US Session Highlights
(US) MAY FINAL MARKIT SERVICES PMI: 53.6 V 54.0 PRELIM
(US) MAY ISM NON-MANUFACTURING COMPOSITE: 56.9 V 57.1E
(US) APR FINAL DURABLE GOODS ORDERS: -0.8% V -0.5%E; DURABLES EX TRANSPORTATION: -0.5% V -0.4% PRELIM
(US) APR FACTORY ORDERS: -0.2% V -0.2%E
(US) Senate Minority Leader Schumer: ready to work with Pres Trump on a real infrastructure plan
Stock rally slowed to a grind with most indices slightly lower on the day. Concerns over the rift between Saudi Arabia and allies with Qatar weighed on oil. Despite lower crude prices and subdued buying power, the worst performing S&P sectors YTD, Energy and Financials, managed to tick up today, by 0.2% each.
US markets on close: Dow -0.1%, S&P500 -0.1%, Nasdaq -0.2%
Best Sector in S&P500: Energy
Worst Sector in S&P500: Utilities
Biggest gainers: KORS +4.4%; NVDA +3.0%; TSO +2.8%
Biggest losers: INCY -5.7%; MNK -5.1%; BMY -4.8%
At the close: VIX 10.1 (+0.3pts); Treasuries: 2-yr 1.30% (+1bp), 10-yr 2.18% (+2bp), 30-yr 2.84% (+3bps)
US movers afterhours
THO: Reports Q3 $2.11 v $1.87e, R$2.02B v $1.96Be; affirms FY17 capex $130M; +11.5% afterhours
COVS: Agrees to be acquired at $2.45/shr by OpenText for $103M; +9.1% afterhours
ACOR: CVT-301 Phase 3 Data showed significantly improved Motor Function during OFF Periods in Parkinson’s Disease; plans to file NDA in U.S. by end of 2Q17; +9.8% afterhours
SIG: COO Bryan Morgan resigns due to violations of company policy; -0.8% afterhours
CASY: Reports Q4 $0.76 v $0.89e, R$1.85B v $1.87Be; Guides FY18 SS fuel gallons sold +1-2%, SS grocery/merchandise sales +2-4% y/y, operating expenses +9-11% y/y; -3.9% afterhours
Politics
(US) White House wants debt ceiling to be raised by August Congressional recess – press
(US) White House nominates Joseph Otting as the US Comptroller of Currency (OCC) – financial press
(UK) According to Survation Poll taken June 2-3, support for Conservatives Party at 41.5% vs 40.4% for Labour – US financial press
Key economic data
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
(AU) AUSTRALIA Q1 CURRENT ACCOUNT BALANCE (A$): -3.1B V -0.5BE; NET EXPORTS OF GDP: -0.7% V -0.4%E
(JP) JAPAN APR LABOR CASH EARNINGS Y/Y: 0.5% V 0.3%E (4-month high)
Asia Session Notable Observations
Asian markets are mixed in the wake of modest declines on Wall St where cash indices fell after two days of large gains. Despite the miss in US economic data and political risk of former FBI director Comey testinony this week, expectations for more than one rate hike by the FOMC are back above 50%, with a tightening this month now seen as nearly 95%-certainty. Risk aversion picked up slightly in the Asia session, as 10-year Treasury yield fell 2bps, USD/JPY plunged over 70pips below 109.70, and US equity futures turned from slightly gains to losses.
Australia economic data and monetary policy were in focus in today’s session. Q1 Current Account saw a much bigger drop in Exports as pct of GDP at -0.7%, and analysts are speculating this may result in an annualized q/q contraction in tomorrow’s GDP report. RBA stood pat at 1.5% and was also more Neutral than expected, acknowledging the expected slowdown in Q1 GDP but maintaining view of 3% long run growth forecast. RBA also added that business conditions have improved and capacity utilisation has increased.
