Asia Mid-Session Market Update: Strong Aussie jobs dent RBA rate cut outlook; Trump under expanded probe for obstruction
US Session Highlights
(US) MAY ADVANCE RETAIL SALES M/M: -0.3% V 0.0%E; RETAIL SALES EX AUTO M/M: -0.3% V 0.1%E
(US) MAY CPI M/M: -0.1% V 0.0%E (2nd negative reading in last 3 months); CPI EX FOOD AND ENERGY M/M: 0.1% V 0.2%E; CPI INDEX NSA: 251.329 V 251.580E
(US) DOE CRUDE: -1.7M V -2.5ME; GASOLINE: +2.1M V -1ME; DISTILLATE: +0.3M V +0.5ME
FOMC decides to lift key interest rates 1/4%, as expected, to 1%-1.25%, leaving room for one more rate hike in 2017. Fed Chair Yellen also said that starting this year the Fed would gradually start unwinding its $4.5 trillion balance sheet, and the lack of slowdown in the projected rate hike path suggests the Fed can both do balance sheet reduction and rate hikes concurrently.
US markets on close: Dow +0.2%, S&P500 -0.1%, Nasdaq -0.4%
Best Sector in S&P500: Consumer Staples
Worst Sector in S&P500: Energy
Biggest gainers: ALXN +9.3%; HRB +7.9%; M +2.3%
Biggest losers: URI -6.1%; SWN -5.4%; MUR -5.4%
At the close: VIX 10.6 (+0.2pts); Treasuries: 2-yr 1.36% (+1bps), 10-yr 2.14% (-7bps), 30-yr 2.78% (-8bps)
US movers afterhours
AVXS Announces alignment with FDA on GMP Commercial Manufacturing Process for AVXS-101 ; +6.8% afterhours
JBL Reports Q3 $0.31 v $0.29e, Rev $4.49B v $4.41Be; Guides Q4 $0.50-0.74 v $0.61e, R$4.7-5.1B v $4.79Be – Guides FY18 ~$2.60 v $2.08e ; +3.3% afterhours
PACB Announces proposed public offering of common stock; size not disclosed; -10.2% afterhours
Politics
(US) Special Counsel Mueller investigating President Trump for possible obstruction; Probe has widened to include Trump after he fired FBI Director Comey – Washington Post
Key economic data
(AU) AUSTRALIA MAY EMPLOYMENT CHANGE: +42.0K (3rd straight increase) V +10.0KE; UNEMPLOYMENT RATE: 5.5% (4-year low) V 5.7%E
(AU) AUSTRALIA JUNE CONSUMER INFLATION EXPECTATION: 3.6% V 4.0% PRIOR (6-month low)
(NZ) NEW ZEALAND Q1 GDP Q/Q: 0.5% V 0.7%E; Y/Y: 2.5% V 2.7%E
Notes and Observations
Asian markets taking the latest FOMC rate hike mostly in stride, with the exception of Hong Kong property names coming under pressure from a matching rate increase by HKMA.
Moderate USD strength weighing on precious metals, leading to losses among Australian gold producers.
AUD/USD rallied about 50pips on much stronger than expected Aussie jobs data, as unemployment rate fell to 4-year low despite the rise in participation rate; Conversely, NZD under pressure after a miss in Q1 GDP, falling some 60pips from the highs toward 0.72
Risk-off flows materializing after a Washington Post report claimed Special Counsel Mueller is looking directly at President Trump for obstruction in relation to firing of FBI Dir Comey and pressure to end investigation of Michael Flynn. Mueller to interview Head of Intelligence Coats, NSA head Coats, and others as soon as next week.
Speakers and Press
China
(CN) PBOC injected funds through open market operations (OMO) today to counter liquidity stress from tax payments and maturing repos – press
(CN) China Academy of Social Sciences (CASS): House prices in Beijing fell 4.1% m/m – Shanghai Daily
(CN) China NDRC: out 43.4Mt of crude steel capacity and 97Mt of coal capacity as of the end of May
Japan
(JP) Junichi Fukuda said to replace Shinichi Sato as Japan Administrative Vice Minister – Japan press
Australia/New Zealand
(AU) CBA: Australia pace of employment growth clearly accelerated; Recent run of strong data takes RBA rate cut off the table for now – press
(NZ) Stats NZ: Investment in plant, machinery and equipment has been the strongest in almost seven years, reflecting higher domestic production and greater imports of machinery – NZ Press
Korea
(KR) South Korea Fin Min Kim: Job creation is a top priority of President Moon’s administration
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.4%, Hang Seng -1.1%, Shanghai Composite -0.1%, ASX200 -1.3%, Kospi -0.7%
Equity Futures: S&P500 -0.3%; Nasdaq -0.5%, Dax closed, FTSE100 -0.3%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.1205-1.1230; JPY 109.30-109.80; AUD 0.7580-0.7630; NZD 0.7210-0.7270
Aug Gold -0.7% at 1,267/oz; July Crude Oil -0.1% at $44.69/brl; July Copper +0.5% at $2.58/lb
SPDR Gold Trust ETF daily holdings fall 12.1 tonnes to 854.9 tonnes; lowest since June 5th and first decline since May 23rd
(CN) PBOC SETS YUAN MID POINT AT 6.7852 V 6.7939 PRIOR; 2nd straight firmer Yuan fix; Strongest Yuan fix since Nov 9th
(CN) PBOC to inject combined CNY150B v CNY90B prior in 7-day, 14-day and 28-day reverse repos
Asia equities notable movers
Australia
Watpac (WTP) -11.4%; Guides FY17 underlying Net to be broadly breakeven y/y (implies ~A$8.5M)
Oil Search (OSH) -2.8%; Affirms FY17 production 28.5-30.5 MMBOE; closed upsized refinancing of $500M debt facility to $600M – investor slides
Tox Free (TOX) -0.6%; Guides FY17 underlying EBITDA of A$82-83M v A$83Me; H2 trading has improved on H1 meeting budget expectations
Japan
Kobe Steel (5406) -3.7%; targeting FY20 pretax profit ¥20B (v ¥12B FY16/17) – Nikkei
Toshiba (6502) -1.1%; On track to select preferred bidder for chip unit in the second half of June; To be demoted to the second section of Tokyo Stock Exchange (TSE) amid financial statement delay
TEPCO (9501) -1.1%; Plans for restructuring of nuclear power business do not impact forming capital ties with other power utilities – Nikkei
Hong Kong
Meitu (1357) -6.4%; shareholder to sell 66M shares at HK$8.50/shr
China Southern (1055) -0.5%; Reports May passenger traffic +13% y/y
Oriental Watch (398) -1.7%; Reports FY16/17 (HK$) Net 16.1M v loss 15.8M y/y; Rev 3.14B v 3.03B y/y
Rykadan Capital (2288) -11.9%; Reports FY17 (HK$) Net 54.4M v loss 91.6M y/y; Rev 602.3M v 153.1M y/y
Besunyen Holdings (926) +6.6%; Guides H1 Net CNY25-35M
China Life Insurance Co (2628) -2.0%%; Reports May YTD premium income CNY298.5B, +19% y/y
