China Expected To Follow Fed Move With Its Own Move In OMO/MLF Rates

Jun 12 18, 06:46 GMT

General Trend:

USD remains stronger leading into North Korea summit, later pared back most gains; USD/JPY an outperformer touching a 3-week high
Trump/Kim one on one meeting lasted 41 minutes before they were joined by top aides; both leaders were positive on the meeting, Kim indicated he would work with Trump towards peace
Trump and Kim sign agreement to acknowledge progress of the talks and pledge to keep momentum going – press
According to Sec of State Pompeo US will offer an unpresented deal to North Korea, better than 2005 agreement
Initial analysis agrees the meeting went well, but expectations are tapered. Now will be looking as to what each leader says to their home countries and if US will back off tariffs in order to secure China’s help on next steps with N. Korea.
USD paired back earlier gains after the one on one summit concluded
Chinese press speculates that PBOC will likely follow Fed move and raise OMO rates
Aussie home loans in April continue to fall though less than expected
Shanghai Cooperation Organization members agree to strengthen cooperation to fight terrorism and efforts to reconstruct war-torn Afghanistan (led by China and Russia, Iran and India also attended)
White House economic advisor Kudlow suffers a minor heart attack, expected to make full recovery

Headlines/Economic Data

Japan

Nikkei 225 opened +0.8%
(JP) JAPAN MAY PPI (CGPI) M/M: 0.6% V 0.2%E; Y/Y: 2.7% V 2.1%E
(JP) Japan Govt is urging power companies to reduce their plutonium stockpiles in response to American requests – Nikkei
(JP) Japan Q2 BSI Large All Industry q/q: -2.0 v 3.3 prior; Large Manufacturing q/q: -3.2 v 2.9 prior
(JP) Japan Fin Min Aso: Still considering personnel appointments at Ministry of Finance (MOF)
Mitsui E&S, 7003.JP Denies press report it would stop making commercial ships at Chiba shipyard

Korea

Kospi opened +0.2%
(KR) Bank of Korea (BOK) Gov Lee: Need to increase policy room for economic changes; reiterates need to sustain its accommodative policy stance
(KR) US President Trump: Summit went better than expected lot of progress made; going now for a signing – comments post North Korea summit; Follow up: When asked what was being signed, he responded you’ll find out very soon
(KR) Sec of State Pompeo: US will offer unprecedented security deal to North Korea with assurances that will go further than 2005 agreement – press
(KR) South Korea police launch investigation into Korea’s seventh largest crypto exchange, Coinrail, who lost KRW40B in altcoins in hack attack over the weekend – Korean press
(KR) South Korean Deputy Fin Hyung-kwon: CPI expected to remain stable in the 1% range as a rise in oil prices is offset in part by a decline in prices of agricultural goods

China/Hong Kong

Hang Seng opened -0.1%, Shanghai Composite 0.0%
(CN) China mid-year liquidity is better than expected; PBOC not likely to tighten liquidity and will keep it stable – China Securities Journal
(CN) China PBOC is very likely to follow Fed and raise is OMO rates after next Fed move – China Daily
(CN) China Securities Regulatory Commission (CSRC): China will adhere to international, legal, and market-based principles to actively and steadily advance the testing of issuance and trading of China Depositary Receipts (CDRs) – Xinhua
(CN) China PBoC Open Market Operation (OMO): Injects combined CNY100B in 7-day, 14-day and 28-day reverse repos v skips prior: Net injects CNY30B v drains CNY20B prior
(CN) China PBoC sets yuan reference rate at 6.4121 v 6.4064 prior
(CN) Sina Finance survey finds 44.8% of respondents would be interesting in investing in mutual funds linked to Chinese Depository Receipts (CDR) but may have a hard time selling to retail investors due to 3-year lock-up period – SCMP
Foxconn Industrial Internet, 601138.CN Shares trade to daily limit for 3rd consecutive day (recent IPO)
China Resource Cement, [-12%], 1313.HK Profit Alert: Guides H1 significantly higher y/y; to sell 450M shares to CRH
Looking ahead: China retail sales, industrial production and fixed asset urban due tomorrow

Australia/New Zealand

ASX 200 opened +0.1%
VAH.AU CEO John Borghetti will not renew contract past 2020, board to start search for successor
(NZ) New Zealand May Card Spending Retail m/m: 0.4% v 1.2%e; Total m/m: +0.5% v -0.7% prior
(AU) Australia sells A$150M in 2% Aug 2035 indexed bonds; avg yield 0.9803%; bid to cover ratio 3.54x
(AU) Australia May NAB Business Conditions: 15 v 21 prior; Confidence: 6 v 11 prior
(AU) AUSTRALIA APR HOME LOANS M/M: -1.4% V -1.8%E; INVESTMENT LENDING: -0.9% V -8.8% PRIOR
(AU) Australia Apr Owner Occupier Loan Value m/m: +0.2% v -2.0% prior
Stanmore Coal, [+13%], SMR.AU Signs agreement with Peabody Australia to acquire MDL1371 and EPC7282 from Millennium Coal for A$30M
Silex Systems, [-20.5%], SLX.AU Will not go ahead with plans to acquire majority stake in GE-Hitachi Global Laser Enrichment llc
Looking ahead: Australia employment data due tomorrow

North America

MCD Financial press citing internal memo shows restructuring plans, to record Pretax charges of $90-80M in Q2; includes layoffs to be announced by June 28th
Fedex, FDX Raises Quarterly dividend 30% to $0.65 from $0.50 (indicated yield 0.99%); after the close

Europe

(RU) Russia first deputy head of upper house international committee Dzhabarov: Russia and its economy have been prepared for possible new restrictions from the G7 countries, and will hardly suffer any losses – press
(UK) Leading Tory Grieve: Have tabled compromise amendment on Brexit deal, likely to rebel if amendment is rejected
(IT) ECB’s Nowotny (Austria): Do not see a real crisis in Italy – German press
Levels as of 01:30ET
Hang Seng +0.4%; Shanghai Composite +0.6%; Kospi +0.0%; Nikkei225 +0.4%; ASX 200 +0.1%
Equity Futures: S&P500 +0.0%; Nasdaq100 -0.0%, Dax +0.1%; FTSE100 -0.1%
EUR 1.1741-1.1784; JPY 109.97-110.49; AUD 0.7585-0.7621;NZD 0.6998-0.7045
Aug Gold -0.1% at $1,301/oz; Jul Crude Oil +0.2% at $66.25/brl; Jul Copper -0.0% at $3.25/lb