Asian Mid-session Market Update: S&P lowers Australia outlook to Negative even as ruling Coalition edges toward election victory; Samsung Electronics rises on prelim Q2 results
***Economic Data***
- (JP) JAPAN JUNE OFFICIAL RESERVE ASSETS: $1.27T v $1.25T PRIOR
- (AU) AUSTRALIA JUNE AIG PERFORMANCE OF CONSTRUCTION INDEX: 53.2 V 46.7 PRIOR; 10-month high
- (NZ) New Zealand June ANZ Truckometer Heavy M/M: +4.7% v -2.7% prior
***Index Snapshot (as of 03:45 GMT)***
- Nikkei225 -0.2%, S&P/ASX +0.4%, Kospi 1.0%, Shanghai Composite -0.5%, Hang Seng +0.8%, Sep S&P500 -0.1% at 2,093
***Commodities/Fixed Income***
- Aug gold +0.2% at $1,369/oz, Aug crude oil +0.5% at $47.65/brl, Sep copper +0.1% at $2.15/lb
- (US) Weekly API Oil Inventories: Crude: -6.7M v -3.9M prior; 3rd straight draw; largest draw since Aug 2015
- GLD: SPDR Gold Trust ETF daily holdings fall 0.3 tonnes to 982.4 tonnes; first decline since June 6th
- SLV: iShares Silver Trust ETF daily holdings rise to 10,620 tonnes from 10,471 tonnes prior; highest since Dec 2014
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6820 V 6.6857 PRIOR
- (CN) PBOC to inject CNY15B in 7-day reverse repos
- (JP) Japan investors bought net ¥428B in foreign bonds v bought ¥400B in prior week; Foreign investors bought net ¥114B in Japan stocks v sold ¥172B in Japan stocks in prior week
***Market Focal Points/FX***
- Asian equities are mixed in the wake of a turnaround on Wall St, where a stronger than expected US ISM Services figure helped reverse some of the recent panic that led to a dash into bonds. Mainland China markets are underperforming due to concerns over the banking sector, but the retreat in Tokyo is more mild than yesterday. Korea is supported by strong prelim Q2 results from Samsung Electronics, while energy names boosted Australia despite the warning from S&P on its sovereign credit rating. WTI crude oil was up over 1% in electronic trade after another big draw in API inventories, and gold consolidated recent gains. In FX majors, AUD/USD was the most active with a 50pip drop to 0.7470 following S&P outlook revision to Negative for Australia, NZD/USD trades in a 30pip range above 0.7120, and USD/JPY is sliding about 60pips below 100.80 after a bounce in US hours. GBP/USD has rallied about 100pips from the lows above 1.2980 with Brexit fears receding again - ESM chief Regling suggested that it is not 100% certain that the Brexit separation will take place.
- Election gridlock in Australia continues, even though local press reports suggest that the ruling Conservative coalition is edging toward the 76 Parliament seat threshold required to form a govt. Counting of absentee ballots continued, with Coalition seen at 72 to Labor's 66. And while Fitch and Moody's had offered a calmer assessment of the situation after the inconclusive polls earlier this week, S&P fired a warning shot today with revising Australia's sovereign outlook to Negative from Stable. Accompanying commentary noted the country's high level of external indebtedness requiring fiscal action, with concern that political gridlock could produce budget deficits for several years. S&P did acknowledge strong Australia banking system and a recent decline in Australia unemployment from cyclical highs. Australia Treasurer Morrison spoke after the S&P warning, stating it was a reminder for the govt to maintain fiscal trajectory and keep the spending "within means", urging Parliamentary response to budget in the next 6-12 months.
- China banking sector was back in focus after comments from regulator CBRC noting continued pressure from bad assets. China NPLs as of May-end have now topped 2%, reaching 2.15%, as CBRC's Yu called for banks to be weary of asset bubble burst risks. Chinese press commentary also addressed the renewed overheating in the property space. China Academy of Social Science (CASS) researcher called for implementation of a property tax in tier-1 cities, while another CASS report noted declining housing inventory in H1 and also attributing less tight markets in tier-3-4 cities to more land supply and investment.
- In Japan, BOJ Gov Kuroda reiterated the central bank will maintain its QE stance as long as it is needed until 2% inflation target is achieved, but acknowledged CPI is likely to remain negative for the time being. Kuroda added the BOJ will consider additional stimulus, but deemed overall financial system to be stable and moderate recovery trend continuing. Separately, BOJ, Finance Ministry, and FSA are once again expected to meet tomorrow to discuss financial markets as they previously pledged to do on a more frequent basis given the recent volatility.
- Samsung Electronics may have posted its best quarter in 2 year. Q2 preliminary op profit topped KRW8T, beating consensus by about 10%, while Rev was just shy of estimates. Q2 final results with all relevant industry and financial metrics will be released at the end of the month. Shares traded up over 1.5% on the results.
***Equities***
US equities / ADRs:
- EYES: CMS said to propose to cover full cost of Second Sight Argus II for 2017 - press; +43.5% afterhours
- WDC: Raises Q4 $0.72 v $0.68e, R$3.46B v $3.41Be (prior $0.65-0.70, R$3.35-3.45B), affirms Q4 gross margin 31%; +4.7% afterhours
- BMRN: Roche said to have rekindled its interest in Biomarin - financial blog; +2.8% afterhours
- ZUMZ: Reports June SSS -4.5% v -3.3% y/y
- WWAV: Danone said to be close to $10B deal to acquire Whitewave Foods - financial press
- COST: Reports June SSS (ex-gas) 3% y/y; US SSS (ex-gas) 2% y/y
Notable movers by sector:
- Consumer discretionary: Intime Department Store Group Co 1833.HK +1.3% (H1 result); Stanley Electric Co 6923.JP +2.9% (Q1 result speculation); Aeon Co 8267.JP -7.6% (Q1 result)
- Industrials: Geely Automobile Holdings 175.HK +3.7% (June result)
- Technology: LG Display Co 034220.KR +3.4% (CLSA raises to outperform); Samsung Electronics +1.7% (Q2 prelim result); Regis Resources RRL.AU +3.2% (Ord Minnett raises to Hold)
- Energy: Sinopec Shanghai Petrochemical 338.HK +6.0% (H1 guidance); Santos STO.AU +3.3%; Oil Search OSH.AU +2.5% (oil price rises); AGL Energy AGL.AU -4.4% (guidance)
- Healthcare: Askul Corp.2678.JP +2.3% (Mitsubishi raises to overweight)
- Material: Ramelius Resources RMS.AU +6.9% (Q4 result); Resolute Mining RSG.AU -2.3% (FY16 prelim result); Zijin Mining 2899.HK +4.6% (plans A-share private issuace)