Asia Summary
Asian equity markets opened broadly weaker, before falling even lower on uncertainty in US policy and North Korea’s latest nuclear test having a chance to reflect for the first time in the US markets after a holiday Monday. AUD held some strength for most of the session before falling to back a slightly weaker level of 0.7990, after Australia Q2 GDP came in slightly lower than expectations. Despite being lower than expectations the 0.8% q/q and 1.8% y/y solidly beat Q1 results. Treasurer Morrison said Expect FY18 budget forecasts to improve if economy stays on current path, a more conservative approach to forecasting has helped the government surpass market expectations and maintain its AAA credit rating.
Offshore yuan continued to climb as the PBOC strengthened the yuan fixing for the 8th consecutive day, making it the longest run since October 2015. A former SAFE official Guan Tao said that China has more leeway to pursue monetary policy goals as yuan’s exchange rate has stabilized this year along with improved forex reserves
Key economic data
(JP) Japan July Labor Cash Earnings Y/Y: -0.3% v +0.5%e; Real Cash Earnings Y/Y: -0.8% v 0.0%e (fastest decline since June 2015)
(AU) AUSTRALIA Q2 GDP Q/Q: 0.8% V 0.9%E; Y/Y: 1.8% V 1.9%E
Speakers and Press
China/Hong Kong
(CN) University of International Business and Economics in Beijing Zhijie: China has more room in monetary policy makes reserve ratio cut an option as yuan depreciation pressure eases
(CN) PBoC Adviser says China should encourage Blockchain technology; China should better regulate virtual currency and there should be stricter supervision for the use of virtual currencies for illegal activities – Chinese Press
(CN) China considering closing North Korea customs post – Chinese press
Korea
(KR) South Korea watching for radiation leak from North Korea test site, so far nothing detected
(KR) South Korea sovereign wealth fund: If a war were to occur on the Korean Peninsula, any impact on the semiconductor industry could be widespread, as South Korean chipmakers supply cellphone and electronics makers globally
(KR) According to analysts North Korea may have as many as 60 nuclear bombs – financial press
Japan
(JP) Former BoJ official/ President of currency think tank Institute for International Monetary Affairs (IIMA)Watanabe: BOJ should stop being obsessed with its 2% inflation target given prices and interest rates around the world remain subdued
Australia
(AU) RBA Gov Lowe: stimulatory policy continues to be appropriate (overnight)
(AU) Australia Treasurer Morrison: Expect FY18 budget forecasts to improve if economy stays on current path
Other\
(US) Fed’s Kaplan (moderate, voter):Policy is not as accomodative as some think; Neutral Fed funds rate (FFR) is much closer to 2.25% than it is to 3%
(RU) Russia Energy Min Novak: Confirms OPEC and Russia may extend oil output cap if needed; OPEC deal terms may change after Q1
(SG) Singapore Central Bank (MAS) quarterly survey: Raises Q3 GDP outlook to 3.1% from 2.8%
Asian Equity Indices/Futures (00:00ET)
Nikkei -0.2%, Hang Seng -1.0%; Shanghai Composite -0.3%, ASX200 -0.3%, Kospi -0.4%
Equity Futures: S&P500 -0.0%; Nasdaq100 -0.9%, Dax +0.0%, FTSE100 -0.0%
FX ranges/Commodities/Fixed Income (00:00ET)
EUR 1.1925-1.1903; JPY 108.80-108.51; AUD 0.8021-0.7985; NZD 0.7261-0.7224
Dec Gold -0.1% at $1,343/oz; Oct Crude Oil -0.2% at $48.58/brl; Sept Copper +0.4% at $3.19/lb
(AU) Australia sells A$900M in Nov 2027 bonds, avg yield 2.6125%, bid to cover 3.16x
(CN) China PBoC injects combined CNY40B in 7-day and 28-day reverse repos v skips prior; drains net CNY120B v CNY70B prior (1st injection after 4 consecutive skips, 1st use of 28-day since June 18th)
USD/CNY *(CN) PBOC SETS YUAN REFERENCE RATE AT: 6.5311 V 6.5370 PRIOR (8TH CONSECUTIVE STRONGER SETTING, longest streak since Oct 2015)
(KR) South Korea sells KRW2.4T v KRW2.4T offered in 2-yr monetary stabilization bonds; avg yield 1.69% v 1.74% prior
(CN) China MoF sells upsized 1-yr bonds at 3.4753%; bid-to-cover 1.49x; sells 10-yr bonds at 3.6341% ; bid-to-cover 3.07x
(TH) Thailand sells THB7.0B in 18.8-yr Govt bonds; avg yield 2.8556%; bid-to-cover 3.38x
Equities notable movers
Australia/New Zealand
SXY.AU Canaccord Genuity Raised SXY.AU to Buy from Hold, price target: A$0.36; +20.4%
ACR.AU Reaches mutual agreement with Eli Lilly to terminate licensing agreement for Axiron; -24.5%
Japan
4751.JPCyberAgent Inc, will not be included in Nikkei225; -7%
6098.JPRecruit Holdings to be added to Nikkei225; +6.7%
6502.JP Board was unable to reach a decision on chip sale today – Nikkei; +3.9%
