Asia Summary
Markets were mixed in the session. North Korea launched a ballistic missile, which was said to have traveled for forty minutes before landing in the sea in Japan’s EEZ. South Korea vowed to sternly respond to the provocation. US President Trump tweeted he hoped that China would take care of North Korea. The USD/KRW stayed little changed, while the USD/JPY fell 0.3% to 113.09.
AUD/USD climbed into the target rate decision but then fell to session lows of 0.7621 after RBA left target rate unchanged at 1.5% and reiterated its policy stance from prior meetings. RBA commented it sees some signs that housing conditions are starting to ease and inflation will increase gradually.
China and Hong Kong markets traded lower, the PBOC skipped OMO for the 8th consecutive day and the yuan mid-point was set at its weakest level in 2-weeks. In an SCMP piece, said that the PBOC is likely to succumb to Fed tightening. Japan auto maker US sales were all higher y/y, while Kia/Hyundai reported weak figures in China vehicle sales.
Reminder US markets are closed for the July 4th holiday.
Key economic data
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50% (AS EXPECTED)
(AU) AUSTRALIA MAY RETAIL SALES M/M: 0.6% V 0.2%E
(NZ) NEW ZEALAND Q2 NZIER BUSINESS CONFIDENCE: 18% V 17% PRIOR
(KR) SOUTH KOREA JUN CPI M/M: -0.1% V -0.1%E; Y/Y: 1.9% V 2.0%E; CPI CORE Y/Y: 1.4% V 1.5%E
(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 114.5 v 111.8 prior
(JP) JAPAN JUN MONETARY BASE Y/Y: 17.0% V 19.2%E; MONETARY BASE END OF PERIOD: ¥468.0T V ¥455.9T PRIOR
(KR) South Korea Q2 Foreign Direct Investment (FDI) y/y: -9.0% v -9.2% prior
Speakers and Press
China
(CN) PBOC Deputy Gov Gonsheng : China looking at allowing foreign agencies to assign credit ratings on onshore bonds – SCMP
(CN) China’s 2017 GDP growth may be higher than 2016 – Chinese Press
Japan
(JP) PM Abe expected to continue to pursue plan to revise Japan’s constitution – Japanese Press
(JP) Bank of Japan (BoJ) Survey: Japan companies expect 1-year inflation at 0.8% y/y
(JP) Japan Fin Min Aso: Will discuss problems facing global economy at G20
Korea
(KR) Bank of Korea (BOK) Gov Lee: Central bank govs at the recent BIS meeting agreed that while monetary policies in developed countries are headed for a change, financial market instability seen during 2013 taper tantrum is unlikely to be repeated
(KR) North Korea has launched ballistic missile, around 09:40AM, said to have traveled 40 minutes – Korean press
(KR) US President Trump: North Korea has just launched another missile. Does this guy have anything better to do with his life? Hard to believe that South Korea and Japan will put up with this much longer. Perhaps China will put a heavy move on North Korea and end this nonsense once and for all! – tweet
Asian Equity Indices/Futures (00:30ET)
Nikkei +0.2%, Hang Seng -0.7%, Shanghai Composite -0.5%, ASX200 +1.7%, Kospi -0.2%
Equity Futures: S&P500 +0.0%; Nasdaq -0.1%, Dax +0.1%, FTSE100 +0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1377-1.1363; JPY 113.41-113.13; AUD 0.7682-0.7654; NZD 0.7296-0.7263
Aug Gold +0.3% at 1,223/oz; Aug Crude Oil -0.5% at $46.84/brl; Sept Copper -0.4% at $2.67/lb
(CN) PBOC skips open market operations (8th straight skip)
(CN) PBOC SETS YUAN MID POINT AT 6.7889 V 6.7772 PRIOR (weakest setting in 2-weeks)
(KR) South Korea sells 30-yr bonds at 2.365%
USD/CNY Commerzbank analyst: PBOC may allow controllable yuan drop; could see yuan at 7.1 by the end of 2017
(TH) Thailand sells combined THB60B in 3-month and 6-month bonds
USD/CNY China State owned banks seen selling dollars at CNY6.80 in onshore forex market – financial press
JGB (JP) Japan MoF sells ¥1.86T in 10-yr 0.1% bonds; Avg yield 0.079%; bid-to-cover 4.77x v 3.64x prior (highest since February 2005)
Asia equities notable movers
Australia
Emeco Holdings, EHL.AU Morgans Financial Ltd Initiates EHL.AU with Add, price target: A$0.15, +11.4%
88 Energy, 88E.AU Provides project update on Project Icewine, -7.7%
Japan
Idemitsu Kosan, 5019.JP Planning ¥140B, 49M share sale (30% of shares outstanding), against the founders wishes; -11.2%
Show Shell, 5002.JP Idemitsu has no plans to call a shareholders’ meeting to vote on a merger with rival Showa Shell Sekiyu after the issuance of new shares, which would dilute the stake held by the refiner’s founding family; +6.7%
Hong Kong/China
PetroChina, 857.HK Announcement regarding the approval of the proposed Issuance of exchangeable Corporate Bonds by the Controlling Shareholder, +4.8%
Sinolink Securities ,600109.CN Tsinghua Holdings plans to cut stake by up to 5% within 6 months, -4.8%
US Session Highlights
US markets closed early ahead of the 4th of July holiday
Trump set to use US LNG as a political tool when he meets leaders from a group of a dozen countries. He is to tell the group, known as the “Three Seas” summit, that Washington wants to make it easier for US gas to reach these nations; which are often held to ransom by their dependence on Russia.
ISM Manufacturing Index rose to an unexpected 57.8 last month, for its best reading since August 2014. The components contributing the most were New Orders, showing a very strong 63.5, and Production also high at 62.4.
Contrasting positive manufacturing data, major US Automakers reported a decline in sales for June, for a fourth consecutive monthly decline. GM said it expected June sales to show 16.6 million units, down 1% from the same period last year.
Treasury yield curve continues to flatten as yields rise across the curve. 10-year yield up 5bps to 2.35%, and 30-year yield up at 2.87%. The 10s/30s yield curve flattening further to 52bps.
US markets on close: Dow +0.7%, S&P500 +0.9%, Nasdaq +1.4%
Best Sector in S&P500: Energy
Worst Sector in S&P500: IT
Biggest gainers: RIG +5.4%; CF +4.5%; GPS +4.2%; MOS +4.1%
Biggest losers: WDC -3.7%; NVDA -3.6%; SYMC -2.8%; AMD -2.6%
At the close: VIX 11.22 (+0.4%); Treasuries: 2-yr 1.41% (+2.0%), 10-yr 2.35% (+2.0%), 30-yr 2.86% (+0.9%)
Notable US Equities
TSLA Reports Q2 deliveries just over 22.0K v 24.2Ke v just over 25.0K q/q; Provided global economic conditions do not worsen considerably, company is confident that combined deliveries of Model S and Model X in H2 of 2017 will likely exceed deliveries in H1 of 2017.
