>>> Asian Update

Asia Mid-Session Market Update: S&P hints Australia could be headed for a downgrade; markets weaker heading into key global economic figures


***Asia Summary***
- Equities markets opened slightly lower across the region. AUD/USD saw some weakness falling to 0.7915 after June trade balance figures came in at a lower than expected surplus or A$856M, exports also fell 1%. China Caixin services PMI slightly fell m/m to 51.5 while composite rose to 51.9 form 51.1. The PBOC adjusted its open market operations (OMO) by just injecting 7-day reverse repos and skipped 14-day operations. Costco SSS, ex-gas rose 5.3%. S&P warned that there is more risk to Australia's sovereign rating than in the past; reminder S&P Has Australia sovereign rating at AAA, outlook negative.
- Markets seem to be cautious ahead of BOE rate decision later today and US jobs report Friday morning. In tomorrow’s session Australia will release RBA’s statement on monetary policy, with the key focus to be on the wording about the A$ and its impact on the economy and inflation.

***Key economic data***
- (AU) AUSTRALIA JUN TRADE BALANCE (AUD): 856M V 1.8BE (8TH CONSECUTIVE SURPLUS)
- (CN) CHINA JULY CAIXIN PMI SERVICES: 51.5 V 51.6 PRIOR; PMI COMPOSITE: 51.9 V 51.1 PRIOR
- (KR) South Korea Jun Current Account Balance: $7.0B v $5.9B prior; Balance of Goods (BOP): $9.7B v $8.8B prior
- (AU) AUSTRALIA JULY AIG PERFORMANCE OF SERVICES INDEX: 56.4 V 54.8 PRIOR
- (JP) JAPAN JULY PMI SERVICES: 52.0 V 53.3 PRIOR; PMI COMPOSITE: 51.8 V 52.9 PRIOR
- (NZ) New Zealand July ANZ Commodity Price: -0.8% v 2.1% prior

***Speakers and Press***
China
- (CN) China insurance regulator CIRC: No plan for Anbang to sell overseas assets
- (CN) China Finance Ministry (MOF) has become concerned public-private partnerships (PPPs) for infrastructure investment are being used to disguise local government borrowing – FT
- (CN) China may accelerate debt to equity swaps in H2 - Financial News
- (CN) China Commerce Ministry (MOFCOM) Gao: Hope China and the US can continue on a path of cooperation; Reminder: Am un-named US government official said President Trump’s administration may be on the cusp of increasing its threats against China on trade
Japan
-(JP) Japan Fin Min Aso: The economy is not bad, oil prices are bringing down inflation
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.2%, Hang Seng -0.1%, Shanghai Composite -0.2%, ASX200 -0.4%, Kospi -1.5%
- Equity Futures: S&P500 -0.1%; Nasdaq100 0.0%, Dax -0.1%, FTSE100 -0.2%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.1858-1.1834; JPY 110.83-110.57; AUD 0.7967-0.7914; NZD 0.7430-0.7392
- Aug Gold -0.8% at 1,261/oz; Sept Crude Oil -0.3% at $49.44/brl; Sept Copper +0.2% at $2.89/lb
- USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6. 7211 V 6.7205 PRIOR
- (CN) China PBOC OMO injects CNY60B in 7-day reverse repos v CNY120B prior in 7-day and 14-day reverse repos
- JGB (JP) Japan MoF sells ¥400B v ¥400B indicated in 10-yr 0.10% inflation-indexed bonds, bid to cover 3.19x

