>>> Asian Update

Asian Mid-session Market Update: China CPI decelerates for 3rd straight month; AUD falls as NAB forecasts more aggressive RBA easing

***Economic Data***
- (CN) CHINA JULY CPI Y/Y: 1.8% V 1.8%E; 6-month low
- (CN) CHINA JULY PPI Y/Y: -1.7% V -2.0%E (53nd consecutive month of decline)
- (JP) JAPAN JULY M2 MONEY STOCK Y/Y: 3.3% V 3.3%E; M3 MONEY STOCK Y/Y: 2.9% V 2.9%E
- (AU) AUSTRALIA JULY NAB BUSINESS CONFIDENCE: 4 V 5 PRIOR; CONDITIONS: 8 V 11 PRIOR
- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.7 v 118.0 prior
- (NZ) NEW ZEALAND JULY CARD SPENDING M/M: 0.3% V 0.1%E; TOTAL M/M: 0.4% V +1.0% PRIOR
- (NZ) New Zealand ANZ July non-tradable inflation m/m: -0.3%; first decline since May 2015
- (NZ) New Zealand July ANZ Truckometer Heavy M/M: -5.7% v +4.7% prior
- (UK) JULY BRC LFL SALES Y/Y: +1.1% V -0.7% PRIOR; 6-month high

***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 +0.4%, S&P/ASX +0.2%, Kospi +0.6%, Shanghai Composite +0.3%, Hang Seng -0.2%, Sep S&P500 flat at 2,176

***Commodities/Fixed Income***
- Dec gold -0.1% at $1,340/oz, Sep crude oil -0.9% at $42.66/brl, Sep copper -0.1% at $2.16/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 6.5 tonnes to 973.8 tonnes; first decline since Aug 3rd
- SLV: iShares Silver Trust ETF daily holdings rise to 10,941 tonnes from 10,911 tonnes prior; multi-year high
- JGB: (JP) Japan's MOF sells ¥725B in 0.3% 30-year bonds; Avg yield: 0.424% v 0.120% prior; Bid to cover: 3.07x v 2.64x prior
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6594 V 6.6615 PRIOR
- (CN) PBOC to inject CNY70B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$150M in 2.5% 2030 Indexed Bonds; avg yield: 0.3921%; bid-to-cover: 2.63x

***Market Focal Points/FX***
- Asian equity markets are gaining modestly despite incremental declines on Wall St as expectations of policy accommodation in the region continue to run high. China consumer inflation has met consensus estimates but slowed for the 3rd straight month to 1.8%, remaining well below the 3% target. Likewise, Australia ANZ business confidence slipped further, while New Zealand ANZ inflation and forward-looking heavy trucking sentiment reversed course into the red in July. S&P futures are flat, oil is consolidating US session gains, and FX majors traded with a dollar-positive bias. AUD/USD fell about 40pips toward 0.7620, NZD/USD was down 30pips below 0.7130, and USD/JPY briefly rose about 25pips from the lows above 102.50. GBP/USD tested below 1.30 level for the first time in nearly a month on comments from a BOE hawk McCafferty who acknowledged that further easing is likely to be necessary as it was difficult to forecast the headwinds from the Brexit vote on the economy.

- China CPI hit a 6-month low, but m/m saw a rise of +0.2% v -0.1% prior. Food price inflation slowed to 3.3% v 4.6% prior, while that of non-food goods rose to 1.4% v 1.2% prior. Economists have also continued to digest overnight release of July trade data that showed higher than expected surplus but bigger than expected declines in both exports and imports. ANZ said outbound shipments will remain lackluster "as sluggish growth in Europe and Japan is likely to drag on Chinas exports... Brexit will weigh further on exports to the EU, as the EU and Japan together make up over a fifth of Chinas total exports."

- NAB July business retreated further in July, prompting its economists to revise its RBA forecasts to anticipate more easing. Namely, NAB now sees two additional RBA rate cuts next year to 1.00% rate along with the possibility of "unconventional monetary policy". NAB cited expectation of CPI remaining below target for extended period and structural transition away from mining in the economy weighing on labor in the long run. NAB sees RBA easing again in May and Aug of 2017 to help stabilize the unemployment rate (which is currently a concern for the RBA) at just over 5%.

