Asia Summary
Markets take a risk on sentiment at the start of the week, seemingly unconcerned about the G20 who met over the weekend in Hamburg, Germany among heavy protesting. The Communique was fairly standard, reiterating to fight protectionism and secure free trade. New elements include to agree by November steps to reduce global overcapacity of steel and in afirst ever dissent: 19 members affirmed the Paris accord with the US (dissenter) saying it will help other countries "access and use fossil fuels more cleanly and efficiently."
Japan govt cut its assessment of machinery orders for the first time since September 2016 after May orders fell 3.6% m/m and only rose 0.6% y/y v the expected 7.6%. USD/JPY rose 0.1% to 113.99 after the data and later tested 114.20. The PBOC again skipped open market operations for the 12th consecutive day, while local press highlighted financial stability as a major topic for the National Financial Work Conference, which will start in mid-July. CPI and PPI were a non-event in the session.
Global shipping names rallied after Cosco Shipping (1919.HK) confirmed it will acquire Orient Overseas for HK$78.67/shr in a HK$49.2B deal. Maersk gave their support of the deal, saying consolidation would be good for the industry.
Key economic data
(CN) CHINA JUN CPI M/M: -0.2% V -0.1% PRIOR; Y/Y: 1.5% V 1.6%E
(CN) CHINA JUN PPI Y/Y: 5.5% V 5.5%E
(JP) JAPAN JUN BANK LENDING (INC TRUSTS) Y/Y: 3.3% V 3.2%E; BANK LENDING (EX-TRUSTS) Y/Y: 3.3% V 3.3%E
(JP) JAPAN MAY TOTAL CURRENT ACCOUNT: ¥1.65T V ¥1.79TE; ADJ TOTALCURRENT ACCOUNT: ¥1.40T V ¥1.63TE; TRADE BALANCE BOP BASIS: -¥115.1B V -¥45.0BE
(JP) JAPAN MAY MACHINE ORDERS M/M: -3.6% V 1.7%E; Y/Y: 0.6% V 7.6%E
(JP) Japan Jun Bankruptcies Y/Y: -7.5% v 19.5% prior
Speakers and Press
China
(CN) China Head of State Administration of Foreign Exchange (SAFE) Pan Gongsheng said no intention of devaluing yuan currency to boost its competitiveness – financial press
(CN) Overseas M&A expected to be major talking point at National Financial Work Conference in mid-July – SCMP
Japan
(JP) Bank of Japan (BOJ) Gov Kuroda: Economy is turning towards moderate expansion; BOJ will continue to adjust policy as needed
(JP) According to Yomiuri poll Japan PM Abe approval rating fell to 36% from 49% in June (lowest reading since being in office)
Australia/New Zealand
(AU) Australia Department of Industry, Science and Innovation: Iron ore will sink back below $50/ metric ton next year as global supply expands and demand moderates in China
(NZ) New Zealand Ministry of Business, Innovation and Employment: Find no evidence of China steel coil dumping
US
(US) Fed’s Kashkari says large banks need to raise ‘much more’ equity – US financial press
Asian Equity Indices/Futures (00:30ET)
Nikkei +0.8%, Hang Seng 1.0%, Shanghai Composite -0.2%, ASX200 +0.5%, Kospi +0.3%
Equity Futures: S&P500 +0.2%; Nasdaq +0.4%, Dax +0.2%, FTSE100 +0.3%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1409-1.1390; JPY 114.20-113.89; AUD 0.7615-0.7596; NZD 0.7281-0.7265
Aug Gold +0.1% at 1,210/oz; Aug Crude Oil +-0.8% at $44.58/brl; Sept Copper +0.2% at $2.66/lb
(AU) Australia repurchases A$500M in Oct 2018 and March 2019 bonds
(CN) PBoC skips open market operations (12th straight session)
(CN) PBOC SETS YUAN REFERENCE RATE AT 6.7964 V 6.7914 PRIOR
(KR) Bank of Korea (BOK) sells KRW1.20T v KRW1.2T offered in 1-yr monetary stabilization bonds; avg yield 1.46% v 1.47% prior
(KR) South Korea sells 5-year bonds at 1.985%
(JP) Japan 5-year JGB yield hits highest level since Jan 2016, near -0.03%
Asia equities notable movers
Australia
Bellamy’s Australia, BAL.AU China suspends export licence of newly acquired canning facility
Ardent Leisure Group,AAD.AU Reports June theme park unit visitation -30.5% y/y, Rev A$4.4M, -35.3% y/y; +2.5%
88 Energy,88E.AU Gives update on Project Icewine, located onshore North Slope of Alaska; -25.5%
Japan
KDDI Corp, 9433.JP President comments on mobile price cuts: Says price cuts needed to compete with Mvnos; -3.1%
Hong Kong/China
316.HK China COSCO Shipping Holdings confirms to bid HK$49.2B ($6.3B) or HK$78.67/share in cash for Orient Overseas International (~31% premium); +24.2%
China Life, 2628.HK China Development said to seek to buy up to 25.3% of China Life – US financial press; +0.4%
US
MYCC To be acquired by Apollo Global Management for $17.12/shr cash (~31% premium); declares one time dividend of $0.13
PBR Federal Court of Appeals in New York partially grants appeal related to class action
WFC Court Grants Preliminary Approval of $142M Settlement in Wells Fargo Unauthorized Accounts Class Action
US market Friday Summary
US stock markets moved up after the June jobs report offered more of the same for investors and the Fed to ponder. Fears that the Fed might have made (or is about to make) a policy mistake should ease, but the data are likely to suggest to the Fed that there is no urgency about raising rates again soon. Job growth accelerated ahead of forecasts, but wage growth came up short of expectations once again. The unemployment rate ticked up along with the participation rate, indicating some slack likely still exists for the US labor market. The NASDAQ reversed course once again, adhering to the fickle nature of trade that has engulfed technology stocks in recent weeks. Along with the strength in technology, homebuilding stocks move higher along with healthcare and deep cyclical sectors. The energy complex moved lower along with crude oil prices.
US rates drifted higher, while the Treasury curve continued to steepen, and TIPS breakeven spreads came off, helped by the decline in oil prices. The US Dollar firmed almost across the board, with the exception being the Loonie. The Canadian Dollar surged after a Canada jobs report crushed expectations. The Yen remained under pressure after the BOJ offered to buy unlimited amount in fixed-rate bonds as part of their yield control operations. Gold prices dropped back towards the 1200 mark, hitting that level for the first time since March.
