China Uses 1-Yr MLF For The 2nd Time In July

General Trend:

• Asian equity markets trade generally lower
• Shanghai Composite moves between gains and losses
• Shanghai Property index rises over 2%
• Nikkei component Fast Retailing declines on speculation the BoJ could make changes to its ETF purchases
• South Korean chipmaker Hynix declines over 4%, expected to report earnings on Thursday (July 26th)
• Japanese megabanks outperform on higher JGB yields
• Tokyo Steel declines over 6% after quarterly earnings report
• Posco Steel rises ahead of expected earnings report
• Rusal rises over 10%: The company has approached the Treasury with a plan that could remove it from the US sanctions list, according to US Treasury Sec Mnuchin
• China companies begin to launch trade suits versus the US: Wanshun Package [300057.CN] said to launch suit against the US anti-dumping and anti-subsidy duties
• Currencies in focus amid recent G20 meeting and comments from US President Trump
• No comments from China regarding the G20 meeting have been seen in the press
• Yen rises amid speculation the BoJ mulling policy changes to make easing measures sustainable; BoJ’s July meeting in focus (July 30-31st)
• BoJ launches fixed-rate JGB operation amid rise in JGB yields
• PBoC set the yuan stronger for the first time in 8 sessions
• PBoC conducts second medium-term lending facility this month, steps up size of the facility
• China 10-yr bond yield extends the gain seen on Friday’s session
• Japanese corporate earnings expected to pick up this week
• Hitachi Chemical expected to report results today
• US and European companies seen reporting earnings on Monday include Alphabet, Haliburton, Hasbro, Illinois Tool Works, Philips, Ryanair and Whirlpool.
• Japan prelim manufacturing PMI due for release on Tuesday

Headlines/Economic Data

Japan

• Nikkei 225 opened -1.0%
• TOPIX Electric Appliances index -0.9%, Real Estate -0.9%; Securities +1.1%
• Japanese automakers decline amid rise in the yen
• (JP) Japan Fin Min Aso: Discussed auto and steel tariffs with US Treasury Sec Mnuchin, not allowed to say what was discussed
• (JP) BoJ Gov Kuroda commented on Saturday at the G20: Said it was inappropriate to say anything predictive on the outcome of the BoJ’s July policy meeting.
• (JP) On Saturday a Japan MoF official said Japan told China at the G20 to explain about yuan (CNY) currency policy; need to be careful about Trump’s FX remark and may need to explain if necessary to the US again about the purpose of the BoJ’s easing – financial press
• (JP) Japan PM Abe is expected to formally declare his candidacy for third and final term as PM at event due to be held in the Yamaguchi Prefecture in Aug – Japanese Press
• (JP) BANK OF JAPAN (BOJ) HOLDS FIXED-RATE OPERATION ON 5-10-YR JGBS (1ST TIME SINCE FEB); Offers to buy unlimited amount of 10-yr JGBS at 0.11%; Received no takers in buying
• (JP) BoJ Official: Confirms today’s special operation is in response to ‘sharp’ rise in JGB yields
• (JP) MUFG Bank analyst comments on possible ways BOJ could adjust policy: shortening duration for JGB purchases, making interest rate operations more flexible, expanding dollar operations to maximize yen strengthening risk

Korea

• Kospi opened flat
• Samsung Electronics, 005930.KR Consents to conclusive arbitration on leukemia victims’ dispute including compensation for the victim
• (KR) South Korea Fin Min Kim asked for exemption from 25% US tariff on autos on sidelines of G20 to Sec Mnuchin
• (KR) South Korea July 1-20 Exports Y/Y: +9.3% v -4.8% prior; Imports y/y: 21.6% v 13.0% prior – Customs
• (KR) President Trump has been asking for daily updates on the status of North Korea negotiations; said to be privately expressed frustrations to aides as pace of talks, even as he publicly tweets about how well talks are going – US press

China/Hong Kong

• Hang Seng opened +0.3%, Shanghai Composite -0.5%
• Hang Seng Property/Construction index +1.2%, Services +1%, Energy +0.9%, Financials +0.6%
• (CN) China PBoC publishes draft rules on wealth management products. Wealth management products should be managed based on their net value and banks must standardize the management of their fund pools to prevent shadow banking risk, according to an online statement. (Friday after the close)
• (CN) China PBOC sets yuan reference rate at 6.7593 v 6.7671 prior (1st stronger setting in 8 sessions)
• (CN) China PBoC Open Market Operation (OMO): Skips OMO for the second consecutive session
• (CN) China PBOC reports June property loans to individuals CNY23.8T, +18.6% y/y – Xinhua
• Rusal, {+14%], 486.HK (US) Treasury Sec Mnuchin: Rusal has approached the Treasury with a plan that could remove it from the US sanctions list
• (CN) China Commerce Ministry (MOFCOM): Launches anti-dumping probe related to stainless steel billet and hot-rolled stainless steel plate imports; relates to countries including EU, Japan, South Korea and Indonesia
• (CN) CHINA PBOC CONDUCTS CNY502B IN 1-YEAR MEDIUM-TERM LENDING FACILITY (MLF) V CNY188.5B PRIOR AT 3.30% V 3.30% PRIOR (2nd MLF operation in July)

Australia/New Zealand

• ASX 200 opened -0.2%
• ASX 200 REIT index -1.2%, Consumer Discretionary -1.1%, Telecom -1%, Utilities -1%, Financials -0.9%, Resources -0.7%
• Nufarm,[-8.5%], NUF.AU Guides FY18 underlying EBIT A$255-270M (prior +5% y/y, implied A$317.4M)
• Wesfarmers,[-1%], WES.AU Expect demerger of Coles to be completed in Nov 2018; to retain 15% of Coles and 50% of flybuys
• (AU) Australia 3-month bank bill fixed 1.9850% v 1.9910% prior (2nd straight fix below 2%)
• (NZ) New Zealand Acting PM Peters: Inflation is not sole issue facing economy

North America

• (US) US Treasury Sec Mnuchin: Hope to get a NAFTA agreement negotiated in near future; See light at the end of the tunnel on trade disputes
• (US) Companies including Amazon, GM, Toyota, and Alcoa are making efforts to counter Trump Administration’s tariff plans – press
• SYNT To be acquired by Atos for $41.00/shr, $3.57B ,including debt; Guides Q2 $0.49 v $0.44e; Rev $249.7M v $233Me
• TSLA Said to have asked suppliers to return cash in order to help the company turn a profit. seeking price cuts from suppliers – US financial press

Europe

• (G20) France Fin Min Le Maire: a trade war has already started; if the US imposes more tariffs, the EU will have no choice but to retaliate – comments from G20
• (G20) G20 Communique: Short and medium term risks to growth have increased including heightened trade the geopolitical tensions; Affirms exchange rate commitments made in March statement to avoid competitive devaluation and refrain from targeting exchange rates for competitive advantage

Levels as of 01:30ET

• Hang Seng +0.2%; Shanghai Composite +0.7%; Kospi -0.6%; Nikkei225 -1.4%; ASX 200 -0.9%
• Equity Futures: S&P500 -0.1%; Nasdaq100 -0.3%, Dax -0.1%; FTSE100 -0.2%
• EUR 1.1724-1.1750; JPY 110.75-111.51; AUD 0.7417-0.7438;NZD 0.6794-0.6825
• Aug Gold +0.1% at $1,232/oz; Sept Crude Oil -0.2% at $68.16/brl; Sept Copper +0.2% at $2.76/lb