1 Net ¥43.2B v ¥42.2B y/y, Op ¥81.5B v ¥81.9B y/y, Rev ¥1.39T v ¥1.44T y/y; -1.3%
- Asahi Glass 5201.JP: May report H1 op profit flat y/y; Rev -4% y/y, to ~¥630B - Nikkei; -6.6%
- Gold producers NST.AU -2.6%, EVN.AU -1.7% on lower gold prices
- S32.AU +4.1% (broker commentary)
- WHC.AU Whitehaven +7.1% on higher coal prices