Asia Summary
Asian markets were generally higher as Fed’s Yellen comments were in line with expectations and Bank of Canada raised rates at expected. Korea’s Kospi rose nearly 1% after BOK left rates on hold but did raise its outlook for 2017 GDP (not taking into account impact of an extra budget). China markets were more reserved as the PBOC skipped reverse repo operations, after 2 injections. China didconduct CNY360B 1-yr 3.2% v 3.2% prior in medium term lending facility (MLF) operations, the last time the PBOC used the MLF was in early June.The dollar remained weaker for another session against the majors.Australia consumer inflation expectations rose sharply for July to 4.4% from 3.6% in June; NAB analysts see this as a return to long run average.
China in the overnight session released the first round of economic data, with money supply M2 coming in at a record low and new yuan loans beat expectations at CNY1.54T. During the session we saw China H1 trade balance in yuan terms fall 17.7% y/y to CNY1.28T; in dollar terms June trade was $42.8B, in line with expectations. Trade with the US in dollar terms was at its highest level since October 2015 at $25.4B. China customs noted that Q3 outlook is still upbeat but H2 higher base effect will poses challenges to trade data.
Key economic data
(KR) BANK OF KOREA (BOK) LEAVES REPO RATE UNCHANGED AT 1.25%; AS EXPECTED (12TH CONSECUTIVE HOLD)
(CN) CHINA H1 TRADE BALANCE CNY1.28T, -17.7% y/y
(CN) CHINA JUN TRADE BALANCE: $42.8B V $42.7BE
(NZ) New Zealand REINZ June House Sales Y/Y: -24.7% v -18.4% prior
(UK) JUN RICS HOUSE PRICE BALANCE: 7% V 15%E
(AU) AUSTRALIA JUL CONSUMER INFLATION EXPECTATION: 4.4% V 3.6% PRIOR
(NZ) NEW ZEALAND JUL ANZ CONSUMER CONFIDENCE INDEX: 125.4 V 127.8 PRIOR; M/M: -1.9% V +3.1% PRIOR
(CN) CHINA JUN FOREIGN DIRECT INVESTMENT YUAN TERMS Y/Y: +2.3% V -3.7% PRIOR
Speakers and Press
China
(CN) PBOC Adviser Yiping: China should consider forming a govt backed fund to deal with employment-related issues arising from the clean-up of zombie firms – Chinese press
(CN) Financial press notes the divergence between Chinese bonds and Treasuries with the 10-yr spread shrinking by 20%/~30bp since early June
(CN) According to American Chamber of Commerce in Shanghai survey ~20% of US firms in Shanghai redirecting investments away from China – SCMP
Japan
(JP) Bank of Japan (BOJ) reportedly intends to raise growth outlook for FY17-18 by 0.1-0.2% at policy meeting next week – Nikkei
(JP) According to Japan Business Federation (Keidanren), Japan large firms raise wages by 2.34% this year, +0.07ppt y/y – Sankei
Korea
(KR) US Trade Rep Lighthizer calls for August meeting with South Korea to fix US goods trade deficit with South Korea
Other
(UK) BOE’s McCafferty (hawkish dissenter): BOE should consider unwinding £435B QE program earlier than planned
Asian Equity Indices/Futures (00:30ET)
Nikkei -0.1%, Hang Seng +1.1%, Shanghai Composite +0.4%, ASX200 +1.1%, Kospi +1.2%
Equity Futures: S&P500 +0.1%; Nasdaq +0.2%, Dax +0.1%, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1439-1.1411; JPY 113.53-112.86; AUD 0.7697-0.7675; NZD 0.7298-0.7247
Aug Gold +0.3% at 1,222/oz; Aug Crude Oil 0.0% at $45.48/brl; Sept Copper 0.0% at $2.69/lb
USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.7802 V 6.7868 PRIOR
(CN) PBoC skips OMO operations v injects CNY70B prior in 7-day and 14-day reverse repos
(CN) PBOC conducts CNY360B 1-yr 3.2% v 3.2% prior in medium term lending facility (MLF) operations
(NZ) New Zealand sells NZ$100M in 2.5% Sept 2040 Bonds at 2.3284%
(JP) Japan MoF sells ¥0.81T v ¥1.0T indicated in 0.60% 20-year JGB bonds, avg yield 0.606% v 0.583% prior; bid-to-cover: 4.19x v 3.98x prior
Asia equities notable movers
Australia
iCar Asia, ICQ.AU Reports Q2 cash collections +35%y/y on a FOREX neutral basis, +6.0%
Anteo Diagnostics,ADO.AU Announces revised payment arrangement with Diasource Vendors; -5.3%
Hong Kong/China
China Everbright, 257.HK Guides H1 Net +40% y/y; Rev +60% y/y; +7.7%
Weichai Power, 2338.HK Guides H1 Net +125-150% y/y; +6.8%
Korea
Kolon Life Science, 102940.KR Receives approval to sell INVOSSA in South Korea; -6.7%
US Session Highlights
(US) Fed chair Yellen, says that there is no rush to tighten monetary policy as inflation remains consistently below target. The Fed expects the economy to continue to develop in the current direction, which will grant room for gradual rate hikes. Reductions in the balance sheet likely to begin this year. These vies were echoed by Fed official George (hawk non-voter) who favors starting balance sheet reductions in the near future. Stating that holding long-term rates below the level that they might otherwise move to naturally, as economic fundamentals improve, risks creating financial imbalances.
(US) After Yellen comments today read as less hawkish, Treasuries saw a sharp rally and the US dollar lost some ground against major currencies. The 10-year yield dropped 5bps reaching 2.30% at one point, before closing slightly higher, 10s/30s curve spread widened further today reaching 57bps.
CIE Announces Agreement to Expand the Anchor Unit; Entered into a definitive agreement with its co-owners in the Anchor development to unitize and include Cobalt’s two leases immediately south of the current Anchor unit (Green Canyon blocks 850 and 851) into the existing Anchor unit ; +30.5% afterhours
US markets on close: Dow +0.6%, S&P500 +0.7%, Nasdaq +1.1%, Russell +0.8%
Best Sector in S&P500: Technology and Real Estate
Worst Sector in S&P500: Financial
Biggest gainers: NRG 29.4%; ATVI 5.2%; UAL 4.7%
Biggest losers: GWW -4.4%; DE -3.6%; CTL -3.2%
At the close: VIX 10.30 (-0.59pts); Treasuries: 2-yr 1.35% (-2.3%), 10-yr 2.32% (-1.8%), 30-yr 2.89% (-1.3%)
