TheChek News Flow

Asian Market Update: Asian markets higher following strong US performance; US unemployment lowest in 6 year

***Notable Economic Data*** - (HK) HONG KONG JUN HSBC PMI: 50.1 V 49.1 PRIOR - (PH) PHILIPPINES JUN CPI M/M: 0.4% V 0.7%E; Y/Y: 4.4% V 4.6%E; CORE CPI Y/Y: 2.8% V 3.1%E

***Index Snapshot (as of 02:30 GMT): - Nikkei225 +0.7%, S&P/ASX +0.6%, Kospi +0.1%, Shanghai Composite -0.3%, Hang Seng +0.1%, Jun S&P500 -0.1% at 1,976

***Commodities/Fixed Income/Currencies*** Aug gold flat at $1,320, Aug crude oil -0.2% at $103.88/brl - USD/CNY: (CN) PBoC sets yuan mid-point at 6.1642 v 6.1581 prior setting (weakest Yuan setting since Jun 4th) - (JP) BoJ offers to buy ¥110B in 1-yr and under JGB, ¥400B in 5-10yr JGB - (AU) Australia MoF (AOFM) sells A$600M in 4.25% 2026 Bonds; avg yield: 3.7224%; bid-to-cover: 3.73x

***Market Focal Points/Key Themes*** - Tracking the record setting gains in the US markets and the solid gains in the jobs data. The Asian bourses were mostly trading higher led by the Nikkei225 rising to a five month high. By the end of the morning session the Nikkei index was up 0.6% to 15,440.60 after rising to a high of 15,490. The USD held steady in the lower 102 range against the yen in early trading holding on to gains from the prior session.

- US crude continued to move lower for the sixth consecutive day, at a three-week low due to easing supply concerns following reports indicating increased crude shipments from Libya with Iraq exports likely to continue unabated. The Libya National Oil Company confirmed plans to lift force majeure on oil ports and planned to discuss with OPEC how to accommodate rising crude production.

- In the Vienna nuclear talks, Iran was said to have ease its nuclear capacity demands by reducing the number of centrifuges it is seeking. Though no figure was specified, western powers want Iran to reduce the number of centrifuges from the current 19.0k+ to the low thousands. The current round of discussion will run until at least July 15.

***Equities*** US markets: - LONG: Ctrip.com said to plan to purchase Expedia's stake in ELong; Deal said to value at $800M-$1B - financial press - CBAK: Subsidiary unit defaulted on about $85.9M in loans - filing

Notable movers by sector: - Consumer Discretionary: Imagi International Holdings 585.HK +6.5% (third party interested in stake) - Financials: Dai-Ichi Mutual Life Insurance 8750.JP -1.1% (confirms speculation on share sale); China Vanke 000002.CN +2.2% (Jun sales results); Steadfast Group SDF.AU +3.4% (announces acquisition) - Materials: Evolution Mining Ltd EVN.AU +5.5% (FY14 gold production results) - Energy: Oil Search Ltd OSH.AU +0.9% (provides drilling update); Drillsearch Energy DLS.AU +1.7% (analyst action); Yantai Jereh Oilfield Services Group 002353.CN +3.9% (share repurchase) - Industrials: Tianjin Port Development Holdings 600717.CN -1.9% (port under probe for petro-chemical financing) - Technology: High Tech Computer Corp 2498.TW +3.3% (Q2 results); Siliconware Precision Industries 2325.TW +1.4% (June Rev result)

Weekly Market Update: 2014 at the Halfway Point

- Low rates, plenty of central bank accommodation and record low inflation levels helped global risk assets extend their long run of strong advances in the second quarter of 2014, which ended on Monday. In the US, equity indices saw their sixth straight quarter of gains: the S&P500 gained 4.7% (up 6.1% YTD), the Nasdaq added 5% (up 5.5% YTD) while the DJIA only gained 2.2% (up 1.5% YTD). This week more strong data help nudge the DJIA and S&P500 to fresh record highs, with the June jobs report and other economic data aiding sentiment. US momentum has helped sustain global gains, however there are signs of cracks: June PMI reports out this week were mixed and/or flattish in Europe, Japan and China, with practically no surprises either to the up or the downside. Inflation in Europe remains stalled at a dangerously low level, while rumblings in the Chinese property market scare everyone. For the week, the DJIA rose 1.3% and reached the 17,000 milestone, while the S&P500 added 1.2% and the Nasdaq surged 2%.