***Equities notable movers***
Hong Kong/China
- Standard Chartered, 2888.HK, Reports H1 adj pretax profit $1.92B v $1.81Be, op income $7.2B v $7.23Be; Declares no dividend; -6.9%
Japan
- Furukawa Electric, 5801.JP Reports Q1 Net ¥6.8B v ¥2.3B y/y; Op ¥10.4B v ¥4.7B y/y; Rev ¥224.9B v ¥196.2B y/y; +12.6%
Korea
-GS Retail,007070.KR Reports Q2 (KRW) Net 42.0B v 59.8Be; Op 53.1B v 74.4Be; Rev 2.09T v 2.09Te; -12.8%
Australia
- Suncorp, SUN.AU Reports FY17 Net profit A$1.08B v A$1.13Be, Cash profit A$1.15B v A$1.20Be; -6.5%
-Commonwealth Bank of Australia, CBA.AU Austrac initiated civil penalty proceedings in federal court against CBA for “serious and systemic non-compliance” with anti-money laundering and counter-terrorism financing laws; +0.5%
***US markets on close: Dow +0.2%, S&P500 +0.1%, Nasdaq flat, Russell -1.1% ***

>>> US After Hours Summary: TTWO +12%, TSLA / OSUR +8%, OCLR +7% highe

TICKER ALERT: WRAPX
After Hours Summary: TTWO +12%, TSLA / OSUR +8%, OCLR +7% higher and PMTS -29%, CENX -12%, DDD / MOH -10%, CRUS / PRU -2% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: ESIO +22.5%, SEDG +16.8%, STMP +15.2%, CENT +12.3%, TTWO +11.5%, FORM +10.1%, PACB +9.1% (ticking higher; also announced that NVGN will purchase 10 Sequel Systems, filed mixed securities offering), TSLA +7.8%, OSUR +7.7%, OCLR +7.2%, HCLP +6.5%, EEP +6.1%, SUPN +5.8%, TGB +5.8% (light volume), HIIQ +5.6%, ECR +5.5%, DATA +5.1%, TRMB +4.8% (ticking higher), OAS +4.8%, ZNGA +4.7%, FIT +4.5%, AXGN +4.3% (light volume), HUBS +4.1%, CPE +2.7%, MRO +2.2%, KGC +2.2%, BIVV +2.1%, MASI +1.9%, BREW +1.8%, CATM +1.6%, CA +1.5%, CAVM +1.4%, AIG +1.4%, TDOC +1.3%,  QRVO +1.2%, CTXS +1.2% (light volume), BMRN +1% (also will expand its development plan for BMN 270 to include an additional Phase 3 study of the 4e13 vg/kg dose based on updated data), IAC +1%

Companies trading higher in after hours in reaction to news: WYN +4.9% (Wyndham Worldwide to spin off the company's hotel business resulting in two separate, publicly traded companies; to explore strategic alternative for the European rental brands; reported earnings), ATVI +4.1% (following TTWO/ZNGA earnings and ahead of its own release tomorrow Aug 3), NVTA +2.1% (Baker Bros/15.1% active stake discloses participation in NVTA's 7/31 private placement), AMC +1.6% (modestly rebounding from 27% decline following guidance; moves up Q2 earnings release and conference call to August 4 before the open), CCXI +1.4% (light volume; Chief Medical Officer Dr. Petrus Bekker retires for family medical reasons), HZO +1.3% (approves a new 2 mln stock repurchase plan)

Oclaro (OCLR) is leading optical names higher following earnings: AAOI +2.2%, FNSR +2.1%, NPTN +1.8% (reports earnings tomorrow), IPHI +1.8%, FN +1.5%, INFN +1.3% (reports earnings tomorrow), LITE +1.3%, ACIA +1.2%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: PMTS -28.7%, IPAS -21.7% (thinly traded), HIVE -14.3%, TSE -13.7% (light volume), MCEP -13%, TTMI -12.8%, CENX -11.6%, DDD -10.4%, MOH -10.2% (also announces restructuring, withdraws outlook), RGR -9.9%, HABT -7.1%, CAKE -6.5%, AREX -5.8%, PE -5.1%, CBPO -5%, HOLX -4.4%, HK -3.8%, NUS -3.4%, CXO -2.9%, TCS -2.9% (ticking lower), MYRG -2.7% (light volume), MTDR -2.7% (light volume), CRUS -2.4%, PRU -2.3%, PK -2%, GKOS -1.8%, TNH -1.7%, MIC -1.5%, SQ -1%, MET -1%

