Asia Summary
Following the negative leads out of the US session and rise in European bond yields, Asian equities generally opened modestly lower. The Nikkei225 opened down by 0.7%, but has since pared losses. This came as the Bank of Japan (BOJ) announced that it would increase purchases of 5-10 year JGBs to ¥500B from ¥450B at its upcoming QE operation. The BoJ acted as earlier during the session the 10-yr JGB yield moved above 0.10% and hit the highest level since February.
The Australian S&P ASX 200, which is lower by over 1%, was the biggest mover, amid declines in the banking sector. This tracked the weakness in US banks. South Korean tech giant Samsung Electronics has traded marginally lower, after guiding its Q2 results above estimates. It was, however, speculated back in early June that the operating profit for the company’s chip unit would total KRW7.0T.
Fed members Mester and Vice Chair Fischer did not have any noticeable impact on currency markets. Looking ahead, traders are focused on the later US June payrolls report and start of the G20 meeting, including the speculated sideline meeting between Russia’s President Putin and US President Trump.
Key economic data
(JP) BoJ announces amounts to buy in upcoming QE operation: Increases regular purchases of 5-10 yr JGBs to ¥500B from ¥450B prior; To purchase 10-yr JGBs at 0.110%; Offers to buy unlimited amount in fixed-rate bond operation
(JP) JAPAN MAY LABOR CASH EARNINGS Y/Y: 0.7% V 0.4%E; REAL +0.1% V -0.1%E; Government said the May, regular pay (base wages) had the largest annual gain since March 2000.
(JP) JAPAN JUNE OFFICIAL RESERVE ASSETS: $1.249T V $1.257TE
(CN) PBoC skips open market operations (11th straight session)
(AU) AUSTRALIA JUNE CONSTRUCTION INDEX: 56.0 V 56.7 PRIOR
Speakers and Press
China
(CN) PBOC China Financial Market Development Report: Market orientated interest rate formation, regulation and transmission mechanism will be improved to enhance PBOC’s regulatory capacity on interest rates; Will also raise the efficiency of the central bank operations, including standing lending facility, medium-term lending facility and reverse repos.
Japan
(JP) BoJ Official: Carried out increased JGB purchases and fixed-rate operations given ‘big’ rise in long-term yields
South Korea
(KR) South Korea confirms considering Red Cross talks and military meeting with North Korea; Also says may consider sending envoy to North Korea to discuss peace; However, says North Korea did not respond to civil contact request.
US
(US) Fed’s Mester (hawkish, non-voter): Fed should launch portfolio runoff sooner rather than later; Expects inflation to resume climb toward 2%, but recent slowdown requires attention.
(US) Fed Vice Chair Fischer: US may be in ‘productivity lull’; No comment on monetary policy; Debt ceiling debate is a ‘dangerous game of chicken’
Asian Equity Indices/Futures (00:30ET)
Nikkei -0.5%, Hang Seng -0.50%, Shanghai Composite -0.2%, ASX200 -1.1%, Kospi -0.3%
Equity Futures: S&P 500 flat, Nasdaq +0.1%, DAX flat, FTSE 100 -0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1408-1.1425 ; JPY 113.11-113.84; 0.7572-0.7588; NZD 0.7274-0.7293
In the currency markets, the volatility has been driven by USD/JPY which has risen over 0.4% to trade above ¥113.70, following the BoJ’s bond buying announcement. Other pairs have shown less volatility ahead of the US payrolls report.
(CN) PBOC SETS YUAN REFERENCE RATE: 6.7914 V 6.7953 PRIOR
Asian government bond yields track rise in global yields: Australia 3-year yield +6bps, 10-year +8bps. Despite the BoJ’s bond buying announcement, the 40-yr JGB yield traded to highs not seen since Feb 2016, near 1.090%. US 10-yr Treasury yield rises 2bps to above 2.380%. In terms of corporate supply, Wal-Mart priced ¥170B in 5,7 and 10-year bonds.
US corporate high-yield funds had outflows of $1.16B in the week ended July 5th, according to Lipper.
In sovereigns, Australia sold A$600M in Dec 2021 bonds at an average yield of 2.1693% (1.980% prior) and bid to cover of 5.46x (3.48x prior). The country also announced a syndicated tap of the June 2039 bonds, which is scheduled for next week.
Some volatility has been seen with regards to the precious metals ahead of US payrolls. Notably, Silver Futures have declined by over 0.7%. In the energy space, WTI and Brent Crude are lower by over 1%
Asia equities notable movers
Australia
Mount Gibson Iron, MGX.AU Announced settlement agreement; +8.5%
China
COSCO Shipping, 1919.HK Profit guidance +11%
Vanke, 2002.HK Resumed trading following acquisition of CNY55.1B in assets from Guangdong International Trust +0.6%
Japan
Canon, 7751.JP EU fine -2.5%
New Zealand
Steel & Tube Holdings, STU.NZ Cut FY17 guidance -5%
Singapore
Noble Group, NOBL.SG Shares rose over 36% on prior session on speculation of debt waiver request -1.5%
South Korea
Samsung Electronics, 005930.KR Guided Q2 results above estimates -0.2%
US Session Highlights
(US) JUN ADP EMPLOYMENT CHANGE: 158K V 188KE; Prior revised lower from +253K to 230K
(US) DOE CRUDE: -6.3M V -2.5ME
US markets on close: Dow -0.7%, S&P500 -0.9%, Nasdaq -1.0%, Russell -1.5%***
