Asian Mid-session Market Update: RBA quarterly statement (SOMP) maintains GDP/CPI forecasts despite uncertainty in labor and transition away from mining; Markets await US payrolls
***Economic Data***
- (JP) JAPAN MAY LABOR CASH EARNINGS Y/Y: 1.3% V 0.3%E (3-month high); REAL EARNINGS (EX-INFLATION) Y/Y: 1.8% V 0.4% PRIOR
- (JP) JAPAN JULY OFFICIAL RESERVE ASSETS: $1.27T v $1.27T PRIOR
- (AU) AUSTRALIA JULY AIG PERFORMANCE OF CONSTRUCTION INDEX: 51.6 V 53.2 PRIOR; 2nd month of expansion
- (PH) PHILIPPINES JULY CPI M/M: 0.1% V 0.3%E; Y/Y: 1.9% V 2.1%E; CPI CORE Y/Y: 1.9% V 2.1%E
- (TW) TAIWAN JULY CPI Y/Y: 1.2% V 1.0%E; WPI Y/Y: -2.4% V -2.2%E
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.3%, S&P/ASX +0.4%, Kospi +0.7%, Shanghai Composite -0.1%, Hang Seng +1.3%, Sep S&P500 +0.2% at 2,162
***Commodities/Fixed Income***
- Dec gold flat at $1,367/oz, Sep crude oil -0.7% at $41.63/brl, Sep copper flat at $2.17/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 3.3 tonnes to 973.2 tonnes; highest since July 11th
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6406 V 6.6444 PRIOR
- (CN) PBOC to inject CNY90B in 7-day reverse repos; For the week drained CNY162B v injected CNY325B w/w
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥430B in 5-10yr JGBs, and ¥1.5T in T-bills
- (AU) Australia MoF (AOFM) sells A$1.0B in 5.75% 2022 Bonds; avg yield: 1.6368%; bid-to-cover: 2.37x
***Market Focal Points/FX***
- Asian equity markets are marginally higher once again with the exception of Shanghai Composite. Investors have taken a rich serving of stimulus from the BOE in stride and now await the critical non-farm payrolls report in the US on Friday. Recall the latest ADP and Online job ads data for July have tipped a second straight month of solid growth after the May disappointment, though the former ADP did not anticipate that swoon with a false positive. Appetite for US stocks has flattened in the past 3 weeks after a torrid first half of July, as traders look to interpret whether the Fed-on-hold-through-2016 upswing has run its course. USD majors are also fairly thin with the exception of AUD/USD rising 30pips to 3-weeks highs after RBA quarterly statement - USD/JPY was in a 30pip range above ¥101, NZD/USD rose 20pips toward $0.72, and GBP/USD has bounced some 30pips off the late US session low of $1.31.
- After a cut in interest rates earlier this week, RBA's quarterly statement on monetary policy did little to elaborate on expectations for the future of policy directions. Following a downward revision on inflation last time around, RBA this time kept all of its forecasts for CPI and GDP unchanged - 2016 and 17-end GDP midpoint 3.0% and 2018 at 3.5%, with 2016 core CPI seen at 1.5% and 2017/18-midpoints at 2.5%. RBA warned that commodity prices will remain under pressure as China demand cools and forecast business investment sentiment in the non-mining sector - the lynchpin of new economy - to remain subdued. Wage inflation outlook was also foggy and momentum difficult to judge. On the flip side, RBA was encouraged by economy's potential given low rates, anticipates resource export demand to improve, sees household consumption growth close to long-run average, and remain upbeat on property investment.
- Among notable China press sources, People's Daily reported that the progress of steel capacity reduction is unsatisfactory, but the coal reduction has been achieved. In the credit space, regulators are close to a launch of CDS products, even as a separate press source reported earlier this week that state banks are encouraged to roll over debt obligations.
- In Japan, Ministry of Economy, Trade and Industry (METI) warned that stronger JPY may force companies to revise their CAPEX plans - recall the latest Q2 Tankan survey showed a better than expected Industry Capex forecast of 6.2%. A Nikkei report noted the recent bond market volatility shows investors concerned that the BOJ may scale back its ¥80T QE program, and one of the options could be widening a range of target monetary base expansion from ¥80T to ¥70-90T, allowing more aggressive QE in the short run to be followed by a taper. Fin Min Aso reiterated risks in Japan economic recovery are still present, and that the govt is working with the BOJ to use all policy options to support growth.
***Equities***
US equities / ADRs:
- RAX: Said to be in advanced talks to be sold to PE firm - press; +19.8% afterhours
- MTZ: Reports Q2 $0.36 v $0.22e, R$1.23B v $1.15Be; +10.8% afterhours
- LGF: Reports Q1 +$0.20 v -$0.23e, R$553.6M v $501Me; +7.7% afterhours
- PCLN: Reports Q2 $13.93 v $12.67e, R$2.56B v $2.60Be; +5.7% afterhours
- SYMC: Reports Q1 $0.29 v $0.25e, R$884M v $878Me; +4.1% afterhours
- KHC: Reports Q2 $0.85 adj v $0.71e, R$6.8B v $6.82Be; Increases dividend 4.3% to $60/shr; +3.5% afterhours
- MNST: Reports Q2 $0.99 adj v $1.04e, R$827.5M v $808Me; Authorizes new $250M share repurchase (~1% of market cap);+1.6% afterhours
- ATVI: Reports Q2 $0.54 v $0.45e, R$1.61B v $1.50Be; +1.2% afterhours
- WTW: Reports Q2 $0.46 v $0.48e, R$310M v $319Me; -7.5% afterhours
- FEYE: Reports Q2 -$0.33 v -$0.39e, R$175M v $181Me; -16.8% afterhours
Notable movers by sector:
- Consumer discretionary: MGM China 2282.HK +2.9% (H1 result); Namco Bandai Holdings 7832.JP +11.0% (Q1 result); Tabcorp TAH.AU +4.3% (FY16 result); Kirin Holdings Co 2503.JP +0.4% (Q1 result)
- Financials: Haitong Securities 6837.HK +1.4% (July result); CITIC Securities 6030.HK +1.7% (July result); China Vanke Co 000002.CN +3.688% (confirms China Evergrande has acquired stake); Mitsui Fudosan Co 8801.JP +1.4% (Q1 result)
- Industrials: Downer EDI DOW.AU +5.1% (FY16 result); Toyota Motor Corp 7203.JP +3.6% (Q1 result); Virgin Australia VAH.AU +2.1% (FY16 result); Yamaha Motor 7272.JP +1.6% (H1 result)
- Technology: Brambles BXB.AU +0.8% (to set up JV); Disco Corp 6146.JP +5.1% (Q1 result); Nikon Corp 7731.JP +5.1% (Q1 result)
- Energy: JX Holdings 5020.JP -0.8% (Q1 result); CNOOC 883.HK +1.4%, PetroChina 857.HK +0.8% (oil gains)
- Healthcare: Terumo Corp 4543.JP +2.9% (Nomura raised to Buy)
- Utilities: Korea Electric Power Corp 015760.KR -0.3% (Q2 result)
- Materials: Maruichi Steel Tube 5463.JP -3.8% (Q1 result)