Asian Mid-session Market Update: China July FX reserves steady while trade surplus rises on soft imports
***Economic Data***
- (CN) CHINA JULY FOREIGN RESERVES: $3.20T V $3.20TE; smallest decline in 19 months
- (CN) CHINA JULY TRADE BALANCE USD TERMS $52.3B (6-month high) V $47.3BE
- (JP) JAPAN JULY BANK LENDING (INC TRUSTS) Y/Y: 2.1% v 2.0% PRIOR; BANK LENDING (EX- TRUSTS) Y/Y: 2.1% V 2.0%E
- (JP) JAPAN JUNE CURRENT ACCOUNT BALANCE: ¥974.4B V ¥1.10TE; ADJUSTED CURRENT ACCOUNT: ¥1.65T V ¥1.60TE; TRADE BALANCE: ¥763.6B V ¥773BE
- (AU) AUSTRALIA JULY ANZ JOB ADVERTISEMENTS M/M: -0.8% V +0.4% PRIOR
***Index Snapshot (as of 04:00 GMT)***
- Nikkei225 +2.0%, S&P/ASX +0.7%, Kospi +0.4%, Shanghai Composite +0.3%, Hang Seng +1.3%, Sep S&P500 flat at 2,177
***Commodities/Fixed Income***
- Dec gold -0.2% at $1,341/oz, Sep crude oil +0.3% at $41.91/brl, Sep copper +0.8% at $2.17/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 7.1 tonnes to 980.3 tonnes; highest since July 11th
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.6615 V 6.6406 PRIOR; weakest Yuan setting since July 27th
- (CN) PBOC to inject CNY125B in 7-day reverse repos
***Market Focal Points/FX***
- Asian equity markets are higher across the board, tracking large gains in the US on Friday after much better than expected non-farm payrolls. US indices hit record high as investors flocked to stocks from bonds, sending yields higher and lifting the probability of a Fed rate hike before the end of the year to 43% from 32%. USD/JPY was again a popular immediate proxy for renewed Fed tightening expectations as it rose over 100pips above ¥102, and that weakness in the Yen is helping Nikkei225 outperform the other markets in Asia. Among other USD majors, EUR/USD has closed about half of its post-NFP gap lower, trading some 50pips from the trough to $1.11. AUD/USD traded in a 20pip range above $0.76, while NZD/USD traded some 20pips on each side around 0.71 - both of those pairs were little changed after mixed China trade and reserves data.
- China FX reserves released over the weekend saw a decline to $3.20T from $3.21T - the smallest drop in 19 months. CICC researchers remarked that softer USD helps explain reduced volatility in reserves, which may begin to improve on expectations of currency stability. China trade data released late in the session were mixed as USD and CNY terms of trade topped consensus and reached 6-month highs, but largely because of bigger than expected decline in imports. Analysts seem to differ whether the imports drops are the function of internal demand or similar result of weaker exchange rate. Outside of the economic data, local press speculated China property investment growth could slow to below 5%, limiting the scope of any potential PBOC rate cut.
- In Japan, cabinet net Suga expressed concern over incursions by Chinese vessels into Japan's territorial waters around the contested Senkaku islands for 3 straight days. PM Abe also spoke, promising to compile the extra budget as soon as possible. In Japan-related press, BOJ was speculated to announce expanded asset purchases and/or remove its inflation target by over 60% of surveyed economists, and over 80% forecast deeper interest rates after the month-long deliberations at the central bank following the latest underwhelming round of easing via expanded ETFs.
- Down under, Australia ANZ job ads declined, and local economist acknowledged the "labour market has lost some momentum so far in 2016, with slower average growth in both employment and job ads seeing the unemployment rate stabilize around 5.75%." Ahead of this week's RBNZ decision, New Zealand PM Key called for banks to pass on all of the rate cuts if the central bank does in fact reduce OCR further as it is expected to do. NZD/USD traded with a heavier tone from the start of the session, as BNZ forecast 3 rate cuts by the RBNZ this year vs 2 moves expected previously.
- Among other notable Asia EM developments, South Korea saw a 1-notch upgrade in its sovereign rating by S&P to AA from AA-, as it cited "superior track record of steady economic growth" and greater policy flexibility along with expectations of contained tensions on the Korean peninsula. In Thailand, voters chose to to approve a "junta-based" constitution in a referendum this weekend, granting military more authority.
***Equities***
US equities / ADRs:
- MFRM: Steinhof International Holdings NV to acquire company for $64/shr or $3.8B including debt
- QCOM: Israel's Checkpoint uncovers security flaws in company's Android smartphone chips - FT
Notable movers by sector:
- Consumer discretionary: Flight Centre FLT.AU +4.9% (access to interest-free financing)
- Financials: Shimao Property 813.HK +1.6% (July result); Agile Property Holdings 3383.HK +2.4% (July result); Bendigo and Adelaide Bank BEN.AU +4.2% (FY16 result); Shui On Land 272.HK -0.9% (profit warning); China Vanke Co 000002.CN +4.1% (Sunac Chairman denies speculation to hold shares)
- Industrials: Sany Heavy Equipment International Holdings 631.HK -0.8% (profit warning); Shimadzu Corp 7701.JP +5.2% (Q1 result); Guangzhou Automobile Group 2238.HK +0.6% (July result);
- Technology: Tech Pro Technology Development 3823.HK -5.0% (profit warning); Largan Precision Co. 3008.TW +5.6% (July result); Pioneer Corp 6773.JP +13.2% (Q1 result); Synnex Technology International Corp 2347.TW -0.3% (July result)
- Materials: St. Barbara SBM.AU -5.2%; Northern Star Resources NST.AU -6.3% (gold extends decline);Marubeni Corp 8002.JP +0.7% (Q1 result)
- Telecom: NTT (Nippon Telegraph & Telephone Corp) 9432.JP -1.4% (Q1 result)