Equities Weaker Amid Growing China Tensions

Jun 21 21, 06:36 GMT

General trend

Regional futures opening lower, after S&P ended last week lowest since Feb after a surprisingly hawkish Fed meeting, US futures opened higher then reversed course trending lower. US 30-year yield fell below 2.00% for the 1st time since February.
In the currencies broad dollar weakness, with largest moves in A$ and NZ$, USD/JPY remained little changed in early trade before following trend.
Consumer discretionary names trade higher as South Korea plans to east social distancing measures.
As market opened lower, they continued to extend declines in early trade, tracking New York, in Japan (weakest) the Nikkei traded off after the first Olympic athlete arrival tested positive for COVID.
Equities dragged lower amid growing China influence over Hong Kong and Taiwan being caught in the middle. Taiwan withdrew some officials from the city over the weekend.
Guangdong Province, China (accounts for 10% of economic output of China) experiencing electricity shortages and has asked factories to cut their power usage.

Headlines/Economic data

Australia/New Zealand

ASX 200 opened -0.3%.
TPW.NZ Announces conditional sale of retail gas, telecommunications, and electricity supply to Mercury for NZ$441M.
CBA.AU To sell Domestic General Insurance unit to Hollard Group for A$625M up front; Establishes 15-year alliance to sell consumer insurance to CBA clients.
BLD.AU Sells North America building products business for $2.15B cash to Westlake Chemical.
(AU) Reserve Bank of Australia (RBA): Excess cash at exchange settlement (ES) accounts at A$266.8B v A$262.8B prior (record high).
(AU) Australia National Party (junior party of ruling coalition) to hold a leadership vote; Follow Up: Barnaby Joyce said to be elected as the leader of Australia National Party – local press.
(AU) Australia May Preliminary Retail Sales M/M: 0.1% v 0.4%e.

Japan

Nikkei 225 opened -1.5%.
(JP) Ugandan Olympian in Tokyo has tested positive for coronavirus upon entry for Olympic games, had received the AstraZeneca vaccine – Japan press.
(JP) Japan said to be planning a ~¥100B fund for chip and other technology use – Nikkei.

Korea

Kospi opened -0.1%.
(KR) Friday South Korea Trade Min and Czech PM Babis met to discuss planned bid for South Korea to build nuclear plant in Czech Republic.
(KR) South Korea to ease social distancing rules – press.
(KR) South Korea May 1-20 Exports y/y: 29.5% v 53.3% prior; Imports y/y: 29.1% v 36.0% prior; Chip Exports y/y: 28.5% v 26.0% prior.

China/Hong Kong

Hang Seng opened -1.0%; Shanghai Composite opened -0.3%.
(CN) Guangdong Province, China (accounts for 10% of economic output of China) experiencing electricity shortages and has asked factories to cut their power usage – press.
(CN) Certain China banks have cut rates for deposit certificates – China Press.
(CN) CHINA PBOC MONTHLY LOAN PRIME RATE (LPR) SETTING: LEAVES BOTH 1-YEAR AND 5-YEAR RATES UNCHANGED (14TH CONSECUTIVE MONTH OF STEADY RATES ).
(HK) Hong Kong Chief Exec Lam: Hong Kong “will serve China’s needs” and play key roles in promoting its financial development – press citing speech.
0728.HK Raises FY21 Dividends will be ‘at least’ 60% net profit; to equal ~70% of Net after A-shr distribution.
00282.HK Founder Lai Adviser: Company to hold board meeting on how to move forward, expects Apple Daily to be shut down in matter of days.
(CN) China Hubei province has halted all coal mining until July 5th due to gas explosions.
(CN) China PBOC sets Yuan reference rate: 6.4546 v 6.4361 prior.
(CN) China PBOC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v CNY10B in 7-day reverse repos prior; Net inject CNY10B v Net CNY0B prior.
000898.CN Guides H1 (CNY) Net 4.80B v 0.5B, +860% y/y (Friday after the close).
HSBC Signs MOU to sell retail banking business in France; No terms disclosed (Friday, after the close).

Other

(IR) Ebrahim Raisi elected President of Iran; Follow Up: Reportedly the US wants a nuclear deal before the inauguration of the new Iranian President – Axios.
(IR) Iran and western officials have temporarily halted talks over discarded nuclear deal after Raisi was elected president (harsh critic of the west).
(HK) Taiwan as of Sunday, has started to pull staff from its representative office in Hong Kong, after Hong Kong government demanded that Taiwan’s officials sign document supporting China’s claim to Taiwan – press.

North America

(CN) Speculation that China’s counterintelligence chief Dong Jingwei defected to the US in Feb (if true would be the highest defection ever).
(US) President Biden to meet with Financial Regulators at 13:45EST on June 21st.

Europe

(UK) PM Johnson seeking to build the UK into a “science superpower” with £14.9B investment per year in spending on R&D into solutions for “the public good”; expected to be officially announced Monday – UK press.
(EU) ECB chief Lagarde: ECB made good progress in shaping strategy on inflation and climate goals – comments after weekend meeting of ECB members (no specifics).
(AT) ECB’s Holzmann (Austria): Projections for inflation to taper off beyond 2021 suggest there is no occasion to raise interest rates, rates would need to rise if inflation approaches 2% on a sustained basis – press.
(IT) ECB’s Panetta (Italy): A digital euro would protect consumer privacy, a key aim was to combat the spread of digital coins created by other nation’s and companies – press.
(UK) Jun Rightmove House Prices M/M: 0.8% v 1.8% prior (largest gain for this time of the year since 2015).
(FR) France far-right party of Marine Le Pen, performed weaker than expected in first round of regional elections, leaving the other parties in a strong position in next weekend’s vote.

Levels as of 01:15ET

Hang Seng -1.2%; Shanghai Composite -0.2%; Kospi -1.0%; Nikkei225 -3.6%; ASX 200 -1.7%.
Equity Futures: S&P500 -0.5%; Nasdaq100 -0.3%, Dax -0.9%; FTSE100 -0.9%.
EUR 1.1877-1.1848; JPY 110.28-109.72 ;AUD 0.7522-0.7481; NZD 0.6974-0.6935.
Commodity Futures: Gold +0.2% at $1,772/oz; Crude Oil +0.4% at $71.58/brl; Copper +0.5% at $4.14/lb.