Companies trading lower in after hours in reaction to news: AGRX -12% (to offer shares of its common stock in underwritten offering), DDD -11.1% (SSYS sympathy), SWIR -8.3% (Numerex Corp. to merge with Sierra Wireless in a stock-for-stock merger transaction valued at ~$107 million), AOBC -4.4% (following RGR earnings), DRRX -4.3% (Durect and Zogenix terminated their Development and License Agreement whereby Zogenix had the worldwide development and commercialization rights to Relday), ONCE -3.1% (commences $300 mln common stock offering), FBP -2.2% (commences 20 mln common stock offering by the co and/or Thomas H. Lee Partners), MNK -1.5% (issues statement on DOJ subpoena related to opioid products), PBYI -1.4% (CHMP has issued its Day-180 List of Outstanding Issues in the process of their ongoing regulatory review of its MAA for neratinib for the extended adjuvant treatment of HER2-positive early stage breast cancer in patients who have previously been treated with trastuzumab-based adjuvant therapy), AGTC -1.1% (appoints William Sullivan as CFO; Larry Bullock is retiring), CHGG -1.1% (increases/prices follow-on offering of 10 mln shares at $13.50 per share), ORC -1% (files prospectus to sell up to $125 million of shares of its common stock through an at-the-market program)

>>> US Close Dow +0,24% S&P +0,05% Nasdaq -0,00% Russell -1,08%

Closing Market Summary: S&P 500 Ekes Out Second Win of the Week

The stock market spent much of Wednesday's session in negative territory as weakness in the broader market outweighed Apple's (AAPL 157.14, +7.09) post-earnings report rally. However, the S&P 500 (+0.1%) managed to sneak into positive territory in the final minutes to eke out its second win of the week. The Nasdaq (unch) finished just short of its unchanged mark while the Dow (+0.2%) outperformed, cruising to its sixth-consecutive record close. 

Apple advanced to a new record high on Wednesday after beating both top and bottom line estimates. The tech titan also issued encouraging guidance, suggesting that its much-anticipated iPhone 8 release is on schedule. AAPL shares settled higher by 4.7% and were largely the reason that the top-weighted technology group (+0.5%), and the broader market, finished in positive territory.

In total, five of the eleven sectors--technology (+0.5%), utilities (+0.5%), industrials (+0.4%), financials (+0.1%), and materials (+0.1%)--finished Wednesday's session in the green. Southern (SO 49.78, +1.25) carried the utilities space to its third-consecutive victory, rallying 2.6% on better than expected earnings and revenues.

Meanwhile, in the industrial sector, transports got their first win of the week, sending the Dow Jones Transportation Average higher by 0.3%. The sector's top performer was Ametek (AME 64.23, +2.61), which climbed 4.2% to a new all-time high after beating both top and bottom line estimates and raising its earnings guidance for the year.

On the downside, the telecom services space (-1.3%) finished at the bottom of the leaderboard as investors took some money off the table following the sector's six-session rally. Despite today's slide, the telecom services sector sits 7.1% above where is settled on July 25. The real estate space (-0.5%) also showed notable weakness, but the remaining laggards finished with losses of no more than 0.3%.

Pioneer Natural Resources (PXD 145.68, -17.59) led the energy sector (-0.3%) lower, plunging 10.8%, after lowering its forecast for production growth. PXD shares settled at a 15-month low.

However, a positive performance from crude oil, which climbed 0.9% to $49.61/bbl, helped keep the energy sector's loss in check. The commodity held a loss of around 1.0% on Wednesday morning, but moved sharply higher not long after the Energy Information Administration released its weekly crude inventory report.

The EIA report showed that U.S. crude inventories declined by 1.5 million barrels for the week ended July 28. The reading was slightly below the consensus, which called for a draw of 3.1 million barrels.

Small caps finished solidly lower on Wednesday, pushing the Russell 2000 lower by 1.1%. The small-cap index closed right at its 50-day simple moving average (1,413.93), which has acted as an area of support since June 1. 

