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Asia Mid-Session Market Update: Japan Prelim PMI slides to 6-month low; North Korea carries out another rocket engine test

US Session Highlights

(US) INITIAL JOBLESS CLAIMS: 241K V 240KE; CONTINUING CLAIMS: 1.944M V 1.93ME

(US) APR FHFA HOUSE PRICE INDEX M/M: 0.7% V 0.5%E

Stocks opened to the upside this morning, with the Dow gaining 50 points, before retracing late afternoon. Other major markets followed suit, with both the Dow and the S&P wiping out all their gains and closing slightly down on the day. The Nasdaq managed to post a small gain, and the Russell kept 0.4% of it gains for the day. In the S&P, the Health Care sector gained 1.1%, helping to pare losses from Consumer Staples and Financials, which lost 0.6% each.

US markets on close: Dow -0.1%, S&P500 -0.1%, Nasdaq flat

Best Sector in S&P500: Health Care

Worst Sector in S&P500: Consumer Staples

Biggest gainers: ORCL +8.6%; SPLS +6.2%; KMX +4.6%

Biggest losers: ACN -4.0%; DPS -3.6%; WLTW -2.4%

At the close: VIX 10.5 (-0.3pts); Treasuries: 2-yr 1.35% (flat), 10-yr 2.15% (-1bps), 30-yr 2.72% (flat)

US movers afterhours

SGH Reports Q3 $0.62 v $0.62e, Rev $207M v $205Me; Guides Q4 $0.62-0.66 v $0.61e, Rev $205-215M v $213Me, gross margin 21-23%; +2.1% afterhours

BBBY Reports Q1 $0.58 adj v $0.66e, Rev $2.74B v $2.80Be; Affirms FY17 EPS to decline low single digits to 10%, implies low end $4.12 v $4.29e; -7.4% afterhours

Politics

(NZ) Latest Roy Morgan survey shows ruling National Party support rise 3.5pts to 46.5% following FY17/18 budget - NZ press

(VE) Venezuela opposition to block streets nationwide on Friday

Key economic data

(JP) JAPAN JUNE PRELIMINARY PMI MANUFACTURING: 52.0 V 53.1 PRIOR; 9th straight month of expansion; 6-month low

Speakers and Press

China

(CN) PBoC: China banks are confident about June-end liquidity - Chinese press

(CN) China Banking Regulator (CBRC): China banks' NPL ratio fell 16bps y/y to 1.99% in May

(CN) China said to cut retail gasoline price by CNY250/ton starting June 24th - press

Australia/New Zealand

(NZ) Quotable Value (QV): Average cost of building a home in New Zealand rose 3.5% y/y in May - NZ press

Korea

(KR) US officials: North Korea has carried out another rocket engine test, likely for small stage of 3-stage ICBM type rocket engine - press

Asian Equity Indices/Futures (00:30ET)

Nikkei +0.2%, Hang Seng +0.1%, Shanghai Composite -0.7%, ASX200 +0.0%, Kospi +0.1%

Equity Futures: S&P500 +0.1%; Nasdaq +0.1%, Dax +0.1%, FTSE100 flat

FX ranges/Commodities/Fixed Income (00:30ET)

EUR 1.1160-1.1170; JPY 110.95-111.45; AUD 0.7540-0.7560; NZD 0.7200-0.7270

Aug Gold +0.7% at 1,254/oz; Aug Crude Oil +0.1% at $42.55/brl; July Copper -0.1% at $2.59/lb

iShares Silver Trust ETF daily holdings rise to 10,571 tonnes from 10,504 tonnes prior

(CN) PBOC SETS YUAN MID POINT AT 6.8238 V 6.8197 PRIOR; Weakest Yuan fix since May 31st and 4th straight weaker setting

(CN) PBoC: To skip today's open market operation (OMO)

(CN) China Finance Ministry sells 3-month bonds at 3.376%

(AU) Australia Finance Ministry (AOFM) sells A$600M in 1.75% 2020 bonds; avg yield 1.843%; bid-to-cover 5.29x

Asia equities notable movers

Australia

CSR (CSR) +2.0%; Guides FY17/18 earnings to rise y/y; Chairman to stand down at the 2018 AGM

Infigen (IFN) -4.9%; Cuts FY17 EBITDA to A$136-138M from A$147M prior forecast

Japan

Takata (7312) +45.5%; Toyota, Honda and Nissan will continue to financially support Takata after it files for bankruptcy protection - Nikkei

Don Quixote (7532) +0.2%; FY16/17 Rev said to rise 10% to ~¥830B; Op profit seen around ¥46.5B, above ¥45.5B prior forecast - Nikkei

Toshiba (6502) -4.2%; Reportedly to request securities report filing deadline extension - Japan press

Hong Kong

Lonking Holdings Limited (3339) +3.0%; Issues positive H1 profit alert

China Electric (85) -2.4%; Guides H1 profit -90% to -80% y/y due to prior one off gain

Bauhaus International Holdings (483) +31.3%; Reports FY17 (HK$) Net 64.9M v 52.9M y/y; Rev 1.31B v 1.51B y/y; SSS -10%

For the 24 hours to 23:00 GMT, the AUD marginally declined against the USD and closed at 0.7541.

