Equity Markets Opened Mostly Higher, But Later Trade Mixed

General Trend:

• Hang Seng underperformed in early trading amid focus on protests, trade and corporate earnings
• Air China and China Construction Bank decline in HK post earnings
• ICBC may report results later today
• Property shares and Financials decline in Shanghai ; China said to consider new rules for small and medium sized banks (local press)
• Insurers, Securities Brokers and Electric/Appliance firms are among the decliners in Japan
• Taiwan’s Innolux said to receive orders from South Korea’s government amid ongoing dispute between Korea/Japan
• Woolworths declines in Australia, weighs on Consumer Staples index
• AUD/JPY declines amid unexpected drop in Australia Q2 private CAPEX, the focus is now on Q2 GDP data (expected to be released on Sept 4th)
• NZD declines as business confidence moved to 11-year low in Aug
• US 30 Year Treasury Futures rise in Asia amid drop in equity futures
• BoJ Board Member Suzuki: Financial firms could start charging fee on deposits if lending rates fall further; No need to be extremely strict about JGB yield range
• There is speculation that lower yields/flatter curve will cause the BoJ to reduce 5-10 yr JGB purchases at Friday’s operation
• Argentina proposes to extend debt maturities, move seen by some as an attempt to preserve FX reserves
• China’s Commerce Ministry (MOFCOM) sometimes holds its weekly press conferences on Thursdays (during European morning)
• Bank of Korea (BOK) expected to leave rates unchanged at Friday’s meeting, Finance Ministry confirms record amount of fiscal spending for 2020
• Upcoming tariff deadlines in focus: US move to levy additional 5% tariff on Chinese goods is due to take effect on Sept 1st ; China’s previously announced plans to levy 5-10% retaliatory tariffs on $75B of US goods is due to take effect on Sept 1st and Dec 15th

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) AUSTRALIA Q2 PRIVATE CAPITAL EXPENDITURE: -0.5% V +0.4%E
• WOW.AU Reports FY19 (A$) adj Net 1.49B v 1.73B y/y; Rev 59.98B v 57.2B y/y
• (NZ) New Zealand Aug ANZ Business Confidence: -52.3 v -44.3 prior (11-year low); Activity Outlook: -0.5 v 5.0 prior

Japan

• Nikkei 225 opened +0.1%
• (JP) Bank of Japan (BOJ) Suzuki: Keeping rates very low could have unusual effects and side effects, important to keep up powerful easing for long time
• (US) USDA Perdue: US Japan trade deal details are still being ironed out – press
• (JP) Japan considering lower the 10% ownership threshold at which foreigners are required to report stakes in domestic companies, targeted at increasing monitoring investment from China
• 7261.JP Toyota to offer private label financing services for Mazda – press
• 9501.JP Reaches agreement with Chubu Electric Power, Hitachi and Toshiba to look to create a framework for safe and efficient construction, operation, maintenance and eventual decommissioning of nuclear power plants
• 6098.JP To sell shares in Japan and overseas for selling stockholders; 116.7M shares will be offered; Recruit to buyback up to ~1.8% of its shares for ¥80B
• (JP) Japan MoF sells ¥2.0T v ¥2.0T indicated in 0.10% 2-year JGBs, avg yield: -0.311% v -0.211% prior, bid to cover 5.40x v 4.71x prior

Korea

• Kospi opened +0.1%
• (KR) South Korea releases 2020 budget: To increase fiscal spending to KRW513.5T, +9.3% y/y (in line with prior comments from SK Fin Min)
• (KR) South Korea to file a World Trade Organization (WTO) complaint against Japan after Japan formally imposed additional trade restrictions on South Korea – Nikkei
• (KR) North Korea Parliament is holding a rare second meeting of the year today. Media speculation that the parliament has been called to rubber stamp a decision from leadership regarding ongoing issues with missile tests or talks with South Korea and US Pres Trump – Yonhap
• (KR) South Korea President Moon: Japan doesn’t honestly state reasons for retaliation; Export curbs, US/China trade issues raise uncertainty – Cabinet Meeting

China/Hong Kong

• Hang Seng opened flat; Shanghai Composite opened +0.1%
• (CN) China PBoC Open Market Operation (OMO): Skips v Injects CNY60B prior; Net drain CNY60B v injects nil prior
• (CN) China PBOC sets Yuan Reference Rate: 7.0858 v 7.0835 prior
• (HK) China Military: Completed troop rotation which involved air, land and maritime forces, forces in HK will make more important new contributions to maintaining Hong Kong’s prosperity and stability
• (CN) China is expected to see its first decline in tax revenue in 2019, since 1968, following China Premier Li’s CNY2.0T tax cut announced in March – press
• (CN) China July Swift Global Payments (CNY): 1.81% v 1.99% prior
• (CN) China Military rotates new troops into Hong Kong and Macau during normal routine rotation – Xinhua
• 939.HK China Construction Bank: Reports H1 (CNY) Net 154.2B v 156,3Be, NII 250.4B v 239.5B y/y, Op Rev 344.4B v 322.7B y/y
• 3333.HK Evergande Real Estate Group: Reports H1 (CNY) Net 27B v 53B y/y, Rev 227.0B v 300.3B y/y
• (CN) China to institute new rules to reduce risks for small to medium banks to reduce risk in the wider economy – Local Press
• (CN) China said to be planning to restrict lenders investment in policy banks, in order to help curb interbank funding

Other

• (TH) Thailand Central Bank: No current plans to impose debt service ratio limit this year; may consider taking steps if household debt becomes worse
• (IR) Iran Foreign Min Zarif: Will not be possible to engage with US unless they stop imposing a war and engaging in economic terrorism

North America

• (US) Fed’s Daly (dove, non-voter) at IMF conference in New Zealand: US financial sector remains resilient, low inflation allows Fed to push for more job gains; must consider risks of running the economy hot
• (US) White House Trade Adviser Navarro: Unlikely anything ‘quick’ will happen with trade talks, We need Fed to do its job and cut rates
• (US) Treasury Sec Mnuchin: US does not intend to intervene in the USD for now – press interview
• (US) White House proposes to withdraw federal methane regulation, would strike requirements on oil and gas operations to target methane leaks

Europe

• (UK) Privy Council: Queen Elizabeth has approved suspension of Parliament; Parliament to be ‘prorogued’ from no later than Sept 12 until Oct 14

Levels as of 1:20 ET

• Nikkei 225, -0.1%, ASX 200 +0.1%, Hang Seng +0.2%; Shanghai Composite +0.1%; Kospi -0.1%
• Equity Futures: S&P500 -0.2%; Nasdaq100 -0.2%, Dax +0.1%; FTSE100 -0.3%
• EUR 1.1089-1.1066 ; JPY 106.12-105.82 ; AUD 0.6745-0.6723 ;NZD 0.6342-0.6307
• Gold +0.1% at $1,551/oz; Crude Oil -0.4% at 55.56$/brl; Copper -0.3% at $2.560/lb