Multiple Trade Worries Weigh On Asian Markets

General Trend:

• Hang Seng underperforms in the face of protests, strike and trade concerns; Financials and tech shares drop
• Chinese airlines drop on weaker yuan and protests in HK; HK train operator MTR drops over 3%
• HSBC declines after disclosing earnings and CEO change
• Trade sensitive sectors weigh on Nikkei; Japanese chip material firms (Nagase, Showa Denko) drop on concerns related to South Korea
• Asics rises over 20% on guidance and stock buyback
• Kobe Steel declines over 9% on guidance, sales volumes to be hurt by chip, IT and foreign auto sectors
• South Korea Kospi trades at lowest level since late 2016 amid ongoing dispute between SK and Japan; Korean smartphone brackets maker Jang Won Tech drops over 7%
• There are signs that South Korea/Japan spat is starting to impact the auto sector
• Yuan falls below the ‘7.0’ level against the US dollar after PBOC fix; China said yuan depreciation is due to the US’ tariffs on China
• PBoC warned speculators amid recent yuan weakness
• Risk aversion helps Yen rise to highest level since Jan; Japanese officials to meet at 4:45 GMT to discuss markets
• AUD/JPY drops over 0.6% on trade concerns and weaker yuan; RBA to hold policy meeting on Tuesday (consensus is unchanged)
• Government bond yields decline in Asia on safe-haven demand, focus on implications of trade on central bank policy; JGB Futures hit fresh contract high
• US Soybean Futures decline on report China has asked state firms to halt US agriculture purchases
• China Caixin services PMI hits 5-month low in July; Hong Kong July PMI hits lowest since 2009 on trade and protest concerns

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened -0.1%
• (NZ) New Zealand Shadow Board does not expect change in RBNZ cash rate later this week; easing bias is still appropriate
• (AU) Australia July AiG Performance of Services Index: 43.9 v 52.2 prior
• (AU) Australia July Final CBA PMI Services: 52.3 v 51.9 prior; PMI Composite: 52.1 v 51.8 prior

Japan

• Nikkei 225 opened -0.8%
• (JP) Japan Econ Min Motegi: Japan and the US has made significant headway towards a bilateral trade deal, have bridged much of the rift between us; will have another meeting by the end of August – Nikkei
• (JP) Japan expected to save ¥50B in costs in April 2020 due to drug price cuts (measure included as part of tax hike in Oct) – Nikkei
• (JP) Japan FX Chief Takeuchi: Watching FX market with sense of urgency; stability of FX markets is important
• 7267.JP Reports Q1 Net ¥172.3B v ¥244.3B y/y, Op ¥252.5B v ¥299.4B Rev ¥4.00T v ¥4.02T y/y (Friday)

Korea

• Kospi opened -0.6%
• (KR) South Korea to set aside KRW1.0T in next years budget to deal with Japan trade restrictions (follows decision by Japan to remove South Korea from preferred trading partners list) – Yonhap
• (KR) South Korea PM Lee: Govt will sincerely implement countermeasures against Japan’s unilateral economic restrictions and help the country take advantage of this situation – Yonhap
• (KR) South Korea Industry Min announces steps to ease reliance on Japan: To invest KRW7.8T or more over 7 years in R&D; to supply KRW2.5T or more to support M&A
• (KR) South Korea FX Authority: USD/KRW move is excessive and abnormal

China/Hong Kong

• Hang Seng opened -1.6%; Shanghai Composite opened -0.5%
• (CN) China reportedly asked state-run purchasers to halt US agriculture imports
• (CN) China PBoC: Depreciation of yuan is due to trade protectionism and tariffs on Chinese goods; Possible to keep Yuan rate basically stable, at a balanced level; economy’s fundamentals are sound; fluctuations in yuan is normal
• (CN) CHINA JULY CAIXIN PMI SERVICES: 51.6 V 52.0E (5 month low)
• (CN) CHINA PBOC SETS YUAN REFERENCE RATE: 6.9225 V 6.8996 PRIOR (weakest yuan fix since Dec 2018)
• (CN) China Offshore yuan -0.5% to 7.0107 (fresh record low)
• (CN) China PBoC Open Market Operation (OMO): Skips for 10th consecutive session; Net CNY0B drained v CNY0B drained prior
• (CN) Follow Up: President Trump ordered fresh tariffs on China after China wouldn’t commit to agriculture purchases – financial press
• (HK) Hong Kong Govt: Illegal protests are spreading and pushing the city to the “extremely dangerous edge”; China govt says it will not allow the situation to persist
• 293.HK More than 130 flights to and from Hong Kong canceled Monday due to protests
• HSBA.UK Reports H1 $0.42 v $0.36 y/y, Pretax $12.4B v $10.7B y/y, Rev $29.37B v $27.29B y/y; to buyback $1.0B shares
• HSBA.UK CEO John Flint steps down by mutual agreement with the Board, names Noel Quinn interim CEO
• (HK) Hong Kong July PMI: 43.8 v 47.9 prior (lowest level since 2009)
• (CN) China National Bureau of Statistics (NBS) head: Long-term economic trend is positive – China Daily
• (HK) Hong Kong Chief Exec Lam: Protests have brought Hong Kong to the edge; protesters are pushing Hong Kong to extremely dangerous situation; some protesters are challenging China’s sovereignty
• (CN) China PBOC Vice Gov: Will deepen regional financial reforms, will use various policy tools to lower corporate funding costs, especially for small firms; Will enhance yuan convertibility on capital account

North America

• (US) Secretary of Defense Esper: China is destabilizing the Indo-Pacific with predatory economics, intellectual property theft and weaponizing the global commons – press

Europe

• (RU) Russia Opposition planning a nationwide protests next weekend despite more than 1,000 being arrested during a protest Saturday, for what was called an illegal march to demand free elections – financial press
• (CN) Switzerland Foreign Min Cassis: It will take a “miracle” for Switzerland and EU to sign a quick trade deal, as talks have stalled which has disrupted cross border share trading – Swiss press
• (SA) Saudi Arabia Energy Min Al-Falih discussed oil markets with counterpart in Russia, stressed would continue to comply with production cuts until end of Q1 2020 – financial press (update)
• (UK) UK PM Boris Johnson prepares for general election – FT
• (UK) Reportedly Trump Administration threatens that UK will not get a new Free Trade Agreement unless a new tax affecting US tech firms is dropped – UK press (Friday)

Levels as of 01:20ET

• Hang Seng -2.8%; Shanghai Composite -0.9%; Kospi -2.4%; Nikkei225 -2.1%; ASX 200 -1.8%
• Equity Futures: S&P500 -1.2%; Nasdaq100 -1.4%, Dax -1.4%; FTSE100 -1.1%
• EUR 1.1105-1.1133; JPY 105.80-106.69; AUD 0.6748-0.6804;NZD 0.6489-0.6533
• Commodity Futures: Gold +0.5% at $1,464/oz; Crude Oil -1.1% at $55.05/brl; Copper -0.6% at $2.55/lb