General Trend:
- Australian equities underperform as the country’s largest trading partner is China, energy and financial companies decline
- Nikkei drops as Softbank Group declines ahead of Aug 7th earnings report; Trade sensitive TOPIX Marine/Transportation index declines
- Shanghai IT and Telecom Services indices decline with the focus on trade; ZTE drops over 4%, Sanan Optoelectronics down over 8%
- Financials and tech shares weigh on Hang Seng; ICBC declines after broker downgrade
- USD trades generally weaker after US Treasury labeled China as a currency manipulator
- Offshore Yuan (CNH) rises on yuan fix and plan by PBOC to sell bills in Hong Kong
- Kiwi rises on better than expected Q2 labor market data; RBNZ rate decision and monetary policy statement due on Aug 7th (consensus is for 25bps rate cut)
- Aussie tracks rebound in the Yuan; RBA left rates unchanged (as expected)
- RBA Gov Lowe is due to appear before Australia House of Representatives Standing Committee on Economics on Aug 9 (Friday)
Headlines/Economic Data
Australia/New Zealand
- ASX 200 opened -0.7%
- (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.00%; AS EXPECTED; Inflation to take longer to reach 2% target, sees 2019 GDP at ~2.5%, 2020 at 2.75%
- (NZ) NEW ZEALAND Q2 UNEMPLOYMENT RATE: 3.9% V 4.3%E; Employment Change Q/Q: +0.8% v +0.3%e ; Y/Y: +1.7% v 1.2%e
- (AU) Australia June Trade Balance (A$): 8.04B v 6.0Be (fresh record high); Exports M/M: +1.0% v +4.0% prior; Imports M/M: -4.0% v +2.0% prior
- RFF.AU Weakness attributed to report by short selling firm Bonitas [-42% before trading halt]
- (NZ) Reserve Bank of New Zealand (RBNZ) Q3 Inflation Expectation Survey: 2-year: 1.9% v 2.0% prior; 1-year: 1.7% v 1.9% prior
Japan
- Nikkei 225 opened -1.9%
- (JP) JAPAN JUNE LABOR CASH EARNINGS Y/Y: +0.4% V -0.6%E; REAL CASH EARNINGS Y/Y: -0.5% V -1.5%E
- (JP) Japan 10-yr JGB yield falls below -0.20% (lowest since July 2016), tracks decline in US Treasury yields
- 2587.JP Reports H1 Net ¥31.8B v ¥41.3B y/y, Op ¥50.9B v ¥56.4B y/y, Rev ¥627.8B v ¥613.9B y/y; Affirms FY outlook
- (JP) Japan Ministry of Finance (MOF) Official: Will keep watching FX market with sense of urgency; China manipulator designation was unexpected
- (JP) Japan Chief Cabinet Sec Suga: Reiterates Japan will continue to closely watch the markets, Economic fundamentals are firm, moderate economic recovery continues
- (JP) Japan MoF sells ¥699.3B v ¥700B indicated in 0.4% (prior 0.50%) coupon 30-year JGBs, avg yield: 0.2920% v 0.357% prior, bid to cover 3.5x v 4.01x prior (bid-to-cover lowest since Nov 2018)
Korea
- Kospi opened -2.4%
- (KR) North Korea fired two more projectiles into East Sea (4th launch in less than 2 weeks) – South Korean press
- (KR) South Korea Deputy Fin Min Bang: Uncertainties seen expanding in Korean markets; will take quick bold steps on contingency plans; closely monitoring KRW coupling with CNY; not targeting specific USD/KRW currency level
- (KR) South Korea Exchange holding meetings to review stock markets and Japan fund flows; will strengthen monitoring on short selling; will take preemptive measures if Japan issues causes market volatilities
- (KR) South Korea FSC Vice Chairman Sohn: Considering strengthening short selling rules if needed and consider reducing daily stock market price limit, to take bold steps in case of stock market instability
China/Hong Kong
- Hang Seng opened -2.6%; Shanghai Composite opened -1.6%
- (CN) US TREASURY DEPT DESIGNATES CHINA AS CURRENCY MANIPULATOR; Insight: Treasury hasn’t declared China a currency manipulator since 1994. US will now have to negotiate for 1 year before it will be allowed to retaliate
- (CN) China Commerce Ministry (MOFCOM) confirms has suspended purchases of US agriculture products; have not ruled out putting tariffs on US agri products imported after Aug 3rd, new 10% tariffs on Chinese goods violates G20 agreement
- (CN) China PBoC Open Market Operation (OMO): Skips for 11th consecutive session; Net CNY0B drained v CNY0B drained prior
- (CN) CHINA PBOC SETS YUAN REFERENCE RATE: 6.9683 V 6.9225 PRIOR (weakest level since May 2008)
- (CN) CHINA PBOC GOV YI GANG: REITERATES WILL NOT HAVE COMPETITIVE DEVALUATION; says CNY level at appropriate level (after the close yesterday)
- (CN) China PBOC to sell CNY30B of 3-month and 1-year bills in Hong Kong on Aug 14th
- (CN) 30 of 31 China provincial govts said to have reported to run a deficit in the first half of 2019; Shanghai was the only one to run a surplus – SCMP
Other
- (TW) Taiwan chipmakers may see disruptions to supply chain caused by US tariffs; Intel and TSMC may need to lower guidance – Digitimes
North America
- (US) DoubleLine’s Gundlach: its a little late to get into US Treasuries, and if treasury rates are going to fall from here, then something bad is going to happen – webcast
- (US) White House Advisor Navarro: First step of FX manipulator label is working with the IMF, there are countervailing tools that the US can use; underlying US fundamentals are ‘solid as a rock;’
Europe
- (UK) There are said to be 30 Labour MPs who are willing to vote for a Brexit deal if PM Johnson secures fresh concessions from EU – Telegraph
Levels as of 1:20 ET
- Nikkei 225, -0.8%, ASX 200 +2.3%, Hang Seng -0.7%; Shanghai Composite -1.4%; Kospi -1%
- Equity Futures: S&P500 +0.4%; Nasdaq100 +0.6%, Dax 1.1%; FTSE100 -0.3%
- EUR 1.1250-1.1190 ; JPY 107.09-105.51 ; AUD 0.6795-0.6750 ;NZD 0.6590-0.6508
- Gold -0.1% at $1,475/oz; Crude Oil +1.1% at $55.31/brl; Copper +0.3% at $2.557/lb