In the bond market, U.S. Treasuries settled mixed; the 2-yr yield jumped two basis points to 1.36%, the 10-yr yield climbed one basis point to 2.26%, and the 30-yr yield slipped one basis point to 2.85%.

Reviewing Wednesday's economic data, which was limited to the ADP Employment Change Report for July and the weekly MBA Mortgage Applications Index:

  • The ADP National Employment Report showed an increase of 178,000 in July (consensus 187,000) while the June reading was revised higher to 191,000 from 158,000.
  • The weekly MBA Mortgage Applications Index decreased 2.8% to follow last week's 0.4% increase.

On Thursday, investors will receive several economic reports, including the weekly Initial Claims Report (consensus 242K) at 8:30 ET, June Factory Orders (consensus 2.9%) at 10:00 ET, and the July ISM Services Index (consensus 56.9) also at 10:00 ET.

  • Nasdaq Composite +18.2% YTD
  • S&P 500 +10.7 YTD
  • Dow Jones Industrial Average +11.4% YTD
  • Russell 2000 +4.1% YTD

>>> Oclaro beats by $0.03, reports revs in-line; guides Q1 revs in-line

Oclaro beats by $0.03, reports revs in-line; guides Q1 revs in-line
Reports Q4 (Jun) earnings of $0.20 per share, excluding non-recurring items, $0.03 better than the Capital IQ Consensus of $0.17; revenues rose 19.3% year/year to $149.38 mln vs the $148.04 mln Capital IQ Consensus.
Non-GAAP gross margin was 41.4% for the fourth quarter of fiscal 2017. This compares with non-GAAP gross margin of 41.6% in the third quarter of fiscal 2017, and non-GAAP gross margin of 32.4% in the fourth quarter of fiscal 2016.
Co issues in-line guidance for Q1, sees Q1 revs of $151-159 mln vs. $154.08 mln Capital IQ Consensus Estimate.
"Our fourth quarter revenue, which reflected the anticipated impact of softness in China, was in line with our expectations. While revenue declined, we once again delivered very strong gross margin and operating profits. As we enter fiscal year 2018, we expect to see continued high demand for our 100G and beyond products in the Data Center and Metro Markets. We also expect to be able to maintain our strong margin performance in fiscal 2018,"

>>> Tesla beats by $0.59, beats on revs

16:23 | TSLA | (325.89 +6.32)
Tesla beats by $0.59, beats on revs; Model 3 production on track, guides for positive Model 3 gross margin in Q4; Model S and X deliveries increases in back half vs. 1H17
* Reports Q2 (Jun) loss of $1.33 per share, $0.59 better than the Capital IQ Consensus of ($1.92); revenues rose 119.6% year/year to $2.79 bln vs the $2.5 bln Capital IQ Consensus. Preannounced deliveries grew 53% compared to Q2'16 in flat luxury vehicle market. Q2 Automotive gross margin at 27.9% GAAP and 25.0% non-GAAP.
* More than $3 billion cash on-hand at the end of Q2
* Model 3 production on track to achieve previously announced targets; Expecting positive Model 3 gross margin in Q4; targeting 25% margin in 2018
* Projecting Model S and Model X deliveries to increase in 2H'17 vs 1H'17
* With no advertising, paid endorsements or guerilla marketing campaigns, Model 3 net reservations have still steadily climbed every month, and have even accelerated further in recent weeks. Orders for Model S and Model X have also been increasing, both leading up to and following the Model 3 handover event. In July, our weekly net order rate for these vehicles was about 15% higher than our Q2 average weekly order rate. In addition, although too early to draw strong conclusions, we are seeing an even further increase in net Model S orders since the July 28th event. This growing demand gives us even more reason to expect increased deliveries of Model S and Model X in the second half of this year.
* Several factors will influence our non-GAAP automotive gross margin for the rest of this year. The combined non-GAAP gross margin for Model S and Model X in Q3 will decline slightly from Q2, driven primarily by mix shift. Additionally, during the initial phase of the Model 3 ramp in Q3, the volume produced will be tiny relative to the installed production capacity. As a result, Model 3 gross margin in Q3 will be temporarily impacted by the excessive allocation of labor and overhead costs and depreciation over this tiny volume. In the absence of these one-time elevated cost allocations, Model 3 gross margin in Q3 would already be positive, resulting in a positive cash contribution. As capacity utilization improves, Model 3 non-GAAP gross margin is expected to be positive in Q4, and should improve rapidly in 2018 to our target of 25%. Consequently, we expect non-GAAP automotive gross margin to temporarily dip below 20% in Q3, before recovering in Q4 and beyond.
* For the second half of 2017, we expect strong improvement in operating leverage as revenue should significantly increase in the second half of the year as compared to the first half, while operating expenses should remain essentially flat. Capital expenditures should be about $2 billion during the second half of 2017, as we make milestone-based payments for Model 3 equipment, continue with Gigafactory 1 construction, and expand our Supercharger, store, delivery hub, and service networks. While delivering the first Model 3 cars was a major company milestone, we are now focused on the critical steps to ramp Model 3 production. We remain confident in our plans and look forward to the upcoming unveiling of the next exciting addition to our portfolio of electric vehicles -- Semi Truck.

