Asia Mid-Session Market Update: Japan manufacturing PMI slows to 6-month low; 19 killed in UK explosion investigated as terror attack
US Session Highlights
OPEC Sec Gen Barkindo: within OPEC and other oil-producing countries reached a growing consensus to extend production cuts
(US) Apr Chicago Fed National Activity Index: 0.49 v 0.10e
(IR) Iran President Rouhani: Iran will test missiles when needed and will continue ballistic missiles program; will not seek US approval to conduct tests
Stock continued to rise for a third consecutive day to start the week on a positive note. Investors were bullish, and the VIX fell back into the ~10.00 range. However, there was a sign of caution, as 10-year Treasury yields were only up 1.5bps as investor show no hurry to get rid of haven assets just yet, and the reflation trade takes a subdued tone. Best performing sectors in the S&P were Technology and Utilities, up 0.8% and 0.9% respectively.
US markets on close: Dow +0.4%, S&P500 +0.5%, Nasdaq +0.8%
Best Sector in S&P500: Technology
Worst Sector in S&P500: Energy
Biggest gainers: BRO +7.5%; QRVO +3.4%; ADSK +3.1%
Biggest losers: AAP -2.7%; TRIP -2.5%; MNK -2.5%
At the close: VIX 10.9 (-1.1pts); Treasuries: 2-yr 1.28% (flat), 10-yr 2.25% (+1bps), 30-yr 2.92% (+1bps)
US movers afterhours
A: Reports Q2 $0.58 adj v $0.48e, R$1.10B v $1.05Be; Guides Q3 $0.49-0.51 v $0.53e, R$1.06-1.08B v $1.08Be; +5.0% afterhours
TTWO: Weakness attributed to tech blog report ‘Red Dead Redemption 2’ release delayed to next year; Launch had been expected this fall; -8.2% afterhours
Key economic data
(JP) JAPAN MAY PRELIMINARY PMI MANUFACTURING: 52.0 V 52.7 PRIOR (6-month low; 9th consecutive expansion)
(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 110.5 v 109.4 prior
(KR) South Korea Q1 Household Debt (KRW) q/q: 1.36T v 1.34T prior (fresh record high)
Asia Session Notable Observations, Speakers and Press
Asia indices trading mixed and US/Europe futures are slightly lower amid geopolitical concerns in UK and US. An explosion at a concert stadium in Manchester arena left 19 people killed and over 50 injured. Local police continues to investigate the cause of the explosion with a possible link to terror activity and a range of speculation in the media – from exploded transformer to a suicide nail bomb. Stateside, Washington Post reported that Pres Trump may have made requests back in March that Director of National Intelligence Coats and NSA director Rogers formally deny links between the Trump campaign and Russia. Report goes on to say that Rogers documented this contact in an internal memo which may be available to the special counsel and congressional investigators.
Also of note in US, White House summary documents disclosed the outline of Trump’s budget proposal seeking $3.6T in cuts over the next 10 years. Military spending benefits at the expense of social program cuts targeting food stamps and Medicaid. The budget also outlines fairly rosy forward growth projections, with 2018 GDP seen at 2.4%, 2019 at 2.7% and 2021-and-beyond growth at 3% or more.
In FX, modest risk-off flows boosted JPY along with overall renewed selling in USD. USD/JPY fell as much as 50pips below 110.90, while AUD/USD and NZD/USD saw 3-week and 4-week highs respectively around 0.75 and 0.70.
In economic data, Japan flash May manufacturing PMI expanded for 9th straight month but also registered a 6-month low. Output, New orders, and employment components were all at Nov-lows, while input and output prices grew at a slower rate. Markit economist noted “wait-and-see” attitudes amongst clients, excess warehouse inventories undermining expansion.
China
(CN) PBOC Advisor Sheng Songcheng: Monetary policy adjustments is a trial and error process; The central bank will not excessively adjust monetary policy – China press
(CN) China insurance regulator CIRC: Insurers’ risks are controllable; to increase risk analysis and checks – press
(CN) Various Chinese companies cancel planned bond sales on market volatility – US financial press
Japan
(JP) Japan said to target large increase in use of generic drugs – press
(JP) Japan Fin Min Aso: Will send a strong message about free trade at G7
BOJ likely to maintain JGB buying targets with yields moving closer to central bank’s target – Nikkei
Australia
(AU) S&P: Number of delinquent loans underlying prime RMBS declined in Mar to 1.16% from 1.23% in Feb – press
Korea
(KR) S&P to visit South Korea as part of an annual review of the sovereign rating this week
(KR) South Korea denies JoongAng Ilbo report that President Moon Jae-in has written Pope Francis a letter asking him to mediate a summit between South Korea and North Korea
Asian Equity Indices/Futures (00:30ET)
Nikkei -0.1%, Hang Seng +0.3%, Shanghai Composite -0.1%, ASX200 -0.2%, Kospi +0.8%
Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.1%, FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1230-1.1255; JPY 110.85-111.35; AUD 0.7465-0.7505; NZD 0.6990-0.7020
June Gold flat at 1,262/oz; July Crude Oil -0.4% at $50.95/brl; July Copper -0.7% at $2.59/lb
SPDR Gold Trust ETF daily holdings rise 1.8 tonns to at 852.5 tonne; 1st increase since Apr 24th
(CN) PBOC SETS YUAN MID POINT AT 6.8661 V 6.8673 PRIOR; 2nd straight firmer Yuan fix
(CN) PBOC to inject combined CNY140B v CNY40B prior
Asia equities notable movers
Australia
OFX Group (OFX) +15.2%; Reports FY17
Woodside Petroleum (WPL) +0.3%; investor day comments
Japan
Sony (6758) +0.7%; Investor relations day comments
Fujifilm (4901) -1.2%; To further delay release of FY16/17 results
Hong Kong
Tai Ping Carpets (146) +4.3%; Strategic review update
Vanke (2202) +1.3; To spend CNY5B to form 2 investment funds with China Merchants Bank
Tingyi Holding (322) -3.4%; Reports Q1
Tongda Group (698) -17.1%; Weakness attributed to shorts targeting the company