- Ahead of this week's RBNZ decision, swaps markets have boosted expectations of a more aggressive 50bp cut to 15% from 10%, while ANZ chief economist said NZ banks are unlikely to pass on a full rate cut given the rise in funding costs and slower deposit growth.

***Equities***
US equities / ADRs:
- MCHP: Reports Q2 $0.84 v $0.75e, R$844.0M (adj) v $821Me; raises dividend 0.1% from $0.3595 to $0.36 (implied 2.5% yield); +4.5% afterhours
- NUAN: Reports Q3 $0.38 v $0.37e, R$485M v $490Me; -1 .0% afterhours
- GPS: Reports July SSS -4% v -0.3%e; Guides Q2 $0.58-0.59 (ex $0.28 in store closure and streamlining costs) v $0.47e, R$3.85B v $3.75Be; -5.1% afterhours
- MTW: Reports Q2 $0.04 v $0.03e, R$457.7M v $468Me: -11.9% afterhours
- MXL: Reports Q2 $0.50 v $0.44e, R$102M v $102Me; -15.5% afterhours

Asia Notables by sector:
- Consumer discretionary: Skyworth Digital 751.HK +1.6% (July result); Cochlear COH.AU -1.7% (FY16 result); Mobile Embrace MBE.AU -8.1% (guidance)
- Consumer staples: Cosmax 192820.KR +1.0% (Q2 result)
- Financials: ANZ Bank ANZ.AU +2.8% (9-month result); IOOF Holdings IFL.AU -6.9% (FY16 result)
- Industrials: Great Wall Motor 2333.HK +2.4% (July result); Brother Industries 6448.JP +16.8% (Q1 result); Japan Steel Works 5631.JP +9.7% (Q1 result)
- Technology: Mesoblast MSB.AU +7.9% (phase 2 results show improvements)
- Materials: Aluminum Corporation of China 2600.HK -0.7% (acquisition); Mitsubishi Materials 5711.JP -5.3% (Q1 result)
- Utilities: Transurban TCL.AU -0.5% (FY16 result)

>>> After Hours Summary: SINA +5%, MCHP +4.4% higher following earn


After Hours Summary: SINA +5%, MCHP +4.4% higher following earnings, CPS +1% on S&P SmallCap 600 addition news... TUBE -22%, MTW -12.8%, GPS -5.2% on earnings/guidance/SSS

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: HIIQ +31%, REN +19.8%, FH +14.3% (also FORM Holdings to acquire 100% of XpresSpa through a private placement of its common stock to Mistral Equity Parterns and other existing XpresSpa holders at $2.31/share or $1.73 mln), AMPH +9.4%, CSLT +8.8%, NVRO +8.7%, ENDP +7.2%, GIGA +6.5% (also receives a $1.9 mln order for non-recurring engineering services associated with its Microsource business unit from an aerospace company), OPK +5.4%, MIME +5%, SINA +4.9%, ZLTQ +4.8%, CPE +4.7%, MCHP +4.4%, (also increased quarterly cash dividend to $0.36/share from $0.3595/share), ARNA +4.2%, IDI +4.1%, (also annouces Harry Jordan as COO), NILE +3.8%, VSLR +3.4%, FGEN +3.2%, VTTI +3.2%, (also VTTI Energy Partners to acquire an additional 8.4% equity interest in VTTI MLP B.V. and associated pro-rata net debt from VTTI MLP Partners B.V. for cash consideration of $96.2 mln; commences 5.25 mln public offering of common units representing limited partner interests in the Partnership ), AMID +3.1%, IPHI +2.3%

Companies trading higher in after hours in reaction to news: WPZ +4.7% (Williams and Williams Partners announced they have agreed to sell the companies' Canadian businesses to Inter Pipeline Ltd. for combined cash proceeds of $1.35 billion CAD), CPS +1.2% (S&P announces Cooper-Standard Holdings will replace QLogic Corp.  in the S&P SmallCap 600 after the close of trading on Wednesday August 10)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: DRYS -31.1%, CNXR -23.2%, TUBE -22.2%, MODN -16.4%, NPTN -15.6%, MXL -14.6%, MTW -12.8%, ROG -9.3%, GPS -5.2% (Gap reports July same store sales -4.0% vs -3.6% Retail Metrics consensus and issues Q2 guidance), RRGB -5.2% (also announces that Denny Marie Post has been appointed as CEO and to the board, effective August 8 2016 ), RRGB -5.2%, BOJA -4.8%, ELNK -4.5%, JPEP -3.1%, DVA -2.9%, MNKD -2%, RAX -1.8% (also sells its Cloud Sites business unit to Liquid Web; terms not disclosed), LC -1.7% (also CFO Dolan stepping down), HTZ -1.7%, TWLO -1.4%, KITE -1.3%, NUAN -1%