LME Copper prices rose 1.5% or $86.0/MT to $5736.0/MT. Aluminium prices rose 0.4% or $6.5/MT to $1872.0/MT.

In the Asian session, at GMT0300, the pair is trading at 0.7546, with the AUD trading 0.07% higher against the USD from yesterday’s close.

The pair is expected to find support at 0.7534, and a fall through could take it to the next support level of 0.7521. The pair is expected to find its first resistance at 0.7560, and a rise through could take it to the next resistance level of 0.7573.

Next week, traders would focus on Australia’s HIA new home sales and private sector credit data.

The currency pair is trading between its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the EUR declined 0.15% against the USD and closed at 1.1165.

On the data front, the Euro-zone's flash consumer confidence index improved more-than-expected to a level of -1.3 in June, notching its highest level since April 2001, buoyed by improved economic outlook after recent data signalled that the region's economy has gathered pace. Markets were expecting the index to climb to a level of -3.0, compared to a reading of -3.3 in the prior month.

Meanwhile, the European Central Bank (ECB), in its latest economic bulletin report, noted that the common currency region remains on course for stronger growth this quarter. Further, the central bank added that underlying inflation continues to remain subdued and has yet to show a convincing upward trend.

Macroeconomic data indicated that the number of Americans filing for fresh jobless claims advanced to a level of 241.0K in the week ended 17 June, slightly more than market consensus for a rise to a level of 240.0K. In the prior week, initial jobless claims had registered a revised reading of 238.0K. On the contrary, the nation's housing price index climbed 0.7% on a monthly basis in April, compared to a revised similar rise in the prior month, while market participants had envisaged for a gain of 0.5%. Also, the nation's leading indicator increased 0.3% on a monthly basis in May, at par with market expectations. In the prior month, leading indicator had registered a revised rise of 0.2%.

In the Asian session, at GMT0300, the pair is trading at 1.1158, with the EUR trading 0.09% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1139, and a fall through could take it to the next support level of 1.1119. The pair is expected to find its first resistance at 1.1178, and a rise through could take it to the next resistance level of 1.1197.

Ahead in the day, investors will keep a close watch on the flash Markit manufacturing and services PMIs data for June across the Euro-zone, to gauge strength in the region's economy. Moreover, in the US, the preliminary Markit manufacturing and services PMIs for June along with new home sales data for May, slated to release later in the day, will be on investors' radar.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the GBP rose 0.14% against the USD and closed at 1.2679.

In economic news, data revealed that UK’s CBI industrial trends total orders surprisingly advanced to a nearly 30-year high level of 16.0 in June, mainly driven by faster growth in export orders. Meanwhile, markets expected it to ease to a level of 7.0, from a reading of 9.0 reported in the preceding month.

In the Asian session, at GMT0300, the pair is trading at 1.2696, with the GBP trading 0.13% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2667, and a fall through could take it to the next support level of 1.2637. The pair is expected to find its first resistance at 1.2713, and a rise through could take it to the next resistance level of 1.2729.

With no major economic releases in the UK today, investors will look forward to Britain’s final GDP figures, BBA mortgage applications, GfK consumer confidence and net consumer credit data, all slated to release next week.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.16% against the JPY and closed at 111.30.

Yesterday, the Japanese Government raised its assessment of the economy for the first time in six months, noting that the economy is on a gradual recovery path aided by increased consumer spending and capital investment.

In the Asian session, at GMT0300, the pair is trading at 111.36, with the USD trading marginally higher against the JPY from yesterday's close.

Overnight data revealed that Japan's preliminary Nikkei manufacturing PMI dropped to a level of 52.0 in June, reducing the nation's manufacturing sector growth to its weakest level in seven months. In the prior month, the PMI had recorded a reading of 53.1.

The pair is expected to find support at 111.06, and a fall through could take it to the next support level of 110.75. The pair is expected to find its first resistance at 111.56, and a rise through could take it to the next resistance level of 111.75.

Going forward, Japan's jobless rate, consumer price index, industrial production and retail trade data, all slated to release next week, will attract market attention.

The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.08% against the CHF and closed at 0.9719.

On the economic front, Switzerland trade surplus widened to a level of CHF3.40 billion in May, as exports grew faster than imports. The nation had reported a revised surplus of CHF1.96 billion in the prior month.

In the Asian session, at GMT0300, the pair is trading at 0.9711, with the USD trading 0.08% lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9700, and a fall through could take it to the next support level of 0.9688. The pair is expected to find its first resistance at 0.9733, and a rise through could take it to the next resistance level of 0.9754.

Moving ahead, investors will eye Switzerland’s KOF institute summer economic forecast report, scheduled to release in a few hours.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.71% against the CAD and closed at 1.3233.

