Equities Track Friday’s US Gains

General Trend:

• Chinese small caps rise while banks lag on move by PBOC to create new rate mechanism
• Brokerage firms gain in China, domestic brokerage firms H1 net profits +100% y/y (local press)
• Hang Seng extends gains from Friday’s session amid continued dearth of negative protest-related headlines; Gainers include tech, gaming and insurers
• Cathay Pacific rises after announcing CEO resignation
• Australian steelmaker Bluescope drops over 8% on cautious outlook; BHP expected to report FY19 results on Aug 20th (generally seen before Australian open)
• Samsung Electronics declines less than 1%; US President Trump notes Apple CEO Cook made a case for how tariffs will negatively impact the company by giving advantages to Samsung Electronics
• Uncertainty remains regarding Huawei: Trump said will make a decision on extending temporary general license to do business [with Huawei] tomorrow (Monday)
• Trump added his administration’s plans for Huawei are opposite of what the media had reported [Reportedly, Trump Administration will grant Huawei an additional 90 day extension on a license that allows the company to conduct some business with US customers, according to a US press article]
• China PBOC announced the loan prime rate (LPR) would become the new benchmark reference rate for bank lending (similar to speculation from early March)
• PBOC will release the first rate under the new mechanism on Tuesday, Aug 20th and update the rate each month.
• Japanese exports declined for the 8th consecutive month in July, pace of decline slowed
• US longer dated Treasury bond Futures decline; Treasury reportedly will perform market outreach again about ultra-long bonds but hasn’t made decision yet whether to issue them, possible durations include 50-year and 100-year bonds (press)
• Aussie 30-yr yields rise as May 2041 bonds again sold at less than 2.0x bid to cover, tracks move in US Treasuries
• Taiwan and Thailand talk stimulus measures in the face of slowing growth
• FOMC minutes due for release on Aug 21st (Wed)
• Fed Chairman Powell expected to deliver Jackson Hole speech on Friday morning (Aug 23rd)
• RBA expected to release Aug Minutes on Tuesday

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.2%
• (AU) Australia ASIC deputy chairman Crennan: Will issue proceedings against the big four banks as well as AMP and Macquarie before Christmas – Aussie press
• BSL.AU Reports FY19 (A$) underlying Net 996.3M v 946Me; Rev 12.53B v 11.49B y/y
• (NZ) New Zealand Q2 PPI Input q/q: +0.3% v -0.9% prior; PPI Output q/q: +0.5% v -0.5% prior
• (AU) Australis sells A$300M v A$300M indicated in 2.75% May 2041 bonds, avg yield 1.382% v 1.9944% prior , bid to cover 1.38x v 1.77x prior

Japan

• Nikkei 225 opened +0.8%
• (JP) JAPAN JULY TRADE BALANCE: -¥249.6B V -¥194.5BE; ADJUSTED TRADE BALANCE: -¥126.8B V -¥-150.8BE; Exports to China -9.3% y/y; US +8.4% y/y; EU +2.2% y/y ; Asia -8.3% y/y; Exports Y/Y: -1.6% v -2.3%e (8th consecutive decline)
• (JP) According to analysts only 50% of Japan companies are able to benefit from 17 trade agreements due to excessive and difficult paperwork – Nikkei
• 8001.JP Backing Ethiopia’s textile industry as an alternative to factories in Asia – Nikkei
• 9984.JP Reportedly intends to lend employees up to $20B to buy stakes in its second Vision Fund – financial press
• (IR) Iran Foreign Min Zarif may visit Japan later this month – Japan press

Korea

• Kospi opened +0.5%
• (KR) North Korea and China have reaffirmed their “traditional friendship” in a series of talks between their top military officials – Yonhap
• (KR) South Korea sells KRW200B in 20-year bonds: avg yield: 1.150% v 1.470% prior
• 010140.KR Awarded KRW751.3B order for 10 crude oil carriers

China/Hong Kong

• Hang Seng opened +1.0%; Shanghai Composite opened +0.4%
• (US) President Trump: China tariffs have cost nothing or very little, China wants to make a deal, we’ll see what happens; humanitarian outcome in Hong Kong would be good for trade deal; China President Xi has something in mind to do with trade, reiterates not ready to make a deal with China – speaking from New Jersey
• (US) President Trump: China tariffs have cost nothing or very little, China wants to make a deal, we’ll see what happens; humanitarian outcome in Hong Kong would be good for trade deal; China President Xi has something in mind to do with trade – speaking from New Jersey
• -HUAWEI.CN US President Trump: We are open not to doing business with Huawei; Huawei is a national security threat – speaking from New Jersey
• (HK) Hundreds of thousands of protesters march downtown Hong Kong in the rain Sunday, forcing police to block roads
• (HK) Hong Kong Monetary Authority (HKMA) and Insurance Regulator checking protest impacts on markets and small/medium sized businesses and if needed asking lenders to support them
• (CN) China PBoC Open Market Operation (OMO): Injects CNY20B in 7-day reverse repos v Injects CNY60B prior; Net drain CNY10B
• (CN) China PBoC sets yuan reference rate: 7.0365 v 7.0312 prior (weakest since March 2008)
• (CN) China PBOC advisor: Reiterates new Loan Prime Rate (LPR) will be linked to medium term lending facility (MLF) rate; difficult to quantify declines in banks’ interest margin
• (CN) China banking and intellectual property regulators (CBIRC) have decided to jointly boost the use of intellectual property (IP) as a financing tool to support the development of innovative enterprises – Xinhua

Other Asia

• (SG) Singapore PM Lee: To raise retirement age and re-employment age by 2030 – National Day Rally speech
• (TW) Taiwan planning NT$10.0B consumption stimulus measures – local press

North America

• (US) President Trump: Money is pouring into the US, Fed is not helping me; US is not going into a recession, rest of the world is struggling; We can do a lot of things if the economy slows down

Europe

• (UK) Aug Rightmove House Prices M/M: -1.0% v -0.2% prior; y/y: 1.2% v -0.2% prior
• (UK) Brexit Secretary signs order to repeal the 1972 Brussels Act ending all EU law in the UK; the repeal will take effect on Oct 31st
• (UK) New Home Sec Patel pressing to end freedom of movement for EU citizens on day 1 of Brexit, Oct 31st, even with no replacement system ready (more aggressive than prior Home Sec positions); prepared to act through secondary legislation that could bypass MPs of all parties who would oppose it – UK press
• (DE) Germany govt reportedly is prepared for deficit spending if recession hits – Der Spiegel (Friday)

Levels as of 01:20ET

• Hang Seng +2.0%; Shanghai Composite +1.8%; Kospi +0.6%; Nikkei225 +0.9%; ASX 200 +0.9%
• Equity Futures: S&P500 +0.6%; Nasdaq100 +0.7%, Dax +0.3%; FTSE100 +0.3%
• EUR 1.1088-1.1102; JPY 106.25-106.47; AUD 0.6774-0.6790; NZD 0.6412-0.6438
• Commodity Futures: Gold -0.3% at $1,519/oz; Crude Oil +1.0% at $55.36/brl; Copper +0.5% at $2.60/lb