Companies trading lower in after hours in reaction to news: TWER -13.9% ( files for $20 mln common stock offering ), FCSC -12.4% ( to offer and sell shares of its common stock and related warrants to purchase shares of its common stock in an underwritten public offering), IAG -8.5% (IAMGOLD to sell, on a bought deal basis, 38.85 mln common shares at a price of $5.15/share, for aggregate gross proceeds of ~$200 mln; commences cash tender offer for up to $150 million of its 6.75% Senior Notes due 2020), ACAD -4.6% ( to offer and sell $200 mln of its common stock in an underwritten public offering ), X -4.2% ( commences 17 mln common stock offering), TSE -3.9% (Trinseo announces that Bain Capital Everest Manager Holding has agreed to sell 8 mln ordinary shares pursuant to its shelf registration statement), BMRN -2.9% (files mixed securities shelf offering; commences 7.5 mln common stock offering), WING -2.8% (announces that a stockholder, namely an affiliate of Roark Capital, intends to offer for sale in an underwritten secondary offering 6 mln shares of the co's common stock ), PSXP -2% ( announces an underwritten public offering of 6 mln common units ), SAVE -0.8% (reports July prelim traffic; RPMs +18.4% Y/Y on ASMs +17.1% Y/Y, load factor for July 2016 was 89.8%, +1%), D -0.3% (to offer to sell 25 million equity units, subject to market and other conditions), ALDX -0.2% (will report the results of a clinical trial of NS2 in patients with Sjögren-Larsson Syndrome on August 9, 2016, prior to the market open)

>>> US Close Dow -0.08% S&P -0.09% Nasdaq -0.15% Russell -0.07%


Closing Market Summary: Stocks Finish Flat as Oil Rallies

The stock market began the week on a quiet note as the Nasdaq Composite (-0.2%) settled behind the S&P 500 (-0.1%) and the Dow Jones Industrial Average (-0.1%). The benchmark index meandered in an eight-point trading range as a rally in crude oil helped counter weakness from the heavyweight consumer discretionary (-0.3%) and health care (-0.9%) sectors.

U.S. equities began the day on a modestly higher note, responding to a positive bias in global bourses. Asia-Pacific indices outperformed as participants reacted to Friday's above-consensus reading of the U.S. Employment Situation Report for July. The employment data showed continued improvement to the hiring landscape as nonfarm payrolls (255K; consensus 185K) handily beat estimates for the second consecutive month. Conversely, there was no negative response to China's disappointing Trade Balance Report after the People's Bank of China suggested potential "innovative" stimulus measures.

The major averages pulled back through the opening hour as the heavyweight technology (UNCH), consumer discretionary (-0.3%), and health care (-0.9%) sectors weighed on the broader market. The move to the downside was limited though, as investors eyed a rebound in crude oil. WTI crude rallied 3.0% ($43.07/bbl; +$1.24) amid reports that several members of OPEC are attempting to revitalize a production freeze agreement. The energy component extended its August gain to 3.6%.

The benchmark index carved out a session low in the afternoon (2177.85), but recovered in the final hour to end just below its flat line. Seven sectors ended in the red with heavily-weighted industrials (UNCH) and technology (UNCH) showing the slimmest losses. On the flipside, financials (+0.1%), materials (+0.2%), and energy (+1.2%) outperformed.

The countercyclical health care sector (-0.9%) ended at the bottom of the leaderboard as pharmaceutical names weighed. In the group, Bristol-Myers (BMY 60.30, -2.98) extended its two-session losing streak to 19.9%. The company came under pressure last Friday after announcing that its Opdivo medication failed to meet its primary endpoints. Biotechnology also underperformed after Allergan (AGN 248.31, -5.54) reported mixed quarterly results and updated its outlook to reflect the sale of the Actavis Generics division to Teva Pharmaceuticals (TEVA 53.30, -0.91).

