Asian Market Update: Japan downgrades assessment of industrial production after a miss in data; CPIs hit new multi-year highs
***Economic Data*** - (JP) JAPAN APR PRELIMINARY INDUSTRIAL PRODUCTION M/M: -2.5% V -2.0%E; Y/Y: 4.1% V 4.5%E; Japan DOWNGRADES assessment on industrial production to "output flattening as a trend" - (JP) JAPAN MAY TOKYO CPI Y/Y: 3.1% V 3.0%E; CPI CORE Y/Y: 2.8% V 2.9%E (fastest annual gain since Apr 1992) - (JP) JAPAN APR NATIONAL CPI Y/Y: 3.4% (highest since Feb 1991) V 3.4%E; CPI CORE Y/Y: 3.2% (multi-year high) V 3.1%E - (JP) JAPAN APR JOBLESS RATE: 3.6% V 3.6%E; JOB-TO-APPLICANT RATIO: 1.08 V 1.07E - (JP) JAPAN APR OVERALL HOUSEHOLD SPENDING Y/Y: -4.6% V -3.4%E (1st decline in two months) - (JP) JAPAN APR LOANS & DISCOUNT CORP: 2.3% V 1.9% PRIOR - (AU) AUSTRALIA APR PRIVATE SECTOR CREDIT M/M: 0.5% (4-month high) V 0.4%E; Y/Y: 4.6% V 4.5%E - (NZ) NEW ZEALAND APR BUILDING PERMITS M/M: +1.5% V -3.5%E (2nd consecutive monthly gain) - (NZ) NEW ZEALAND APR MONEY SUPPLY M3 Y/Y: 5.3% V 5.0% PRIOR - (SG) SINGAPORE APR CREDIT CARD BAD DEBTS: 21.6M V 21.8M PRIOR; CREDIT CARD BILLINGS: 3.5B V 3.7B PRIOR - (SG) SINGAPORE APR MONEY SUPPLY M1 Y/Y: 4.8% V 6.9% PRIOR; M2 Y/Y: 1.4% V 2.0% PRIOR - (SG) SINGAPORE APR BANK LOANS AND ADVANCES: 13.2% V 13.5% PRIOR - (KR) SOUTH KOREA APR INDUSTRIAL PRODUCTION M/M: 0.1% V 0.5%E; Y/Y: 2.4% V 3.1%E - (KR) SOUTH KOREA JUN MANUFACTURING BUSINESS SURVEY: 81 V 86 PRIOR; NON-MANUFACTURING SURVEY: 72 V 74 PRIOR - (KR) SOUTH KOREA APR CYCLICAL LEADING INDEX CHANGE Y/Y: +0.1% V -0.2% PRIOR - (UK) UK MAY GFK CONSUMER CONFIDENCE: 0 V -2E (first non-negative reading since Mar 2005)
Market Snapshot (as of 03:30 GMT): - Nikkei225 -0.5%, S&P/ASX -0.2%, Kospi-0.3%, Shanghai Composite -0.1%, Hang Seng +0.3%, Jun S&P500 -0.2% at 1,915, Aug gold +0.1% at $1,258, Jul crude oil -0.2% at $103.38/brl
***Highlights/Observations/Insights*** - A raft of economic data out of Japan was largely mixed, with bigger than expected drop in industrial production balanced by multi-year high CPI figures. The miss in industrial output prompted the govt to lower its economic assessment on the sector to "flattening as a trend." Recall the last time BOJ announced its policy statement, it reiterated industrial production is on a moderate increasing trend. Japan CPIs remained elevated, with Core prints hitting multi-year highs on both nationwide and Tokyo-region basis. Note however that the CPIs account for the impact of consumption tax increase being passed on to consumers, and analysts are divided to what extent the stripped-out for VAT version meets the BOJ's 2% target. Govt spokesperson Suga said prices are moving in line with govt expectations. Nikkei225 is underperforming while USD/JPY traded softer for much of the session, falling about 25pips from opening highs to around ¥101.50.
- Korean Won continued to strengthen, with USD/KRW opening onshore trade below KRW1,020 - its firmest level since late 2008. Unconfirmed speculation of an intervention from the BOK sent the pair back to KRW1,021. Also of note in the currency market, NZD outperformed after a better than expected Building Approvals data, rising back above the $0.85 handle after a sharp decline earlier this week.