FT : Ryanair chief warns of post-Brexit summer holiday chaos

Ryanair chief warns of post-Brexit summer holiday chaos
Michael O’Leary tells transport secretary the UK needs ‘a Plan B’ as flight cancellations loom

UK travellers face widescale cancellation of flights to popular summer holiday destinations unless the pace of negotiations over post-Brexit rules on the operation of airlines quickens, according to the boss of Europe’s biggest low-cost airline.

Michael O’Leary, chief executive of Ryanair, warned that if no deal was struck by the end of next year, “we and other airlines will have to start cancelling flights or taking flights off sale” for summer 2019, depriving the UK travellers of cheap summer holidays in Spain and Greece.

“The UK doesn’t have time to negotiate this . . . The discussions haven’t yet started,” Mr O’Leary said in a press conference following a “very good” meeting with Chris Grayling, the UK transport secretary.

Mr Grayling was increasingly aware of the need to conclude a deal before the end of 2018, said Mr O’Leary, but he did not share the minister’s view that such a deal would be straightforward and warned of complacency by the UK government and International Airlines Group, owner of British Airways.

The airline chief said a deal governing UK-EU air traffic needed to be in place by late 2018 ahead of formal Brexit since that is when airlines start scheduling and selling flights for the summer of 2019. The UK is due to leave the EU in March 2019.

Mr O’Leary added that rival continental airlines were “opposed to the UK getting any favourable deal” and were “actively campaigning” for a deal in which the UK accepts EU regulations and court judgments. This would be something that would be “almost unacceptable” to those that believe in a hard Brexit because they did not want to be seen to “bend the knee” to a European authority, he said.

Yet he said his warnings and lobbying were falling on deaf ears, adding: “The UK government doesn’t have a Plan B, other than we hope and trust a deal will get done by September 2018.”

The Ryanair boss warned that the UK’s negotiating tactics were at risk of relying too much on their perceptions of the self-interest of EU countries. “The European regional airports and the Spanish hotels and the Greek hotels will not suffer the kind of Armageddon that many here in the UK believe will happen”, he said.

A government spokesperson said it was “committed to getting the right deal for Britain” and said it was “pursuing liberal access to European aviation markets”.

IAG said: “We’re confident that a comprehensive air transport agreement between the EU and the UK will be reached. It’s in Europe’s interest to have a fully liberalised aviation agreement.”

Mr O’Leary’s warning about UK-EU flights follows another from IAG chief Willie Walsh about EU rules on the ownership of airlines. Last month he pleaded for the EU to overhaul its “arcane” airline ownership laws, which rivals and analysts warn could force IAG to buy out a quarter of its shareholders or risk being broken up after Brexit.

REcode.net : Instagram wants you to know people spend more time with Instagram t

Instagram wants you to know people spend more time with Instagram than Snapchat
It’s been a year since Instagram cloned Snapchat Stories and now it’s got another message.

