RBA Cuts Rates As Expected, Markets Now Look Ahead To Comments From RBA Gov Lowe For Rate Outlook

Jun 04 19, 06:53 GMT

General Trend:

US and China continue to debate why trade talks broke down
Possible antitrust probe into big US tech companies weighs on tech shares: Tencent -1.7%, Softbank -2.8%, Samsung Electronics -1%
Australian markets outperform, utilities and REITs gain after rate cut
Consumer Discretionary, Industrial, Materials and Health Care firms are among the decliners in Shanghai
Fast Retailing is expected to report monthly sales after the Nikkei close
New Zealand’s A2 Milk declines, China is seeking to increase domestic production of baby formula; NZD declines
RBA Gov Lowe is expected to speak during the NY morning (5:30 AM est)
Australia Q1 current account deficit was the smallest since 1996, iron ore exports rose
Australian April retail sales unexpectedly decline, Q1 GDP data due on Wednesday
Korean Won (KRW) weakens as Q1 GDP contraction and exports were worse than feared
US T-note Futures decline in Asia after gains on Monday
Various Canadian lumber companies announce production cuts, market conditions cited

Headlines/Economic Data

Australia/New Zealand

ASX 200 opened +0.1%
(AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.25%; AS EXPECTED (1st rate move since Aug 2016, resuming the easing cycle)
(AU) AUSTRALIA APR RETAIL SALES M/M: -0.1% V +0.2%E
(AU) AUSTRALIA Q1 CURRENT ACCOUNT (A$): -2.9B V -2.9BE (smallest deficit since 1996)
(NZ) NEW ZEALAND Q1 TERMS OF TRADE Q/Q: 1.0% V 0.5%E
(AU) Australia Treasurer Frydenberg has told the big 4 banks to pass on in full any interest rate cut to stimulate the economy – AFR
(AU) Australia government: Q1 gov’t investment will not contribute to GDP, gov’t consumption to add 0.2 pct point to GDP
CLQ.AU Confirms that it has commenced a partnering process for its wholly-owned Sunrise nickel, cobalt and scandium project located in central New South Wales [+20%]

Japan

Nikkei 225 opened +0.1%
(JP) Japan Fin Min Aso: No change in stance on sales tax, economy is gradually recovering
(JP) Japan Econ Min Motegi: Japan and US to hold working level trade talks in the US from June 10-11th
(JP) Japan May Monetary Base ¥511.8T v ¥514.6T prior; Y/Y: 3.6% v 3.1% prior
(JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.10% 10-year JGBs: avg yield: -0.1060% v -0.060% prior, bid to cover 3.99x v 4.44x prior
6501.JP Releases mid term plan: Planning growth investment of ¥2.0-2.5T; Capex ¥1.8T

Korea

Kospi opened -0.1%
(KR) SOUTH KOREA MAY CPI M/M: 0.2% V 0.4%E; Y/Y: 0.7% V 0.8%E; Core CPI y/y: 0.8% v 0.8%e (lowest rate since Dec 1999)
(KR) SOUTH KOREA Q1 FINAL GDP Q/Q: -0.4% V -0.3%E; Y/Y: 1.7% V 1.8%E
207940.KR Prosecutors find evidence was destroyed on CEO’s computer – Yonhap
(KR) South Korea sells KRW1.85T v 1.85T indicated in 30-yr bonds; avg yield 1.725% v 1.90% prior

China/Hong Kong

Hang Seng opened +0.4%; Shanghai Composite opened -0.1%
(CN) CICC said to have downgraded various banks in China to hold on deleveraging concerns after gov’t takeover of Baoshang Bank – US financial press
(CN) China PBoC is more likely to use reverse repo and MLF to ease credit – China Securities Journal
(CN) China NDRC issues notice on infant formula sector; to set higher standards for baby formula, targeting to boost domestic production beyond 60% and improve quality – Chinese press
(CN) China firmly opposes US Sec of State Pompeo’s statement on human rights in China, his statement interfered in its internal affairs
(CN) China PBoC sets yuan reference rate: 6.8822 v 6.8896 prior
(CN) China PBoC Open Market Operation (OMO): Injects CNY60B in 7-day reverse repos v CNY80B prior; Net: drain CNY90B v CNY0B prior
HUAWEI.CN Chairman: We currently are not in communication with the US government; remains confident in business continuity management

North America

(CN) USTR and US Treasury Dept. issue response to China ‘White Paper’ on trade: Disappointed China is ‘misrepresenting’ trade talks; China ‘misrepresenting’ why talks broke down
(US) FED’S BULLARD (DOVE, VOTER): INTEREST RATE CUT MAY BE WARRANTED SOON ON TRADE AND INFLATION RISKS
(MX) Mexico Agriculture Sec Villalobos: Tariffs announced by Trump would cause total economic damage in the US and Mexico of $117M/month
(MX) Mexico Econ Min Márquez: Mexico could take several paths if the US goes ahead with the tariffs; could ask for help from WTO, but that is a slow route or implement its own tariffs on US goods – US financial press
(US) SEMI: Q1 Worldwide Semiconductor Manufacturing Equipment Billings: $13.8B v $17.0B y/y; -8% y/y; -19% q/q
Thirteen large global banks are preparing to launch digital versions of major global currencies in 2020 – Press
(US) There is said to be some Republican opposition to the tariffs that Trump proposed for Mexico – US press

Europe

(UK) May BRC Sales LFL y/y: -3.0% v 0.8%e
(IE) Ireland May Manufacturing PMI: 50.4 v 52.5 prior (lowest level since July 2016)
(UK) Pres Trump tweets: “Also, big Trade Deal is possible once U.K.gets rid of the shackles. Already starting to talk!”
(UK) France Pres Macron: Oct 31 is now the final Brexit deadline

Levels as of 1:20 ET

Nikkei 225, -0.1%, ASX 200 +0.3%, Hang Seng -0.5%; Shanghai Composite -0.8%; Kospi -0.1%
Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax -0.3%; FTSE100 -0.3%
EUR 1.1258-1.1240 ; JPY 108.09-107.85 ; AUD 0.6994-0.6959 ;NZD 0.6602-0.6580
Gold flat at $1,327/oz; Crude Oil -0.2% at $53.14/brl; Copper -0.3% at $2.650 /lb