RBA Cuts Rates As Expected, Aussie Remains Higher

General Trend:

• REITS and Utilities outperform in Australia after rate cut, financials decline
• Automaker BYD rises over 3%, China President Xi said willing to support new energy auto sector
• HK gaming shares rise after monthly revenue data
• Nikkei-weighted Fast Retailing expected to report monthly sales after the equity close
• RBA cut rates as expected
• Markets now look ahead to upcoming comments from RBA Gov Lowe (5:30 AM EST or 9:30 GMT)
• China Premier Li: Will scrap ownership limits for securities companies and life insurance by 2020 (vs prior plan of 2021)
• China’s overnight repo rate declines below the PBOC IOER, PBOC noted current banking system liquidity is at relatively high level to absorb maturing reverse repos
• Additional protests have been reported in Hong Kong, President of HK Legislative Council said the repairs [related to protests] will take a long time
• USTR raises tariff threat related to the EU

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) RESERVE BANK OF AUSTRALIA (RBA) CUTS CASH RATE TARGET BY 25BPS TO 1.00%; AS EXPECTED (2nd consecutive cut)
• (NZ) New Zealand Q2 Business Confidence Index: -34 v -29 prior (lowest since Mar 2009); Domestic Trading Index: -4 v -2 prior
• (NZ) New Zealand May Building Permits m/m: +13.2% v -8.0% prior
• SDA.AU Cuts FY19 EBITDA ~$140-150M (prior ~A$160-171M); Guides H1 underlying EBITDA $60-64M

Japan

• Nikkei 225 opened -0.1%
• (JP) Bank of Japan (BOJ) Q2 Tankan Company Survey of CPI Expectations: Cuts 3-year outlook to 1.0% from 1.1%; Maintains 1-yr and 5-year
• (JP) Japan end-June Monetary Base ¥523.2T v ¥511.8T prior; Y/Y: 4.0% v 3.6% prior
• (JP) Japan Economy Min Motegi: Tankan confirms Japan’s non-manufacturing sector is strong; capital spending plans are strong and supporting demand
• (JP) Japan Fin Min Aso: Tankan shows non-manufacturing sentiment is improving; exports are slowing resulting in manufacturing slowdown; domestic fundamental remain solid; reiterates must raise sales tax in October
• (JP) Japan Cabinet Sec Suga: Japan’s exports managed appropriately for security purposes
• (JP) Japan MoF sells ¥2.1T v ¥2.1T indicated in 0.1% 10-year JGBs: avg yield: -0.139% v -0.106% prior, bid to cover 3.92x v 3.99x prior

Korea

• Kospi opened -0.4%
• (JP) Follow up to Japan trade barrier to export of chip making supplies to South Korea: Under new rules Japanese companies must seek approval to export 3 semiconductor industry chemicals to South Korea; Japan Govt has indicated this process is likely to take ~3-months; typically South Korea chip makers keep 1-2 months of supply on hand – Nikkei
• (KR) US State Dept: US is not currently not preparing any new proposals for negotiations to dismantle North Korea’s nuclear weapons program – Yonhap
• (KR) SOUTH KOREA JUN CPI M/M: -0.2% V -0.1%E; Y/Y: 0.7% V 0.8%E

China/Hong Kong

• Hang Seng opened +1.3%; Shanghai Composite opened -0.1%
• (CN) China Premier Li: China will not resort to competitive yuan devaluation, to keep yuan at reasonable and equilibrium level; will keep economic growth stable, to maintain prudent monetary policy, will not flood economy with excess liquidity – speaking at World Economic Forum
• (CN) US President Trump: New round of trade talks has started with China, expect that China President Xi will move on some of the disputed issues
• (CN) China military conducted antiship ballistic missile tests in the South China Sea over the weekend, expected to test again before the testing window closes Wednesday
• (HK) Hong Kong pro-democracy protesters have entered the Legislative Council building – financial press (later broken up and kicked out by police, many arrested)
• (CN) China PBOC Gov Yi Gang: Domestic economy growing close to potential; trade truce better than expected but outstanding issues remain – comments from Helsinki
• (CN) China PBoC Open Market Operation (OMO): Skips for the 7th consecutive; Net drains CNY90B v drain CNY150B prior
• (CN) China PBOC sets yuan reference rate: 6.8513 v 6.8716 prior
• (CN) China Commerce Ministry (MOFCOM) Official Chu Shijia: Number of companies moving supply chains out of China is small, shouldn’t be overstated; trade war impact on the economy is manageable

North America

• (US) USTR proposes increased tariffs on EU products due to EU aircraft subsidies, proposes adding more tariffs to $4.0B of EU goods

Europe

• (RU) Russia Energy Min Novak: Russia will study proposal to change OPEC+ inventory target
• (UK) Parliament Speaker Bercow denies amendment that would block a no deal Brexit
• DBK.DE Reportedly considering lowering capital buffer to fund the company’s overhaul – press

Levels as of 1:20 ET

• Nikkei 225, flat , ASX 200 +0.1%, Hang Seng +1.3%; Shanghai Composite -0.3%; Kospi -0.3%
• Equity Futures: S&P500 flat; Nasdaq100 flat, Dax flat; FTSE100 +0.2%%
• EUR 1.1291-1.1275; JPY 108.47-108.27 ; AUD 0.6987-0.6957 ;NZD 0.6682-0.6658
• Gold +0.3% at $1,393/oz; Crude Oil -0.2% at $58.98/brl; Copper +0.2% at $2.690/lb