The Canadian Dollar gained ground, after Canada’s retail sales rose more-than-anticipated by 0.8% MoM in April, boosting optimism over the state of the economy and intensifying hopes that the Bank of Canada will raise interest rates at its July meeting. Retail sales had recorded a revised advance of 0.5% in the previous month, while markets were expecting for a gain of 0.3%.

In the Asian session, at GMT0300, the pair is trading at 1.3228, with the USD trading a tad lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3178, and a fall through could take it to the next support level of 1.3128. The pair is expected to find its first resistance at 1.3308, and a rise through could take it to the next resistance level of 1.3388.

This afternoon will bring a crucial Canadian release, namely the consumer price index for May.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

Short term DAX Elliott Wave view suggests the rally from 5/18 is unfolding as a double three Elliott Wave structure. Minute wave ((w)) ended at 12879.5 and Minute wave ((x)) pullback ended at 12617. Internal of Minute wave ((x)) subdivided as an expanded flat Elliott Wave structure where Minutte wave (a) ended at 12633.5, Minutte wave (b) ended at 12922.5 and Minutte wave (c) of ((x)) ended at 12617. DAX has broken above Minutte wave (b) on 6/14, adding conviction that the next leg higher has started. Up from 12617, the rally is unfolding as a zigzag Elliott Wave structure where Minutte wave (a) ended at 12948.5 and Minutte wave (b) is proposed complete at 12701.5. Near term, while pullbacks stay above 12701.5, and more importantly above 12617, expect Index to extend higher. We do not like selling the Index.

DAX 1 Hour Elliott Wave Chart

Currency pair EUR/USD

The EUR/USD is probably building a break, retracement, and continuation, which is why waves 1 and 2 (brown) are indicated on the chart. Price will need to break below the bottom at 1.11 before a potential wave 3 becomes likely.

The EUR/USD stopped at the 61.8% Fibonacci level of wave X (blue). A break below support (green) could indicate a continuation of the bearish trend. Price invalidates wave 2 (brown) if price manages to break above the 100% Fibonacci level but the other Fibonacci levels could act as resistance - similar to how price bounced at the 38.2% of wave 2 (brown).

Currency pair USD/JPY

The USD/JPY seems to be building a retracement after the bullish breakout above resistance (dotted red). The pullback is probably a wave 4 (orange) which could find support (green lines) at the previous bottom and tops.

The USD/JPY needs to break above resistance (red) before the wave 5 (orange) could start. A break below the 61.8% Fib of wave 4 vs 3 makes a wave 4 (orange) unlikely.

Currency pair GBP/USD

The GBP/USD is challenging resistance lines (red/orange) and a break above these levels would invalidate (part of) the current wave structure.

The GBP/USD is in a potential wave 4 (orange) but this wave is invalidated if price manages to break above the bottom of wave 1 (red). A break below support (green) could see the continuation of wave 3 (blue).

Global Markets:

• Asian stock markets: Nikkei up 0.15 %, Shanghai Composite fell 0.75 %, Hang Seng rose 0.05 %, ASX 200 unchanged
• Commodities: Gold at $1253 (+0.50 %), Silver at $16.60 (+0.55 %), WTI Oil at $42.90 (+0.40 %), Brent Oil at $45.40 (+0.40 %)
• Rates: US 10-year yield at 2.16, UK 10-year yield at 1.02, German 10-year yield at 0.26

News & Data

• Japan Manufacturing PMI 52.0 vs 53.4 expected – RTRS
• PBoC Fixes USDCNY Reference Rate At 6.8238 (prev fix 6.8197 prev close 6.8368)
• Asian shares flat, still on track for winning week – RTRS
• Dollar sluggish but firm, oil bounce helps commodity currencies – RTRS
• Oil edges up, but set for worst first-half performance in 20 years – RTRS

Markets Update:

Markets remained quiet overnight amid a lack of events. Most major Asian indices are unchanged on the day. Oil prices bounced slightly after briefly trading below $42 yesterday. The outlook remains negative, but support at $42 has proven to be relatively strong. WTI might see a bounce here before the downtrend continues.

The US Dollar came slightly under pressure in Asia. EUR/USD rose to 1.1165, while GBP/USD managed to return above 1.27. While the Euro rally may continue, the outlook for GBP is negative amid the political situation in the UK and uncertainty about the upcoming Brexit negotiations. Resistance is noted at 1.2720 and ahead of 1.28.

The Australian Dollar remains resilient, although it lacks momentum. Strong support is seen at 0.7520, while resistance lies at 0.76 and 0.7630. A clear break above 0.7630 is needed to confirm that the AUD rally will continue.

Upcoming Events:

• 08:00 BST – French Manufacturing PMI
• 08:00 BST – French Services PMI
• 08:30 BST – German Manufacturing PMI
• 08:30 BST – German Services PMI
• 09:00 BST – Euro Zone Manufacturing PMI
• 09:00 BST – Euro Zone Services PMI
• 13:30 BST – Canadian CPI
• 13:30 BST – Canadian Core CPI
• 14:45 BST – US Services PMI
• 14:45 BST – US Manufacturing PMI
• 15:00 BST – US New Home Sales