- The June jobs report was much, much stronger than expected, with both the nonfarm (+288K) and private payrolls (+262K) figures crushing expectations, and the April nonfarm payrolls were revised up to 304K from 282K. Unemployment dropped to 6.1% without any further deterioration in the labor force participation rate. After the data, Goldman Sachs now sees a risk of rate hikes in late 2015, but refrained from formally changing their standing guidance for hikes starting in Q1 of 2016. JP Morgan pulled forward expectations for rate hikes to Q3 of 2015 from Q4 prior.

- The conflicts in Ukraine and the Middle East raged on this week, however WTI and Brent futures fell to three-week lows thanks to silver linings among the geopolitical storm clouds. In Libya, the government reached a deal with rebels to return oil ports and end a blockade, which should release about 500K bbls of capacity that had been on ice for about a year. In Iraq, ISIS rebels christened the territories they held as "the Islamic State" and declared that it was the sacred duty of all Muslims worldwide to obey ISIS leader Abu Baker al-Baghdadi the caliph, or the successor to the Prophet Mohammed. Fighting continued throughout the regions around Baghdad as the US rushed in more drones and hellfire missiles, while ISIS captured key border towns, however there has been little impact on Iraq oil exports. The ceasefire between Ukraine and pro-Russia rebels in the eastern part of the country expired late Monday and Kiev launched an aggressive offensive against rebel-held towns and made rapid progress. France, Germany and Russia said they had reached a deal to set up fresh talks for another ceasefire, which could arrive as soon as Saturday.

- General Motors announced another six safety recalls this week, covering 7.6 million vehicles. The additional recalls brought GM's total recalls this year to 29 million units, a number greater than the company's combined US sales for 2005 to 2013. In addition, Ken Feinberg outlined the terms of GM's compensation program for customers hurt in accidents caused by faulty ignition switches. The company will pay anyone - drivers, passengers or pedestrians - who proves they were injured in a crash tied to the faulty switches and the fund will have no monetary cap.

- Total US June auto sales rose 1.2% to 1.4 million units, pushing the annualized selling rate to 16.98 million, its highest pace since July 2006. GM sold 267.5K units, up 1% y/y, beating expectations for a roughly 6% decline in sales. Meanwhile Ford's sales fell 6%, right in line with expectations, and truck sales fell at an even steeper rate. Nissan and Toyota saw good sales gains, while Honda's sales fell 5.8% y/y.

- In the first four days of trading, shares of camera-on-a-stick company GoPro doubled from the IPO price of $24. Wednesday saw the stock bounce lower, with shares dropping 14%. The reversal has been partially ascribed to short sellers entering in force. One analyst said the cost of borrowing GoPro shares has become one of the highest on the market.

- JPMorgan CEO Dimon disclosed this week that he has throat cancer, albeit a very mild and highly treatable form of the disease. Dimon said he plans to start treatment shortly and expects to continue working during his treatment and claimed his prognosis is excellent.

- The first reading of Eurozone June CPI saw the headline figure stalled at four-year lows of 0.5%, although the core figure ticked slightly higher, to 0.8% from May's 0.7%. Last week, preliminary German June CPI had risen to 1.0%, raising hopes of a better showing. The inflation data hardly altered expectations for no ECB action at the decision on Thursday, and the only announcement of note at the meeting was that the ECB would shift to a six-week meeting schedule and begin publishing meeting minutes, effective in January 2015. EUR/USD tested 1.3700 on Monday and Tuesday and then fell gradually in the lead-up to the June US jobs report. On Thursday morning, EUR/USD tested below 1.3600 on the good jobs data.

- The Bank of Japan's Q2 Tankan survey showed large manufacturing fell for the first time in six quarters thanks to the consumption-tax related slowdown in economy. The industrial CAPEX forecast for FY14/15 surprised to the upside however, rising 7.4% on composite basis and 12% for manufacturing. The labor earnings survey saw base wages rise 0.2%, the first increase in over two years, but real wages (ex-inflation) registered their largest decline since Dec 2009. Meanwhile, the Japanese Business Federation (Keidanren) said pay at large Japanese companies rose 2.3% following spring negotiations, the biggest increase in 15 years.

