Asia Mid-Session Market Update: Bond market strain reverberates across Asia after Friday's massive US selloff
***Economic Data***
- (JP) JAPAN JULY MACHINE ORDERS M/M: +4.9% V -2.9%E; Y/Y: 5.2% V 0.3%E; Govt raises machine order assessment
- (JP) JAPAN AUG PPI M/M: -0.3% (4-month low) V -0.1%E; Y/Y: -3.6% (6-month high) V -3.4%E
- (AU) AUSTRALIA JULY CREDIT CARD BALANCES: A$51.3B v A$52.2B PRIOR; CREDIT CARD PURCHASES: A$23.6B v A$25.5B PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 -1.5%, S&P/ASX -2.2%, Kospi -1.8%, Shanghai Composite -2.1%, Hang Seng -2.8%, Dec S&P500 -0.6% at 2,103
***Commodities/Fixed Income***
- Dec gold -0.2% at $1,331/oz, Oct crude oil -1.7% at $45.10/brl, Dec copper -0.5% at $2.08/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 10.7 tonnes to 939.9 tonnes; 3rd straight decline
- (LY) Ras Lanuf and Es Sider oil terminals in Lybia have been captured by forces of Libyan commander Haftar - financial press
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6908 V 6.6684 PRIOR; 3rd straight weaker setting; biggest margin of decline in 2 weeks
- (CN) PBOC to inject CNY70B in 7-day reverse repos and CNY45B in 14-day reverse repos; Gauges demand for 28 day reverse repos (1st 28-day reverse repos gauge in 7 months)
- (JP) BOJ offers to buy ¥430B in 5-10yr JGBs and ¥25B in inflation-indexed JGBs
***Market Focal Points/FX***
- Risk assets remain under pressure at the start of the new week in Asia as bears awoke from summer slumber to the sound of repricing of central bank easing expectations across the globe. Recall last week Gov Kuroda was not particularly persuasive that the central bank has enough conviction to expand asset purchases or push rates deeper into the red, with local press also commenting on a fractured BOJ containing a camp favoring no more easing. On Thursday, ECB's Draghi was similarly non-committal, stating his policy board also did not discuss extension of QE and suggesting that no additional stimulus was needed for the time being. On Friday, a typically dovish Boston Fed president and FOMC voter Eric Rosengren also seemingly endorsed another tightening this year in the face of the recently disappointing non-farm payrolls and ISM services US data, lifting the probability of a rate hike next week to 24% and that of 2016 to nearly 60% from low 50's last week.
- With the focus turning to Asia and the far east, traders are also closely watching the PBoC after it was reported to have gauged demand for 28-day reverse repos for the first time since February, having already added 14-day reverse repo to its liquidity toolbox last month. Hibor is rising to multi-month highs on funding worries, Shanghai Composite and Hang Seng are leading the decliners among indices, and Australias ASX200 is dragged down by materials. In FX, USD/JPY traded down nearly 40pips from Friday close to 102.30, AUD/USD was down about 20pips around 0.7520, and NZD/USD trading sideways in a 30pip range below 0.7350.
- Political / geopolitical risk is also creeping into sentiment, adding policy uncertainty to the monetary worries. Stateside, Hillary Clinton was shown collapsing into the arms of Secret Service after leaving the 9/11 Memorial ceremony early. A statement from her doctor said the Democratic candidate was suffering from pneumonia and experienced overheating/dehydration, prompting her to cancel her campaign trip to California. On the Korean peninsula, South Korea officials warned that the North has already completed preparations for another nuclear test, just as the UN Security Council convenes to discuss imposing further sanctions on Pyongyang for its detonation last week. Finally, US and Russia had reached a ceasefire agreement on Syria that they hope will result in a peace process, but one of the main rebel groups - Ahrar Al Sham - contends that it will not be bound by truce as it would only benefit Assad. The ceasefire is effective on Monday, and if it holds for 7 days, Russia/US promise to do more coordinated bombing against the al-Qaeda wing in Syria.
***Equities***
US equities / ADRs:
- PRGO: Starboard said to take a 4.6% stake; Calls for Board to consider selling some non-core assets, including Tysabri - financial press
- TSLA: Announces Autopilot 8.0; Will rely on radar and fleet learning to improve safety - Tesla blog
Notable movers by sector:
- Consumer discretionary: Asiana Airlines 020560.KR -11.4% (rights offering)
- Consumer staples: Australian Agricultural AAC.AU -5.9% (to stop long-haul export of cattle); Elders ELD.AU +6.9%(guidance); Coca-Cola East Japan Co 2580.JP +2.6% (raises guidance)
- Financials: Greenland Hong Kong 337.HK -2.6% (YTD result); ICBC 1398.HK -3.6%, CCB 939.HK -3.8% (CSRC calls for loan support to indebted firms); Woori Bank 000030.KR +2.2% (Posco considering bid)
- Industrials: Calsonic Kansei Corp.7248.JP +3.5% (receives bid for Nissan's stake)
- Technology: Samsung Electronics 005930.KR -6.4% (Galaxy Note 7 halt recommended)
- Materials: LG Chem 051910.KR +0.6% (to merge LG Life Sciences); Whitehaven Coal WHC.AU -7.5% (China targeting coal price)
- Energy: Neo Solar Power Corp. 3576.TW +3.8% (deal with Hermes Micro)
- Healthcare: Novogen NRT.AU +5.0% (FDA approves new drug application)