Asia Mid-Session Market Update: Japan 10-yr JGB yield reaches 0.1%; Aussie trade surplus much higher than expected
***Asia Summary***
- Sentiment remains a bit risk off in the region amid Fed meeting minutes showing some uncertainty about when the next rate hike would be and tensions in the region continue to increase as Trump criticizes China in a tweet,“Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us - but we had to give it a try!”. Crude gained some of its overnight losses in the session after a larger draw down in weekly API figures and speculation about production levels in the next OPEC meeting.
- The main economic data point for the session was Australia May trade balance, which came in nearly A$1.5B higher than analysts expectations. The A$2.47B surplus helped the A$ pair losses, before dipping to 0.7596. Notably coal exports rose 62% m/m, however the jump was likely due to Cyclone Debbie impact on April figures.
- China again skipped open market operations for a 10th day and PBOC Gov Zhou reiterated to keep prudent monetary policy stance.
***Key economic data***
- (AU) AUSTRALIA MAY TRADE BALANCE (A$): +2.47B V +1.0BE (7th consecutive surplus)
- (CO) Colombia Jun CPI M/M: 0.1% v 0.2%e; Y/Y: 4.0% v 4.1%e
- (JP) Japan investors net bought ¥772.8B in foreign bonds v bought ¥322B in prior week; Foreign investors net sold ¥14.0B in Japan stocks v sold ¥26.3B in prior week
***Speakers and Press***
China
- (CN) PBoC Gov Zhou: Reiterates to keep 'prudent, neutral' monetary policy in 2017 - 2016 Annual Report
- (CN) China Ministry of Commerce (MOFCOM): Trade probes against China fell noticeably in H1
Japan
- (JP) BOJ Minutes of the Fifth Round of the "Bond Market Group" Meetings; questions leaving ¥80T market operation pledge
- (JP) BOJ likely to keep policy steady and cut inflation forecast for year ending in Mar 2018 at quarterly review on July 20th - financial press
Korea
- (KR) S&P: North Korea's ICBM launch NOT at level which hurts South Korea's credit rating
- (KR) Moody's affirms South Korea Aa2 sovereign rating; Raises 2017 GDP outlook to 2.8% from 2.5%
Australia
- (AU) Reserve Bank of Australia (RBA) Harper: RBA comfortable holding interest rates for now; no reason “to scare the horses at the moment” by signaling coming interest rate increases - financial press
***Asian Equity Indices/Futures (00:30ET)***
- Nikkei -0.6%, Hang Seng -0.3%, Shanghai Composite -0.3%, ASX200 -0.1%, Kospi -0.2%
- Equity Futures: S&P500 +0.0%; Nasdaq -0.1%, Dax +0.1%, FTSE100 +0.1%
***FX ranges/Commodities/Fixed Income (00:30ET)***
- EUR 1.1355-1.1329; JPY 113.31-113.89; AUD 0.7611-0.7585; NZD 0.7292-0.7264
- Aug Gold +0.4% at 1,226/oz; Aug Crude Oil +0.8% at $45.48/brl; Sept Copper -0.3% at $2.66/lb
-China Shenhua Energy,1088.HK To raise July spot coal prices by 5% to CNY600/ton - Chinese Press
- (CN) PBOC skips open market operations (10th consecutive skip)
- (CN) PBOC SETS YUAN MID POINT AT 6.7953 V 6.7922 PRIOR
- (JP) Japan MoF sells ¥650B v ¥800B indicated in 0.8% (0.8% prior) 30-yr bonds; Avg yield: 0.8780% v 0.817% prior; Bid to cover: 3.62x
- (MY) Malaysia sells MYR3.0B in 2024 bonds; avg yield 3.919%; bid-to-cover 2.88x
- JGB 10-yr yield rises to 0.1% (1st time since mid-Feb)
***Asia equities notable movers***
Australia
- Galaxy Resources, GXY.AU Production at Mt Cattlin exceeded target, +7.5%
- Doray Minerals,DRM.AU Says mining at the underground Andy Well to be suspended on Nov 1st, -23%
Japan
- Seven & I, 3382.JP To form an e-commerce and distribution tie up with Askul - Japan press; Askul +5.5%
Hong Kong/China
- Gemdale Properties ,535.HK Reports June Contracted sales CNY6.33B, +92% y/y; +17%, over 2-year high
- China New City Commercial Development ,1321.HK Discloses entered into the Placing Agreement for 260M shares – filing; +21.6%
US
- COST Reports Jun SSS (ex gas) +6.5%; US SSS (ex gas) +6.3% v 3.9%e
***US Session Highlights***
-US markets ended mixed, with the Dow slightly negative, while the NASDAQ bounced and handily outperformed that of the other major indices thanks to strength from tech. The focal point this afternoon was the release of the minutes from the FOMC's June meeting, which pointed to a divided Fed on when to begin the balance sheet runoff and on the outlook for inflation with its effect on the future path of rate hikes. Treasuries were mostly stronger, while the energy complex saw sellers emerge after the 8-day winning streak in oil prices came to an end. Outperformers on the day were tech and healthcare; laggards were energy and real estate.
-Russia is said to oppose any deeper oil production cuts at the upcoming OPEC ministerial meeting on July 24th, reportedly believing further supply reductions so soon after the existing agreement was extended would send the wrong message to the oil market.
-(US) President Trump lamented in an early morning tweet that “Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us - but we had to give it a try!” Later in the day, US Ambassador to the UN Haley indicated the US will propose new sanctions on North Korea in the coming days.
***US markets on close: Dow 0.0%, S&P500 +0.2%, Nasdaq +0.7%***
- Best Sector in S&P500: IT
- Worst Sector in S&P500: Energy
- Biggest gainers: AMD +8.6%; MU +4.7%; PYPL +3.3%
- Biggest losers: ORLY -18.9%; AAP -11.2%; AZO -9.6%
- At the close: VIX 11.07 (-1.3%); Treasuries: 2-yr 1.41% (-0.5%), 10-yr 2.33% (-0.8%), 30-yr 2.85% (-0.5%