Asian Mid-session Market Update: Yen craters on reports of ¥27T fiscal stimulus announcement from Abe; Australia core inflation top estimates, dampening the case for easing next week
***Economic Data***
- (AU) AUSTRALIA Q2 CONSUMER PRICES (CPI) Q/Q: 0.4% V 0.4%E; Y/Y: 1.0% (multi-year low) V 1.1%E; TRIMMED MEAN Q/Q: 0.5% V 0.4%E; Y/Y: 1.7% V 1.3%E
- (CN) CHINA JUNE INDUSTRIAL PROFITS Y/Y: 5.1% V 3.7% PRIOR
- (CN) China July Westpac Consumer Confidence Index: 114.0 v 115.9 prior
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +1.4%, S&P/ASX +0.1%, Kospi -0.1%, Shanghai Composite -1.6%, Hang Seng -0.1%, Sep S&P500 +0.2% at 2,167
***Commodities/Fixed Income***
- Aug gold -0.2% at $1,318/oz, Sep crude oil -0.3% at $42.80/brl, Sep copper flat at $2.22/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 4.5 tonnes to 954.2 tonnes; 3rd straight decline; lowest since July 1st
- (US) Weekly API Oil Inventories: Crude: -0.8M v -2.3M prior; 2nd straight draw
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6671 V 6.6778 PRIOR; 2nd straight firmer Yuan fix
- (CN) PBOC to inject CNY180B in 7-day reverse repos
- (CN) China MoF sells 3-yr bonds at 2.43%
- JGB: (JP) Japan govt considering issuance of 50-year JGBs as part of a fiscal stimulus plan - longest maturity of postwar era - financial press
- (JP) BOJ offers to buy ¥430B in 5-10yr JGBs, ¥200B in 10-25yr JGBs, and ¥120B in JGBs with maturity over 25-yr
***Market Focal Points/FX***
- Asian equity markets are once again mixed following a flattish session on Wall St. After-market earnings saw some notable upside surprises from Apple, Panera, and US Steel, while Twitter was sharply lower as the company whiffed on top-line results and guidance. Japan is at the forefront among the gainers on late-session speculation of a ¥27T fiscal stimulus decision by PM Abe. Conversely, credit concerns in China sent Shanghai Composite lower by over 1.5%. Among FX majors, USD/JPY spiked up over 100pips above ¥106.40 after stimulus rumors. AUD/USD saw some brief strength on mixed Q2 Australia CPI data that saw core annualized inflation topping expectation, rising over 50pips above 0.7560 before selling off below 0.7470.
- Fuji News reported PM Abe would announce the details of a ¥27T stimulus package as soon as today, with the cabinet approval for the plans coming next week. Accompanying the speculation, US financial press also reported the govt is considering issuance of 50-year JGBs as part of a fiscal stimulus - the longest maturity of postwar era - though Japan Finance Ministry deflected that report. Also late last week, Nikkei speculated the fiscal stimulus may be in ¥20-30T range if it includes govt guarantees and other off-budget measures. Fresh economic measures could also accompany the moves by the BOJ as it begins its 2-day meeting ahead of Friday's policy announcement. Today's Nikkei feature speculated that more BOJ members are inclined to support new monetary actions, even though a separate report forecast Q1 net earnings of Japan's top 3 banks to fall about 30% due to depressed lending amid negative BOJ interest rate policy.
- Australia Q2 CPI report has been billed as one of the key deciding factors on whether RBA would move rates again to new record lows next week. Although the headline y/y figure was a decimal below consensus, the RBA-tracked core CPI was slightly hotter than expected, pushing the probability of a cut below 50% from over 60% before the release. Economists with Barclays, CitiGroup, and TD Securities said they still expect rates to move lower from the current level, but noted that may not happen next week after this latest set of inflation data.
- In China, Moody's echoed sentiment from Fitch last week about the growing size of China shadow banking system, stating the leverage in the economy continues to rise as credit growth outpaces nominal GDP. Economist with UBS advocated for more policy easing by the PBoC, calling for RRR to be cut another 1-2 times this year.
***Equities***
US equities / ADRs:
- LOGM: Announces Merger with Citrix's GoTo Family of Products to Create Billion Dollar Industry Leader in a $1.8B deal; +17.7% afterhours
- UIS: Reports Q2 +$0.36 v -$0.38e, R$748.9M v $692Me; +8.6% afterhours
- AAPL: Reports Q3 $1.42 v $1.39e, R$42.4B v $41.8Be; +6.8% afterhours
- PNRA: Reports Q2 $1.78 v $1.75e, R$699M v $698Me; agrees to sell and refranchise Company-owned bakery-cafes in Canada; +3.9% afterhours
- X: Reports Q2 -$0.31 v -$0.55e, R$2.58B v $2.66Be; +2.7% afterhours
- NCR: Reports Q2 $0.72 v $0.65e, R$1.62B v $1.55Be; +1.7% afterhours
- TSS: Reports Q2 $0.74 v $0.72e, R$1.15B v $1.15Be; -0.2% afterhours
- JNPR: Reports Q2 $0.50 v $0.47e, R$1.22B v $1.19Be; -1.3% afterhours
- ILMN: Reports Q2 $0.86 adj v $0.73e, R$600M v $594Me; Appointed CEO Jay Flatley Executive Chairman; Names Francis deSouza CEO; -3.0% afterhours
- MTCH: Reports Q2 $0.17 adj v $0.16e, R$301.1M v $297Me; -5.0% afterhours
- TWTR: Reports Q2 $0.13 v $0.10e, R$602M v $614Me; -10.8% afterhours
- AKAM: Reports Q2 $0.64 v $0.63e, R$572M v $574Me; -11.7% afterhours
Notable movers by sector:
- Consumer discretionary: Wanda Commercial Properties Group Co 169.HK +1.3% (Glass Lewis recommendation); Shimano Inc 7309.JP +4.8% (H1 result); Asahi Group Holdings 2502.JP +4.5% (raises guidance)
- Financials: SAI Global SAI.AU -4.8% (Canaccord Genuity cuts to Sell)
- Industrials: Mitsui Chemical 4183.JP +13.6% (revises H1 guidance); Dandong Xintai Electric Co 300372.CN +10.0%; Bradken BKN.AU +9.1% (restructuring business model); Nufarm NUF.AU +2.6% (RBC initiates with Outperform); GrainCorp GNC.AU -6.5% (Shareholder withdraws bid); Hyundai Motor Co 005380.KR +0.4% (Q2 result)
- Technology: LG Display Co 034220.KR +2.1% (Q2 result)
- Materials: Itochu Corp 8001.JP -7.1% (Claucus Research publishes negative report); Shin-Etsu Chemical Co 4063.JP +15.5% (Q1 result); Fortescue Metals Group FMG.AU +8.1% (Q4 result)
- Energy: Yanzhou Coal Mining Co.1171.HK -0.8% (Q2 result); China Shenhua Energy Co 1088.HK -0.6% (China govt urges to cut coal capacity)