Japan Power Companies Planning Record High Bond Offerings

General Trend:

• Asian equity markets trade mostly lower; US stocks ended down in shortened session ahead of July 4th holiday
• Chinese and Hong Kong property shares decline
• Japanese chip equipment companies trade generally lower amid declines in shares of Micron: Tokyo Electron -5.1%, Advantest -4.7%, SUMCO -4.9%
• Nikkei weighted Fast Retailing declines, reported drop in monthly SSS
• Chinese Telecom ZTE rises after being given temporary relief by US government
• Samsung expected to report prelim Q2 results on Friday July 6th, Op profit expected to decline q/q
• Aussie rises after better than expected retail sales, later pares gain
• Australian PMI Services surveys paint mixed picture in June: AIG index hits record high, CBA index declined
• China Caixin PMI Services Index unexpectedly rose amid higher input costs
• Yuan (CNY) trades higher despite being fixed weaker by PBoC
• China PBoC Advisers comment on risks related to deleveraging measures
• BoJ’s Harada warns against early rate hike

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.5%
• TOPIX Electric Appliances index -2.3%, Securities -0.8%, Marine Transportation -0.6%; Information & Communication +0.7%, Retail Trade +0.5%, Real Estate +0.5%
• (JP) Japan government said to see FY19 real GDP growth of 1.5% (vs 1-2% that was speculated) – Japanese Press
• (JP) JAPAN JUN PMI SERVICES: 51.4 V 51.0 PRIOR; COMPOSITE: 52.1 V 51.7 PRIOR
• (JP) 10 regional power companies in Japan are planning to sell approx. ¥1.7T in bonds during the current fiscal year (FY19), +17% y/y (the highest amount in 10-years) – Japanese Press
• (JP) Bank of Japan (BOJ) Harada: BOJ bold easing policy is having intended effects; need to continue current easing to reach 2% inflation

Korea

• Kospi opened -0.1%
• 005380.KR Hyundai/Kia expected to record Q2 net lower due to slowing sales in US and China – Korean press
• (KR) Bank of Korea (BoK) sells 2-year monetary stabilization bonds; yield 2.06% v 2.10% prior
• (KR) South Korea Jun Foreign Reserves: $400.3B (record high) v $398.9B prior

China/Hong Kong

• Hang Seng opened 0.0%, Shanghai Composite -0.4%
• Hang Seng Energy index -2.7%, Consumer Goods -2.3%, Property/Construction -2.2%, Industrial Goods -2.1%, Materials -2%, Info Tech -2%, Financials -0.9%
• 763.HK US Commerce Dept gives ZTE temporary authorization to resume some business activities until Aug 1st – press
• (CN) PBoC Financial Research Institute Head Sun Guofeng: Reiterates prudent, neutral monetary policy; reiterates 2018 monetary policy not overall loosening; RRR cut doesnt mean monetary policy easing
• (CN) Former PBoC Adviser said to issue warning about risks related to deleveraging – China Financial News
• (CN) China said to be pressuring the EU to issue a ‘strong’ joint statement against US President Trump’s trade policies at the upcoming Sino-European summit (July 16-17); some EU officials said to have concerns about the Chinese proposal – financial press
• (CN) China PBOC Gov Yi Gang: closely watching moves in fx market, reiterates to keep yuan basically stable and at reasonable level; reiterates ‘prudent, neutral’ monetary policy (after the close yesterday)
• (CN) China State Council financial stability and development committee: China is completely equipped with the favorable conditions to win the battle against major financial risks and counter external risks – Xinhua
• (CN) China PBoC set yuan reference rate at 6.6595 v 6.6497 prior (weakest setting since Aug 23, 2017)
• (CN) China PBoC Open Market Operation (OMO): Injects CNY10B in 7-day reverse repos v skips prior; Net: CNY80B drain v CNY150B drain prior
• (CN) China PBOC has told mobile-payment providers that they need to deposit all customer funds with the central bank rather than elsewhere; proportion of funds to be placed with the central bank will rise incrementally from roughly 50% now to 100% by next year
• (CN) CHINA JUN CAIXIN PMI SERVICES: 53.9 V 52.7E; COMPOSITE: 53.0 V 52.3 PRIOR
• (CN) China plans to raise fuel standards for diesel vehicles from July 2019 – US financial press

Australia/New Zealand

• ASX 200 opened +0.1%
• ASX 200 Financials index -0.9%, Consumer Discretionary -0.7%; Telecom +1.1%
• (NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: -5.0% v -1.2% prior
• (AU) Australia Jun AiG Performance of Service Index: 63.0 v 59.0 prior (record high)
• (AU) Australia Jun CBA PMI Services: 52.7 v 55.9 prior; Composite: 52.9 v 55.6 prior
• (AU) AFR notes uptick in Australia shadow banking in the residential developers market as big banks shy away
• (NZ) New Zealand Jun ANZ Commodity Price m/m: -1.0% v 1.5% prior (1st decline since Dec 2017)
• (AU) Australia sells A$800M v A$800M indicated in Nov 2029 bonds, avg yield 2.6094% v 2.7059% prior, bid to cover 3.50x v 3.62x prior
• (AU) AUSTRALIA MAY TRADE BALANCE (A$): 0.83B V 1.20BE; Exports m/m: +4% v -2% prior; Imports m/m: +3% v 0% prior
• (AU) AUSTRALIA MAY RETAIL SALES M/M: 0.4% V 0.3%E

Other Asia

• (MY) Officials in Malaysia have arrested former PM Najib – financial press

North America

• US equity markets ended lower in holiday shortened session: Dow -0.5%, Nasdaq -1.2%, S&P 500 -0.5%
• S&P500 Technology -1.2%, Telecom -1.2%
• Micron [MU]: Spokesperson: Micron has not yet been served with injunction in China; will not comment until receiving formal court notice
• T-Mobile [TMUS]: Officials from the US House said to call for ‘full and robust’ probe of transaction between Sprint and T-Mobile USA; cites Softbank’s ties to China’s Huawei – Japanese Press
• (US) Weekly API Oil Inventories: Crude: -4.5M v -9.2M prior
• (US) On Tuesday, the US Treasury 2 and 10 yield spread hit the flattest level since Aug 2007, the spread declined below 30bps – FT

Europe

• (DE) Bundesbank rejects monetary policy motivated by ECB investment – German press

Levels as of 01:30ET

• Hang Seng -0.9%; Shanghai Composite -0.4%; Kospi flat; Nikkei225 -0.2%; ASX 200 -0.5%
• Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.1%; FTSE100 +0.1%
• EUR 1.1654-1.1679; JPY 110.27-110.63; AUD 0.7376-0.7426; NZD 0.6744-0.6779
• Aug Gold +0.4% at $1,258,/oz; Aug Crude Oil +0.6% at $74.60/brl; Sept Copper +0.3% at 2.934$/lb