Influential Netflix (NFLX 95.11, -1.92) weighed on the consumer discretionary space (-0.3%) after reports indicated that Alibaba (BABA 85.00, +0.41) is not seeking to invest in the company. Separately, Chinese streaming service Leeco announced that it is looking to add additional U.S. employees. Amazon (AMZN 766.56, +0.58) finished flat after Wal-Mart (WMT 73.34, -0.42) agreed to purchase Amazon competitor Jet.com. Wal-Mart agreed to pay $3 billion in cash for the company. Elsewhere, on the M&A front, Mattress Firm (MFRM 63.75, +34.01) spiked after Steinhoff offered to acquire the company for $64 per share. 

The PHLX Semiconductor Index (-0.2%) ended behind the broader technology sector (UNCH) as Qorvo (QRVO 54.30, -0.75) continued to underperform. The name has been under pressure after reporting its quarterly results on August 2. Separately, ON Semiconductor (ON 10.11, +0.12) ended higher by 1.2% after beating analysts' estimates for the quarter and offering in-line guidance for the third quarter.

The U.S. Dollar Index (96.39, +0.19) settled modestly higher as the greenback gained ground against the pound and yen. Sterling lost 0.2% against the buck (1.3042) while the dollar/yen pair ended the day higher by 0.6% (102.44). Elsewhere, the dollar lost 0.1% against the commodity-sensitive Canadian dollar (1.3165).

Treasuries ended a quiet session on a flat note as the yield on the benchmark 10-yr note finished flat at 1.59%.

Participation was below the recent average as fewer than 772 million shares changed hands on the NYSE floor.

There was no economic data of note released today. 

Tomorrow's economic data will include the preliminary estimate of second quarter Productivity (consensus 0.5%) and Unit Labor Costs (consensus 1.7%), which will cross the wires at 8:30 ET. Separately, Wholesale Inventories for June (consensus +0.2%) will be released at 10:00 ET. 

  • Russell 2000 +8.3% YTD
  • S&P 500 +6.7% YTD
  • Dow Jones +6.3% YTD
  • Nasdaq Composite +4.1% YTD 

>>> Intercontinental Hotels Group target raised to $48 at MKM Partners (42.60 +

Intercontinental Hotels Group target raised to $48 at MKM Partners

MKM Partners raises their IHG tgt to $48 from $45 noting co reported adj. EBIT ~4% ahead of consensus and EPS ahead of expectations driven by RevPAR acceleration in 2Q from 1Q and cost phasing to 2H. Firm believes this quarter highlights why they favor co's high-quality, less cyclical fee business: (1) Nearly 90% of fee income is based on hotel revs and 95% of operating profit is from its recurring fee business and (2) its transition to asset-light has structurally higher ROIC (deserves a higher multiple, in their view) that they calculated has increased from 10% in 2003 to 47% in 1H16. Firm believes IHG is a good candidate to participate in further industry consolidation.

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: DGLY -8.3%, DF -2.2%, AGN -0.5%

Select metals/mining stocks trading lower: DRD -3.9%, MUX -1.4%, AUY -1.2%, AUY -1.2%, AU -1.2%, HMY -0.7%, KGC-0.6%, NEM -0.5%

Other news:
  • LNTH -5.2% (files for $50 mln mixed securities shelf offering and files for 17,793,599 share common stock offering by selling shareholders)
  • SM -3.6% (commences underwritten public offering of 15 mln shares of its common stock)
  • GSK -2% (in sympathy with NVO)
  • SHPG -2% (in sympathy with NVO)
  • MACK -1.8% (in sympathy with peers)
  • NFLX -1.1% (headlines of Alibaba (BABA) denying it will be pursuing an investment )
  • DAL -1.1% (global-wide system outage)
  • TSLA -0.9% (filed its 10-Q with Gigafactory update)
Analyst comments:
  • NVO -4.6% (downgraded to Neutral from Buy at BofA/Merrill)
  • RBS -1.1% (downgraded to Neutral from Outperform at Macquarie)