It’s been nearly three years since Instagram released data on how much time users spend on its app.

But that metric is important to Snapchat — it was part of Snap’s IPO roadshow — so now Instagram cares about it, too.

And on the one-year anniversary of Instagram cloning Snapchat’s best product, Stories, Instagram is also sharing “time spent” data about its user base. (Third-party data companies have tried to measure this on their own.)

Unsurprisingly, Instagram’s numbers are better.

Instagram, owned by Facebook, says its users under 25 spend “more than 32 minutes a day on Instagram,” and users 25 and over “spend more than 24 minutes a day” on the app.

Both numbers are bigger than what Snap shared in its S-1 back in February. Snap said users under 25 spent “over 30 minutes on Snapchat every day” while users 25 and older spent “approximately 20 minutes on Snapchat every day.”

Snap did not update those metrics during its Q1 earnings call, so it’s possible they could be bigger, but Snap did say that all users on Snapchat use the app more than 30 minutes per day, on average.

Snap stock has struggled since the company went public, and many people, including one of its own underwriters, believe that Instagram is a major reason why. Now Instagram is celebrating the one-year anniversary of Stories by throwing some more salt on Snapchat’s wounds. Ouch.

FT : ‘Trainspotting generation’ drives record UK drugs deaths

FT : ‘Trainspotting generation’ drives record UK drugs deaths
More drugs-related deaths of people aged 40-49 in 2016 than any other age group

People aged 40 to 49 who became addicted to heroin in the 1980s and 1990s had the highest mortality rates from drug-related causes in the UK last year.

In 2016 there were 108 drug-related deaths registered for every 1m people aged 40 to 49, up 14 per cent on 2015, according to figures released by the Office for National Statistics on Wednesday.

According to a report by Public Health England published last year, a “large proportion of heroin/opiate users” being treated in 2015/16 started using when the drug took off in the 1980s and 1990s. Now aged over 40, they are particularly vulnerable to complex health problems.

Rosanna O’Connor, director for drugs, alcohol and tobacco at Public Health England, called them the “Trainspotting generation” — a reference to Danny Boyle’s 1996 film about heroin addicts, and now depicting older heroin users “often with poor physical and mental health, [who are] sadly losing their battle with long-term addiction to drugs”.

By contrast, people aged 20-29 had a drugs-related mortality rate of 98 per 1m last year.

Deaths in this age group have increased since 2012, but are still far lower than at their peak in 2001, when they were the most vulnerable group.

Overall, registered drug-related deaths increased 2 per cent year-on-year to 3,744 — a high since records began in 1993.

Not all UK regions are equally affected: the North East had the highest drugs-related mortality rate, 77 per 1m people, compared with an average of 44 for England. In 2016, the drugs-related mortality rate rose 13 per cent year-on-year in the North East, against 3 per cent nationally.


More than half of all UK deaths involved an opiate, usually heroin or morphine. There was a rise in registered deaths involving fentanyl — a synthetic opioid more potent than heroin — from 34 in 2015 to 58 in 2016.

The National Crime Agency on Tuesday said 60 drug-related deaths in the UK since December 2016 have been linked to fentanyl or carfentanyl, a related and even stronger opioid.

Fentanyls were found in 50 deaths across the Yorkshire, Humber and Cleveland region since November 2016, said Detective Superintendent Patrick Twiggs of West Yorkshire police. He blamed supply from China and Hong Kong via the “dark web”.

Ian Cruxton, deputy director at the National Crime Agency, said drug dealers mixing synthetic opioids with heroin were playing “Russian roulette with the lives of their customers”.

>>> Fed's Mester (hawkish, non-voter): Fed's anticipated path of rate increases

Fed's Mester (hawkish, non-voter): Fed's anticipated path of rate increases is appropriate 
- Three rate hikes per year is appropriate to avoid overheating and reach-for-yield
- Can begin to shrink balance sheet before knowing its final size 
- Inflation weakness is due to special factors, not a general downward trend