Equities Slide Tracking US Session As Trade War Concerns Flare Up Again

General Trend:

• Asian equities trade generally lower, Shanghai extends declines; Markets later pare losses
• Shanghai Property index drops over 3%; Developers in HK decline amid renewed speculation related to vacancy tax
• US equity markets declined on Monday’s session, despite Trump Administration officials playing down investment restrictions on China
• Markets focused on mixed signals from Trump Administration on China (financial press)
• US Treasury is said to plan to issue report on China on Friday
• US companies said to request advance shipments of goods from Chinese firms ahead of the date when tariffs are due to take effect (HK Press)
• Reserve Bank of New Zealand (RBNZ) reiterates accommodative policy ahead of Thursday’s rate meeting
• Japan ruling LDP officials begin to show where loyalties lie ahead of Sept leadership contest

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.8%
• TOPIX Retail Trade index -0.7%, Info & Communications -0.7%, Electric Appliances -0.7%; Marine Transportation +1.5%
• Megabanks outperform
• (JP) JAPAN MAY PPI SERVICES Y/Y: 1.0% V 1.0%E
• Softbank, 9984.JP Mobile division reportedly to file for IPO as soon as July – Nikkei
• (JP) Japan Chief Cabinet Sec Suga: Confirms to create new North Korea division in July
• (JP) Japan PM Abe: Wants to secure US understanding of reason for BoJ policy; reiterates BoJ monetary policy not aimed at weakening yen currency (JPY)
• (JP) Japan MoF sells ¥1.0T v ¥1.0T indicated in 0.5% (prior 0.50%) 20-yr bonds; avg yield 0.5030% v 0.5320% prior; bid to cover 4.23x v 4.12x prior

Korea

• Kospi opened -1.0%
• (KR) South Korea Jun Consumer Confidence: 105.5 v 107.9 prior
• (KR) South Korea think tank KIET: Sees 2018 GDP reaching 3% in 2018
• (KR) Said to be 6 US officials in North Korea discussing a visit by Sec of State Pompeo – Korean press
• (KR) South Korea Finance Ministry expected to announce H2 policy plan in July, which may include cutting job creation target to 200K from 320K currently – Korean press

China/Hong Kong

• Hang Seng opened -0.3%, Shanghai Composite -1.0%
• Hang Seng Property/Construction index -1.6%, Services -1.5%, Materials -1.1%, Energy -0.9%, Industrial Goods -0.6%, Info Tech -0.4%, Financials -0.3%; Telecom +1.3%
• Xiaomi: The individual investor subscription rates for the Xiaomi IPO have been less than what was seen with other recent IPOs, according to anecdotal data from local retail brokers – South China Morning Post
• (CN) China Pres Xi reportedly told various CEOs last week that Beijing plans to strike back against punitive American tariffs; says “In our culture we punch back” – press
• (CN) China PBoC may further reduce the Reserve Ratio Requirement (RRR) in H2 – China Securities Journal
• (CN) China National Bureau of Stats (NBS) Chief: China’s economy has stable, positive momentum; Uncertainties in international environment are increasing
• (CN) China Development Bank (CDB) to finance Shantytown projects in orderly manner, says Chinese Press report; CDB said to have tightened approvals for the redevelopment of property said a separate press report
• (CN) China PBoC Open Market Operation (OMO): Injects CNY80B in 7-day reverse repos v skips prior; Net: drains CNY90B v CNY10B injection prior
• (CN) China PBoC sets yuan reference rate at 6.5180 v 6.4893 prior (weakest yuan setting since January)
• (CN) Companies in China that would be directly impacted by US tariffs are said to be scrambling to find ways to deal with the possible impact; options that are being examined include price increases and changes in the ways that products are shipped to the US – South China Morning Post
• (HK) Hong Kong said to plan to impose tax on apartments that are unsold – Local Press
• (HK) Hong Kong 1-week HK$ HIBOR -49bps to 1.93607% (most since 2008); 3-month 2.08679% (highest level since 2008)

Australia/New Zealand

• ASX 200 opened -0.3%
• ASX 200 Resources index -1.3%, Consumer Discretionary -0.8%, Energy -0.4%; Utilities +0.6%, Financials +0.5%
• (NZ) RBNZ announces Statement of Intent for July 2018 to June 2021: NZ$ remains at an elevated level
• (NZ) RBNZ Gov Orr: Policy committee will be effective and transparent, communicate more widely
• (NZ) New Zealand Ministers Letter of Expectations to RBNZ Gov: Seeks deeper dialog between Treasury and RBNZ
• BHP and VALE5.BR Confirm have signed final agreement between Samarco, its shareholders and the Brazilian authorities
• BHP.AU Gives Samarco Update: to file petition to dismiss the BRL20B Civil Claim
• (NZ) RBNZ Deputy Gov Bascand: Too early to say if RBNZ should issue digital currency, could pose financial stability risks
• (AU) Australia sells A$150M v A$150M indicated in 2.50% Sept 2030 indexed bonds, avg yield 0.7029% v 0.8357% prior, bid to cover 3.36x v 3.43x prior

North America

• US markets ended broadly lower: Dow -1.3%, S&P500 -1.4%, Nasdaq -2.1%, Russell 2000 -1.7%
• S&P500 Consumer Discretionary -2.2%, Technology -2.1%
• (US) White House Trade Adviser Navarro: we have no plans to impose investment restrictions; today’s market selloff is a large overreaction – CNBC interview
• (US) Treasury Sec Mnuchin: Statement will be out not specific to China, but to all countries that are trying to steal our technology
• HOG Plans to shift production of motorcycles with EU destinations away from US to avoid tariffs, expects tariffs will result in an incremental cost of ~$2.2K per average motorcycle exported from the US to the EU – filing

Europe

• (EU) ECB’s Couere (France): we will keep reinvesting the principal payments from maturing securities in our portfolio in 2019 (~€15B/mo); Expect rates to remain unchanged through the summer 2019. – press interview
• (GR) S&P raises Greece sovereign rating one notch to B+ from B; outlook Stable from Positive
• (UK) House of Commons approves Heathrow expansion plan by 415-119 vote – press
• (FR) France Fin Min Le Maire: EU needs independent European financing body; hope the Us realizes soon that tariffs are bad for its own economy
• (EU) Eurogroup chief Centeno: would like guidance from EU leaders on ways to restructure public debt more easily
• (IT) Italy govt to issue new 5-year, 7-year, and 10-year BTP in Q3
• (CH) SNB’s Maechler: Very happy CPI is in positive territory, but remains low, conditions are fragile, CHF remains highly valued

Levels as of 01:30ET

• Hang Seng +0.1%; Shanghai Composite -0.4%; Kospi -0.2%; Nikkei225 +0.2%; ASX 200 -0.3%
• Equity Futures: S&P500 +0.1%; Nasdaq100 +0.0%, Dax +0.1%; FTSE100 +0.3%
• EUR 1.1699-1.1720; JPY 109.37-109.78; AUD 0.7403-0.7423;NZD 0.6884-0.6903
• Aug Gold -0.4% at $1,264/oz; Aug Crude Oil +0.3% at $68.28/brl; Sept Copper +0.2% at $3.01/lb