Asia Summary
Asia markets are mixed, but mostly to the upside; with a quiet day of trade with little economic catalysts ahead of Bank of Japan (BOJ) policy decision tomorrow. BOJ is expected to cut inflation forecast and raise GDP forecast. Australia APRA announced stronger capital requirements by 2020, though all of the major banks assured the markets they would easily meet the requirements. Their shares rose, giving the ASX a boost. BHP released its production results, which failed to impress, much like Rio yesterday. This put some pressure on the smaller miners.
PBOC again injected through reverse repos, the 3rd consecutive injection over CNY100B and set the yuan reference rate at 6.7451, the strongest setting since October 2016. AUD/USD continued to be buoyed off yesterday’s more hawkish meeting minutes testing 0.7936.
Key economic data
(KR) SOUTH KOREA JUN PPI M/M: -0.4% V -0.2% PRIOR; Y/Y: 2.8% V 3.4% PRIOR
(AU) AUSTRALIA JUN WESTPAC LEADING INDEX M/M: -0.1% V 0.0% PRIOR
(MY) Malaysia Jun CPI Y/Y: 3.6% v 3.9%e
Speakers and Press
China
(CN) China Economic Information Daily Op Ed: Massive outflows of forex reserves to pay for irrational overseas mergers could have an impact on China’s forex management system, could affect the stability of the yuan exchange rate
(CN) China can now censor images in one-on-one chats in real time and delete them before the receive can see them – financial press
Australia/New Zealand
(AU) Australia APRA announces "unquestionably strong" capital benchmarks; main banks need CET1 ratios of at least 10.5% by 2020
Korea
(KR) US Commerce Dept said to be probing some fiber imports from Korea and Taiwan; to announce preliminary injury ruling by Aug 11th – press
Japan
(JP) Renewed speculation that BOJ could cut its inflation forecast in its upcoming outlook report – financial press
(JP) Japan Chief Cabinet Sec Suga: Strong economic growth more important than a temporary deficit cut; reiterates govt view that strive for primary balance surplus in FY20/21
Other
(MX) S&P revises Mexico sovereign outlook to stable from negative; Affirms BBB+ rating
Asian Equity Indices/Futures (00:30ET)
Nikkei +0.1%, Hang Seng +0.5%, Shanghai Composite +0.8%, ASX200 +0.6%, Kospi -0.2%
Equity Futures: S&P500 +0.1%; Nasdaq +0.3%, Dax +0.1%, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1555-1.1536; JPY 112.14-111.88; AUD 0.7936-0.7909; NZD 0.7357-0.7341
Aug Gold -0.1% at 1,240/oz; Aug Crude Oil -0.3% at $46.28/brl; Sept Copper -0.1% at $2.72/lb
(AU) Australia Finance Ministry (AOFM) sells A$900M in 2.75% 2028 bonds; avg yield 2.7747% v 2.5124% prior; bid-to-cover 2.82x v 2.69x prior
(CN) China PBoC OMO: injects CNY140B in 7 and 14 day reverse repos v CNY200B prior (3rd consecutive injection over CNY100B)
USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.7451 V 6.7611 PRIOR (strongest setting since Oct 2016)
(KR) Bank of Korea (BOK) sells KRW2.3T in 2-yr monetary stabilization bonds; avg yield 1.66% v 1.67% prior
JGB (JP) Japan to sell ¥0.3T in enhanced liquidity auction
(CN) China MOFCOM sells 7-yr bonds; avg yield 3.6056%; bid-to-cover 3.76x
Equities notable movers
Australia
BHP,BHP.AU Reports Q4 iron ore production 60.0Mt v 61.5Mte v 54.0Mt q/q; -1.5%
Wellard Limited,WLD.AU Guides FY17 pretax loss A$65M to loss A$55M, ex-impairments on vessels; -31%
Hong Kong/China
China Shipping Development,1138.HK Guides H1 Net CNY800-900M; -57% to -51% y/y; -3.8%
Japan
Takata Corp,7312.JP Said that victims’ lawyers calling it unjust to halt US air bag cases against carmakers – press; -23%
US markets on close: Dow -0.04%, S&P500 0.0%, Nasdaq +0.03%, Russell +0.2%
Best Sector in S&P500: Information Technology
Worst Sector in S&P500: Telecom
Biggest gainers: NFLX +13.5%; WYNN +2.9%; PLD +2.7%
Biggest losers: VNO -20%; HOG -5.9%; CMG -4.3%
At the close: VIX 9.89 (+0.0.7pts); Treasuries: 2-yr 1.35% (-0.6%), 10-yr 2.26% (-2.1%), 30-yr 2.85% (-1.5%)
US Market Summary
Stock were mixed today, focus was on the administration’s failure to move forward with healthcare legislation and what that means for potential economic policy reforms. Treasuries were investors’ favorites again, and they found more value in medium to long term notes. 10-year yield lost 5.5 bps, dropping to 2.26% , while 30-year bonds lost 6 bps in yield reaching 2.85%. 2s10s spread flattened by 4.5 bps, decreasing to 91 bps, and 10s30s spread remained steady at 59
US Afterhours Movers
SNI Discovery Communications said to be in combination talks with Scripps Networks – US financial press; +14.7% afterhours
MKC, RB.UK McCormick confirms to Acquire Reckitt Benckiser’s Food Division for $4.2B (over $4.0B was speculated); +0.2% afterhours
VRTX Announces positive Phase 1, Phase 2 data from three different Triple combination regimens in people with Cystic Fibrosis who have one F508del mutation and one Minimal Function Mutation (F508del/Min); +24.6% afterhours
UAL Reports Q2 $2.75 v $2.65e, Rev $10.0B v $9.96Be; Guides Q3 PRASM -1% to +1%- Guides Q3 CASM 2.0-3.0%, capacity ~4.0%; -3.6% afterhours