In China, PBoC skipped its regular daily reverse repo ops but injected CNY498B in medium-term lending facility (MLF) operations. Yuan fix was also set marginally stronger, with the Offshore rate remaining at 6.77.
Speakers and Press
China
(CN) Muddy Waters’ Carson Block: China is a massive asset bubble and credit bubble; blow up could start in shadow banking and wealth management
(CN) Analysts expect liquidity conditions to tighten in June amid seasonal factors; Unlikely it will lead to full-scale liquidity crunch – Chinese press
(CN) China Foreign Min Wang Yi announced an agreement had been reached between China and ASEAN countries on a first draft of a framework for a Code of Conduct (COC) for the South
China Sea – press
(CN) China Information Daily: China should continue to push for normalizing IPOs
Japan
(JP) Japan Fin Min Aso: Importance of lowering Japan debt-to-GDP ratio is clear – press
Australia/New Zealand
(AU) AMP’s Oliver: Overall picture for Australia economy is subpar growth running well below that assumed by RBA and in the budget – SMH
(AU) Australia Fair Works Council (FWC) to raise Minimum Wage by 3.3%/A$22.20/week for a total of A$694.90/week – press
(AU) ANZ CEO: Australia house prices are very inflated; There is a very low probability of a housing crash – press
(NZ) New Zealand real estate agency Barfoot & Thompson: Auckland region May property sales were 886 units, up from 664 m/m but down from 1,306 y/y; lowest number of sales in the month of May since 2010 – NZ press
Korea
(KR) Bank of Korea (BOK): THAAD dispute may impact talks on Korea-China currency swap – Korean press
(KR) US Nuclear Submarine USS Cheyenne has arrived in Busan, South Korea – Korean press
Asian Equity Indices/Futures (00:15ET)
Nikkei -0.6%, Hang Seng +0.4%, Shanghai Composite -0.2%, ASX200 -1.2%, Kospi closed
Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.3%, FTSE100 -0.3%
FX ranges/Commodities/Fixed Income (00:15ET)
EUR 1.1255-1.1275; JPY 109.75-110.50; AUD 0.7455-0.7490; NZD 0.7125-0.7160
Aug Gold +0.4% at 1,287/oz; July Crude Oil -0.4% at $47.19/brl; July Copper -0.1% at $2.56/lb
iShares Silver Trust ETF daily holdings fall to 10,562 tonnes from 10,601 tonnes prior; 4th straight decline
(CN) PBOC SETS YUAN MID POINT AT 6.7934 V 6.7935 PRIOR; 5th straight firmer Yuan fix; Strongest Yuan fix since Nov 10th
(CN) PBOC skips open market operations v CNY70B prior injected (first skip since May 28th)
(CN) PBOC conducts CNY498B in medium-term lending facility (MLF) operations; Offers 1-year MLF at 3.2% v 3.2% prior
(JP) Japan MoF sells ¥723B v ¥0.8T offered in 30-year 0.8% (0.8% prior) JGBs; Avg yield: 0.817% v 0.819% prior; bid to cover: 3.63x (highest since Oct 2016) v 3.35x prior
Asia equities notable movers
Australia
Musgrave (MGV) +1.4%; Reports high grade gold intersected near surface at Lena
BHP (BHP) -1.3%; Tribeca Partners said to propose some candidates to replace certain BHP directors
Sirtex (SRX) -1.5%; Announces primary endpoint of combined SIRFLOX/FOXFIRE study was not met
Spark Infrastructure (SKI) -2.0%; Cut at Goldman Sachs
APA Group (APA) -4.5%; Cut at Goldman Sachs
Japan
Toshiba (6502) +3.5%; Western Digital reportedly willing to compromise in order to get deal on Toshiba chip unit – Nikkei
Hong Kong
Evergrade (3333) +6.2%; To redeem all of its perpetual bonds by the end of June, ahead of plan
Beijing Capital (2868) +3.0%; May contracted sales
China Aoyuan Property Group (3883) +1.3%; May contracted sales
Shimao Property (813) +5.9; May contracted sales