- In China, the Banking Regulator surmised that the risks in the property sector were controllable, while the PBoC eased up on a trend of softer settings for the currency midpoint rate going into the weekend. On Sunday, China will release its official Manufacturing PMI expected to rise for the 3rd consecutive month.
***Speakers/Political/In the Papers*** - (CN) China Banking Regulatory Commission (CBRC): Overall property loan risk controllable - financial press - (CN) Nomura economist Zhang: Economy still faces downward pressure; Difficulties cannot be underestimated - Shanghai Daily - (CN) Barclays: estimates China shadow banking reached CNY38.8T; Sees higher chance to have more significant monetary easing - financial press - (JP) Japan Econ Min Amari: Japan economy on firm track to recover despite the sales tax hike - financial press - (JP) Japan Chief Cabinet Sec Suga: Prices are moving in line with govt expectations - financial press - (JP) Japan Fin Min Aso: Q2 economic slowdown likely to be smaller than expectations; sees Q3 pick up to be fast - financial press - (US) Fed's George (non voter, hawk): Fed should raise rates shortly after the end of bond buying; open to possibility of keeping balance sheet large - policy conf (Stanford CA) - (GR) Greece opposition Syriza party leader Tsipras: May not adhere to the agreement on Greek debt relief - financial press
***Fixed Income/Commodities/Currencies*** - (JP) BOJ offers to buy ¥250B in 1-3yr JGB, ¥250B in 3-5yr JGB and ¥400B in 5-10yr JGB as well as ¥2.0T in T-bills - (AU) Australia MoF (AOFM) sells A$700M in 2018 Bonds; avg yield: 3.0600%; bid-to-cover: 5.93x - (US) Weekly Fed Balance Sheet Total Assets Week ending May 28th: $4.32T v $4.33T prior; Reserve Bank Credit: $4.28T v $4.28T prior; M1: -$11.0B (2nd consecutive decline) v -$23.3B prior; M2: +$5.0B (4th consecutive increase) v +$4.6B prior; M1 y/y change: 10.6% (9-month high) v 10.5% w/w; M2 y/y change: 6.2% v 6.3% w/w - USD/CNY: (CN) PBoC sets yuan mid point at 6.1695 v 6.1705 prior setting (1st firmer Yuan setting in three sessions)
***Equities*** US extended session notables: - RTRX: Enters into US License Agreement for Thiola (Tiopronin); raises FY14 Rev guidance to $30-35M v $20Me (1est; $20-22M prior); +27.7% afterhours - OVTI: Reports Q4 $0.40 v $0.27e, R$331M v $289Me; +17.4% afterhours - CRM: Microsoft and salesforce.com confirm global, strategic partnership; Terms of the deal were not disclosed; +1.9% afterhours - GES: Reports Q1 -$0.03 v -$0.06e, R$522.5M v $522Me; -3.3% afterhours - SPLK: Reports Q1 -$0.04 v -$0.06e, R$85.9M v $80.4Me; -9.5% afterhours - PSUN: Reports Q1 -$0.11 v -$0.13e, R$171.1M v $171Me; -9.9% afterhours - EXPR: Reports Q1 $0.06 v $0.14e, R$460.7M v $481Me; Approves $100M share repurchase (8.8% of market cap); -11.5% afterhours - BNNY: Reports Q4 $0.29 v $0.35e, R$60.1M v $61.1Me; -17.4% afterhours - BLOX: Reports Q3 $0.07 v $0.03e, R$61M v $62.5Me; -29.8% afterhours
Asia movers by sector: - Technology: Yonyou Software 600588.CN +3.9% (China govt support of software industry); Toshiba 6502.JP +1.5% (S&P outlook) - Materials: Aquila Resources AQA.AU +0.4% (Australia approves Baosteel's takeover bid); Yancoal Australia YAL.AU -7.4% (Chairman comments of market conditions) - Financials: Australand ALZ.AU +2.1% (Raises guidance; to cooperate with Stockland on due dilligence); Cheung Kong Holdings 1.HK +1.8%, Power Assets Holdings 6.HK +0.8% (JV announcement) - Telecom: KDDI 9433.JP +0.2% (voice plan)