Asia Mid-Session Market Update: China inflation slows to 10-month low; BOK on hold, while North Korea conducts another nuclear test
***Economic Data***
- (CN) CHINA AUG CPI Y/Y: 1.3% V 1.7%E; 10-month low
- (CN) CHINA AUG PPI Y/Y: -0.8% V -0.9%E; 54th consecutive month of decline; smallest decline since Apr 2012
- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 1.25%; AS EXPECTED
- (JP) JAPAN AUG M2 MONEY STOCK Y/Y: 3.3% V 3.3%E; M3 MONEY STOCK Y/Y: 2.8% V 2.9%E
- (AU) AUSTRALIA JULY HOME LOANS M/M: -4.2% V -1.5%E; biggest decline in 6 months
- (NZ) NEW ZEALAND AUG CARD SPENDING M/M: -0.4% V +0.3%E; TOTAL M/M: -0.8% V +0.4% PRIOR
- (PE) PERU CENTRAL BANK (BCRP) LEAVES REFERENCE RATE UNCHANGED AT 4.25%; AS EXPECTED
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 -0.2%, S&P/ASX -0.8%, Kospi -1.3%, Shanghai Composite flat, Hang Seng +1.0%, Sep S&P500 flat at 2,177
***Commodities/Fixed Income***
- Dec gold +0.1% at $1,342/oz, Oct crude oil -0.9% at $47.21/brl, Dec copper flat at $2.10/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 950.6 tonnes; 2nd straight decline
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6684 V 6.6620 PRIOR; 2nd straight weaker setting
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr, ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs and ¥1.25T in T-bills
- (AU) Australia MoF (AOFM) sells A$900M in 2.75% 2019 Bonds; avg yield 1.5262%; bid-to-cover 3.68x
***Market Focal Points/FX***
- Asian equity markets are mixed in the wake of modest losses in US hours. Korea's Kospi is under particularly heavy pressure amid continued saber-rattling by the North, this time with another nuclear test and pledges to continue to develop its nuclear arsenal. Recall North Korea has already come under international condemnation for a ballistic missile test from a submarine last month. China markets fared better, with soft CPI data potentially renewing the case for additional policy easing by the PBoC. Hong Kong gainers included casino stocks on positive outlook from Deutsche Bank and HKEX on reports that CIRC may start trials allowing insurance funds in Shanghai-Hong Kong stock connect. Oct WTI crude oil has pared some of the gains of the past 48 hours after today's spike on 17-year high draw in DOE inventories. In FX, USD/JPY fell nearly 50pips below ¥102 handle, AUD/USD traded in a 20pip range above 0.7635, and NZD/USD was in a 20pip range around 0.74.
- China CPI hit a 10-month low at 1.3%, down from 1.7% prior, though much of the slowdown was attributed to lower food prices. Food CPI fell to 1.3% v 3.3% prior, while non-food was unchanged at 1.4%. Wholesale prices remained in deflation for the 54th straight month, but it was also the smallest annualized decline since early 2012. Following inflation data release, national Stats Bureau remarked that this is a critical period for structural optimization. Separately, PBoC advisor Fan Gang warned that while questionable bank credit could reach 5-6% of lending, banks are not in a crisis right now. Fan added the economy has likely bottomed, even if growth is not evident at this time.
- What was initially reported as a modest earthquake turned out to be another nuclear test by North Korea, and this time the energy magnitude was rumored to be twice the most recent one. South Korea Pres Park and Japan officials condemned the test and were both said to consider unilateral expansion of sanctions and other measures. North Korea's state media KCNA also confirmed the test, announcing the country now has a new ability to standardize nuclear warheads and mount them onto rockets. Also on the peninsula, Bank of Korea stood pat at 1.25% as expected in a unanimous decision with a fairly neutral bias. BOK said economic sentiment has improved and inflation would remain low before rising while also warning about increase in household debt.
- In Japan, BOJ Gov Kuroda held one of his regular lunch meetings with PM Abe. Afterwards, Kuroda said he has explained the central bank's comprehensive policy review to Abe, but he did not offer any comments on monetary policy. USD/JPY softened briefly on Kuroda remarks when he said the two did not discuss the topic of BOJ buying foreign bonds as part of its new QQE policy options.
***Equities***
US equities / ADRs:
- RH: Reports Q2 $0.44 v $0.29e, R$543M v $530Me; +14.1% afterhours
- FNSR: Reports Q1 $0.38 (adj) v $0.30e, R$341M v $334Me; Guides Q2 $0.44-0.50 v $0.32e, R$355-375M v $343Me; +12.6% afterhours
- ZUMZ: Reports Q2 -$0.03 v -$0.08e, R$178.3M v $178Me; +6.0% afterhours
- LOCO: To enter S&P SmallCap 600 index on Sept 12th; +5.8% afterhours
Notable movers by sector:
- Consumer staples: BGF retail Co 027410.KR -11.4% (Chairman to sell stake)
- Financials: Greentown China 3900.HK +2.8% (Aug result); Woori Bank 000030.KR -0.9% (Posco considers bid for stake); China Galaxy Securities Co 6881.HK +4.2% (Aug result); Hong Kong Exchanges & Clearing 388.HK +6.8% (China allows insurance funds in stock connect)
- Industrials: Takata Corp.7312.JP +1.5% (to take bids from 7 rescuers)
- Technology: LG Display Co 034220.KR +0.9% (Berstein cuts to Market Perform); AU Optronics Corp 2409.TW -1.3% (Berstein cuts to Market Perform); Kyocera Corp 6971.JP +2.2% (BNP Paribas raised to Hold)
- Energy: Origin Energy ORG.AU +5.9% (new CEO); Beach Energy BPT.AU +3.2% (oil gains)
- Healthcare:Sigma Pharmaceuticals SIP.AU +7.8% (UBS raised to Buy)