Asia Mid-Session Market Update: Macron gets the mandate to govern France with strong Parliament election showing; Japan economic data disappoint
Friday US Session Highlights
(US) APR FINAL WHOLESALE INVENTORIES M/M: -0.5% V -0.3%E
(US) House Dem Leader Pelosi: hopes there will be no debate on whether to raise the debt ceiling; hopes for vote by end of July
(UK) PM May: I will now form a government; Brexit talks to start in 10 days as expected; to govern with support of Democratic Unionist Party (DUP) (as speculated)
(UK) Scottish Min Sturgeon (SNP): PM May has lost all credibility and authority following election results
Weekend corporate activity
NOBL.SG: Said to receive approaches for oil business – FT
WDC: Reportedly to make a new offer at over $18B for Toshiba’s chip business in final effort to win the assets – press
Politics
(US) Sen Graham (R-SC): Senate will vote on a new round of Russia sanctions this week; Warns Pres Trump not to veto it – press
(RU) Russian opposition leader Navalny organizing protest marches on Monday; Thousands of people expected to take part – press
Key economic data:
(JP) JAPAN APR MACHINE ORDERS M/M: -3.1% (first decline in 3 months) V 0.5%E; Y/Y: 2.7% V 7.3%E
(JP) JAPAN MAY PPI (CGPI) M/M: 0.0% (7-month low) V 0.1%E; Y/Y: 2.1% V 2.2%E
(NZ) NEW ZEALAND MAY CARD SPENDING RETAIL M/M: -0.4% V 0.2%E; TOTAL M/M: -0.2% V +0.4% PRIOR
(NZ) ANZ: New Zealand May non-tradable inflation m/m 0.2% v 0.0% prior, y/y: 2.3% v 2.2% prior
Asia Session Notable Observations
Investors are alarmed going into this week’s key Fed meeting this Thursday, with expectations of a rate hike overshadowed by heightened volatility in the tech space on Friday when the Nasdaq plunged over 100 points. Ahead of Monday open, US equity futures are slightly lower while Asian indices start the week under pressure. Hang Seng is particularly vulnerable, falling over 1% to a 1-week low.
FX majors are in narrow range despite some constructive weekend developments overseas. Political risk has been dialed back to a simmer in Europe. French President Macron secured well over 400 seats in the first round of National Assembly elections – well above 330-360 expected – giving him the mandate to govern toward labor reform promised on campaign trail. In Italy too, the euroskeptic 5-Star faction was dealt a blow politically, failing to make the run-off vote in all 7 major cities holding local elections this weekend. Recall Italy presidential elections are expected early next year, but may be called sooner. EUR/USD firmed up marginally above 1.12. GBP/USD was also slightly higher as PM May has survived the first few days of her election disappointment, though there were more reports of Conservative lawmakers looking at a No Confidence vote coup. NZD/USD was down some 20 pips from the highs below $0.72 after NZIER cut New Zealand FY16/17 GDP forecast from 3.4% to 3.0%.
Even though South Korea’s new president Moon is increasingly looking more conciliatory with China on the issue of North Korea, Pyongyang’s KCNA threatened that it wasn’t far away from test-firing an ICBM w/the potential of hitting the continental US. President Trump has long maintained a test of this magnitude threat would represent crossing a red line.
Ahead of this Friday’s BOJ meeting, Japan’s 2nd tier data continues to give little justification for rumored discussion about QE exit process. Forward-looking Machine Orders registered its first decline in 3 months, while the corporate goods index did not rise m/m for the first time in 7 months.
Speakers and Press
China
(CN) China Financial News: Slower IPO pace will improve investor sentiment
(CN) China Commerce Ministry reportedly to "substantially" reduce restrictions on foreign access to China market – Chinese press
Australia/New Zealand
(NZ) NZ Institute of Economic Research (NZIER) cuts New Zealand FY16/17 GDP forecast from 3.4% to 3.0%
Korea
(KR) North Korea is close to test-firing an ICBM with potential of reaching US – KCNA (update)
(KR) South Korea Finance Ministry said to submit a 2018 budget plan to Parliament by Sept 1st; Estimated to see 6% increase in spending from 2017 – Korean press
(KR) Bank of Korea Gov Lee: Monetary policy needs to stay accommodative to support the economy, but adjustments should be reviewed if growth remains strong – speech for Bank of Korea’s 67th anniversary
Asian Equity Indices/Futures (23:30ET)
Nikkei -0.4%, Hang Seng -1.2%, Shanghai -0.5%, ASX200 closed, Kospi -0.9%
Equity Futures: S&P500 -0.2%; Nasdaq -0.3%, Dax -0.1%, FTSE100 -0.4%
FX ranges/Commodities/Fixed Income (23:30ET)
EUR 1.1195-1.1215; JPY 110.15-110.45; AUD 0.7520-0.7535; NZD 0.7195-0.7215; GBP 1.2725-1.2765
Aug Gold -0.2% at 1,269/oz; July Crude Oil +0.3% at $46.09/brl; July Copper -0.4% at $2.64/lb
(CN) PBOC SETS YUAN MID POINT AT 6.7948 V 6.7971 PRIOR
(US) Weekly Baker Hughes US Rig Count: 927 v 916 w/w (+1.2%) (21st straight weekly rise)
(CN) PBOC to inject combined CNY40B v CNY60B prior
(KR) South Korea sells 5-yr Govt bonds; avg yield 1.885% v 1.925% prior
Asia equities / Notables / movers
Hong Kong
Evergrande (3333) -0.2%; Vanke +0.7%; Evergrade to sell its 14% stake in China Vanke to Shenzhen Motor Group for CNY29.2B
China Resources Land (1109) -1.7%; May sales
Japan
Toshiba (6502) +7.0%; Western Digital to make a new offer at over $18B for Toshiba’s chip business in final effort to win the assets – press
FujiFilm (4901) +1.7%; Reports FY17 Net profit ¥131.5B vs ¥112B prior forecast, Op profit ¥172B v ¥192B prior forecast