- China's official manufacturing PMI hit a six-month high, meeting consensus at 51.0. Among the more notable components, New Exports returned to expansion of 50.3 v 49.3 m/m and Employment rose to 48.6 from 48.2. HSBC final PMI remained in expansion as anticipated by recovery in the Flash data, coming in at 50.7 v 50.8 initial estimate. HSBC chief China economist said the latest figure "confirms the trend of stronger demand and faster de-stocking", but also noting "there are still downside risks from a slowdown in the property market, which will continue to put pressure on growth in the second half of the year."

Closing Market Summary: Stocks End Strong Week on Upbeat Note

The stock market finished the abbreviated trading week on an upbeat note thanks to a boost from a June jobs report that surpassed expectations. The S&P 500 advanced 0.6% with nine sectors posting gains. As a result, the benchmark index extended its weekly gain to 1.3%.

Today's upbeat tone was set early with the June Nonfarm Payrolls report pointing to the addition of 288,000 jobs (consensus 210,000). In addition, the unemployment rate unexpectedly dropped to 6.1%.

Appropriately, the strong report gave a boost to cyclical sectors, while their countercyclical counterparts struggled a bit in the early going.

Consumer discretionary (+0.8%), financials (+0.8%), and industrials (+0.8%) paced the advance throughout the session and ended ahead of the remaining sectors. The discretionary space owed its outperformance to retailers as the group rallied broadly with the SPDR S&P Retail ETF (XRT 88.65, +1.15) climbing 1.3%. Homebuilders also posted gains, but the iShares Dow Jones US Home Construction ETF (ITB 24.94, +0.10), which added 0.4%, could not keep pace with the sector.

Elsewhere, industrials received support from transport stocks. All 30 components of the Dow Jones Transportation Average (+0.8%) finished in the green with airlines posting solid gains to follow yesterday's relative weakness. United Continental (UAL 39.88, +0.61) led the pack, climbing 1.6%.

Also of note, the financial sector padded its weekly advance to 1.3%.

On the countercyclical side, health care (+0.4%) and telecom services (+0.3%) displayed intraday losses, but returned into the green ahead of the close. The consumer staples sector (+0.6%), however, outperformed due to strength in tobacco names. Lorillard (LO 64.41, +3.26) jumped 5.3% in reaction to reports the company's merger with Reynolds American (RAI 61.56, +1.40) is on track to be announced within weeks.

Lastly, the utilities sector (-1.1%) displayed relative weakness for the third day in a row, ending the week lower by 3.2% as profit-taking continued.

Treasuries slumped in reaction to today's data, but spent the remainder of the session in a climb. The benchmark 10-yr yield inched up two basis points to 2.65%.

Economic data included June Nonfarm Payrolls, weekly initial claims, June Challenger Job Cuts, May Trade Balance, and the ISM Services report for June:

* Nonfarm payrolls added 288,000 jobs in June after adding an upwardly revised 224,000 (from 217,000). The consensus expected nonfarm payrolls to increase by 210,000 

* Private payrolls were up 262,000 jobs in June after adding 224,000 jobs in May. That outpaced the consensus expectations of a 213,000 increase  * The unemployment rate fell to 6.1% from 6.3%, while the consensus expected no change from 6.3%

* The decline resulted from workers finding jobs (+407,000) rather than a drop in the labor force 

* Average hourly earnings increased 0.2% and hourly workweek was unchanged at 34.5 hours, as expected 

* The weekly initial claims level increased to 315,000 from an upwardly revised 313,000 (from 312,000). The consensus expected the initial claims level to increase to 315,000 

* Over the past few weeks, the initial claims level has settled into a range of 310,000 to 320,000 and this week's claims were no different 

* The Challenger Job Cuts report for June pointed to a 20.0% year-over-year decline  * The U.S. trade deficit narrowed in May to $44.40 billion from a downwardly revised $47.00 billion (from $47.20 billion) in April. The consensus expected the trade deficit to fall to $45.2 bln 

* Total goods deficit fell to $63.30 billion in May from $65.70 billion in April. The services surplus increased to $18.90 billion from $18.60 billion 

* The ISM Non-Manufacturing Index fell to 56.0 in June from 56.3 in May. The consensus expected the index to increase to 56.5 

* Business activities softened as the related index declined to 57.5 in June from 62.1 in May as non-manufacturing businesses worked down their backlogs  * The Backlog of Orders Index fell to 53.0 from 54.0 

There is no economic data on Monday's schedule.

* S&P 500 +7.4% YTD  * Nasdaq Composite +7.4% YTD  * Dow Jones Industrial Average +3.0% YTD  * Russell 2000 +3.7% YTD