Asian Mid-session Market Update: Policy stimulus expectations continue to fan Japan gains; Alcoa kicks off US earnings season on a high note
***Economic Data***
- (AU) AUSTRALIA JUNE NAB BUSINESS CONFIDENCE: 6 (3-month high) V 3 PRIOR; CONDITIONS: 12 (3-month high) V 10 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.2 v 115.8 prior
- (JP) JAPAN JUNE PPI M/M: -0.1% V -0.1%E; Y/Y: -4.2% V -4.2%E
- (UK) JUNE BRC LFL SALES Y/Y: -0.5% V +0.5% PRIOR
***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +2.7%, S&P/ASX +0.9%, Kospi +0.1%, Shanghai Composite +0.1%, Hang Seng +0.6%, Sep S&P500 +0.1% at 2,132
***Commodities/Fixed Income***
- Aug gold flat at $1,357/oz, Aug crude oil +0.2% at $44.85/brl, Sep copper +0.3% at $2.15/lb
- USD/CNY: *(CN) PBOC SETS YUAN MID POINT AT 6.6950 V 6.6843 PRIOR; Weakest Yuan fix since Oct 2010
- (CN) PBOC to inject CNY30B in 7-day reverse repos
- JGB: (JP) Japan's MOF sells ¥728B in 0.3% 30-year bonds; Avg yield: 0.120% v 0.314% prior; Bid to cover: 2.64x v 3.42x prior
- (AU) Australia MoF (AOFM) sells A$150M in 1.25% 2035 Indexed bonds; avg yields 0.6155%; bid-to-cover 3.62x
***Market Focal Points/FX***
- Asian equity markets have extended their gains, tracking another strong session Wall St where S&P500 ended the day in record territory. There has been no letdown from the euphoria of a very strong non-farm payrolls on Friday, while political risks in UK, Japan, and Australia have also abated to give way to more clarity. The unofficial start of the US earnings season with Q2 results from Alcoa has also been impressive. AA beat on top and bottom lines, affirmed global aluminum demand growth expectations, and forecast improvement in H2 and 2017 on ramp-up of capacity. Tech got a welcome set of prelim numbers from Seagate, which raised its top line forecasts even though it also increased its layoff plans. Shares of AA and STX were up 3.6% and 13% afterhours respectively. S&P500 emini futures are pointing to a modestly higher open on Tuesday.
- After yesterday's 4% jump, Nikkei225 is at the forefront of the rally again with a near 3% gain. Weakness in JPY continues to provide a tailwind in Tokyo, as USD/JPY rose about 80pips from the lows above 103.20, though expectations of a liberal fiscal stimulus response to low inflation doldrums is also helping stoke sentiment. Overnight, PM Abe confirmed the stimulus would be over ¥10T, though today cabinet spokesman Suga said the govt does not yet know the actual size of the package. Fin Min Aso added the govt will consider the funding for the package once more details are determined, and Econ Min Ishihara noted the package has not been ordered yet. Earlier, a Nikkei report forecast govt cutting its FY16 GDP target to 0.9% from 1.7%.
- In notable economic data, Australia's NAB saw its Business confidence and conditions rise to 3-month highs. NAB economist said companies are "choosing to focus on the positives they see in their own business, at least for the time being" in spite of political uncertainty, though JPMorgan analysts focused on NAB's 13-point drop in retail business conditions and rising cost inflation weighing on margins. AUD/USD hit session highs after the release, rising about 50pips to $0.7590.
- In Europe, Italian Fin Min Padoan declared that speculation of a banking crisis in Italy is incorrect since the govt is working to resolve the non-performing loans issue. Shortly after those comments, IMF lowered its Italy 2016 GDP target to just under 1.0% from 1.1% and 2017 to about 1% v 1.25% prior forecast, warning that risks are tilted to the downside with resolution needed to address asset quality in the financial sector.
***Equities***
US equities / ADRs:
- STX: Reports prelim Q4 Rev $2.65B v $2.32Be; citing demand & well ahead of guidance; To cut additional 6.5K jobs; +13.0% afterhours
- RRD: Reportedly in merger discussions with Xerox - press; +6 .7% afterhours
- AA: Reports Q2 $0.15 v $0.09e, R$5.30B v $5.25Be; on track to separate in H2; +3.6% afterhours
- UAL: Reports June load factor 87.1% v 86.3% y/y; +1.1% afterhours
- TSLA: Said to be investigated for possible securities law breach by the SEC - financial press; -1.1% afterhours
- IMPV: Cuts Q2 -$0.22 to -$0.20 v -$0.04e, R$57.5-58.0M v $66.1Me (prior -$0.04 to -$0.02, $65.5-66.5M); -9.1% afterhours
Notable movers by sector:
- Consumer discretionary: China International Travel Service Co 601888.CN +0.5%, China Travel Intl 308.HK +6.1% (merger); Lawson 2651.JP -3.4% (Q1 result)
- Financials: Mirvac Group MGR.AU +1.0% (affirms guidance); China Galaxy Securities Co 6881.HK +0.7% (June result); Poly Property Group Co119.HK -0.5% (H1 result)
- Industrials: DIC Corp 4631.JP +4.7% (H1 result speculation)
- Technology: NEC Corp 6701.JP +6.7% (CitiGroup raises to Buy)
- Materials: Energy Resources of Australia ERA.AU +0.6% (Q2 result); Evolution Mining EVN.AU -2.3%, Newcrest -1.2% (gold prices lowers)
- Energy: China Coal Energy 1898.HK +5.0% (H1 guidance)