Asian Mid-session Market Update: PMI's from China slow; Hong Kong and Japan PMI recovered

***Economic Data***
- (CN) CHINA MAY CAIXIN PMI SERVICES: 51.2 V 51.8 PRIOR; 3-month low
- (JP) JAPAN MAY SERVICES PMI: 50.4 V 49.3 PRIOR; COMPOSITE PMI: 49.2 V 48.9 PRIOR
- (JP) JAPAN APR LABOR CASH EARNINGS Y/Y: 0.3% (3-month low) V 0.9%E; REAL EARNINGS (EX-INFLATION) Y/Y: 0.6% V 1.4% PRIOR
- (HK) HONG KONG MAY COMPOSITE PMI: 47.2 V 45.3 PRIOR (15th consecutive month of contraction)
- (AU) AUSTRALIA MAY AIG PERF OF SERVICES INDEX: 51.5 V 49.7 PRIOR; first expansion in 3 months
- (NZ) NEW ZEALAND Q1 VALUE OF ALL BUILDINGS Q/Q: 5.3% V 1.0%E (2-yr high)
- (NZ) New Zealand 10-month core tax Rev NZ$1.12B less than expected; Budget surplus NZ$941M less than expected

***Index Snapshot (as of 03:30 GMT)***
- Nikkei225 +0.2%, S&P/ASX +0.7%, Kospi -0.1%, Shanghai Composite flat, Hang Seng +0.2%, Jun S&P500 flat at 2,103

***Commodities/Fixed Income***
- Aug gold +0.1% at $1,214/oz, Jul crude oil flat at $49.17/brl, Jul copper +0.2% at $2.07/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 4.5 tonnes to 875.2 tonnes; 2nd straight increase
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5793 V 6.5688 PRIOR
- (CN) PBOC to inject CNY40B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$900M in 1.75% 2020 bonds; avg yield 1.714%; bid-to-cover 3.30x

***Market Focal Points/FX***
- Asian equity markets are trading mixed, with soft China Services PMIs keeping mainland indices on the defensive despite the highest close in S&P500 since Nov 2015. Traders await non-farm payrolls data tomorrow to have greater clarity on the outlook for Fed decision this month, even as the funds futures probability is still around the 20% mark. In FX, USD/JPY remains near its 2-week lows of 108.50 approached in US hours, AUD/USD is in a 25pip range above 0.7220, and NZD/USD has rallied about 30pips from 0.68 session lows. EUR/USD is consolidating a mild ECB decision-driven selling in a 20pip range above 1.1140.

- China Caixin Services and Composite PMIs slid to 3-month lows but remained in expansion territory. Markit noted declines in New Orders component, marginal job creation, and rising volume of unfinished work. Easing cost pressures in PMI gauges also do not bode well for upcoming official May inflation figures. Markit economist said all of the index categories except Output prices showed signs of deterioration, calling on govt to continue with policy steps to boost the economy. In Hong Kong, May composite PMI contracted for 15th straight month but at a slower pace. Output, new orders and employment components all fell at softer rates, but Markit warned that since "global economic conditions remain unfavorable and client demand remains weak, its likely that private sector companies in Hong Kong will continue to see business conditions deteriorate in the coming months." In separate notable press reports out of China/Hong Kong, officials from both sides were said to be working closer toward the launch of the Shenzhen stock link. Meanwhile, China Financial Futures Exchange regulators were also looking at potential easing of trading limits on stock index futures.

- Fallout from Japan's decision to postpone its sales tax hike appears to be contained. All 3 major credit rating agencies have expressed varying amount of caution, though only Moody's was most concerned, stating it considers the decision as a credit negative. Japan Chief Cabinet Sec Suga spoke in today's session, stating that the govt is carefully monitoring the govt bond market - remarks likely in reference to both BOJ's negative rates and the sales tax hike delay. In economic data, Japan May services PMI returned to expansion at 50.4. Markit said growth was underpinned by a modest increase in new orders for the second consecutive month and employment remained in growth territory. However, input prices rose at the weakest rate in the current 43-month sequence of inflation and cost pressures at Japanese services firms eased to the weakest in over three-and-a-half years. Deflationary trends were likewise evident in Japan's labor cash earnings figures, sliding from 1.4% to 0.3% in April - a 3-month low.

***Equities***
US equities / ADRs:
- AVH: United Continental and Delta among possible bidders considering Avianca - financial press; +33.2% afterhours
- AMBA: Reports Q1 $0.34 v $0.27e, R$57.2M v $55.9Me; Plans to repurchase $75M over 6-month period in FY17 (5.4% of market cap); +8.9% afterhours
- AVGO: Reports Q2 $2.53 v $2.38e, R$3.56B (adj) v $3.55Be; Raises dividend 2% to $0.50 (implied yield 1.3%); +7.2% afterhours
- GPS: Reports May SSS -6% v -7%e; +4.6% afterhours
- FIVE: Reports Q1 $0.12 v $0.10e, R$193M v $188Me; +1.8% afterhours
- ZUMZ: Reports Q1 -$0.05 (adj) v -$0.11e, R$173M v $173Me; -9.4% afterhours

Post-extended session
- MCK: Said to consider separation of information technology unit with estimated value around $5B - financial press
- YHOO: Said to have met with Twitter on a possible merger several weeks ago - NY Post

Notable movers::
- Samsung Heavy 010140.KR: Samsung Electronics Vice Chair Lee Jae Yong would buy new shares of Samsung Heavy if company is faced with liquidity shortage - Korean press; +6.9%
- Fast Retailing 9983.JP: Reports May Uniqlo SSS +5.9%; largest gain since Jan; +6.1%
- Takata 7312.JP: Ningbo Joyson reportedly mulling offer for Takata - financial press; +3.3%
- MSB.AU: Trading halted pending announcement regarding material developments related to certain company assets
- ABC-Mart 2670.JP: Reports May SSS -0.8% y/y v +3.4% in April; -3.8%
- 6841.JP: Weakness attributed to Cautious note from Nomura, forecasting 6% y/y decline in orders in FY16/17 - financial press; -5.6%
- 1229.HK: Issues FY15/16 profit warning; -5.7%
- Samsung SDS 018260.KR: Reportedly to split off logistics business - Korean press; -7.5%
- NOBL.SG: Trading halted: Announces $500M rights issue; reducing headcount and SAO expense reduction in excess of 20%; -11.7%