Russia, Ukraine meet in Berlin

Asian Market Update: China property sector, foreign direct investment continue to slow; Russia, Ukraine meet in Berlin

Economic Data

- (CN) CHINA JULY ACTUAL FOREIGN DIRECT INVESTMENT (FDI) Y/Y: -17.0% (to $71.1B) V +0.2% PRIOR; YTD y/y: -0.4% (first decline since Mar 2013) vs +2.2% prior

- (CN) CHINA JULY NEW HOME PRICES M/M: PRICES RISE IN 2 OF 70 CITIES V 8 PRIOR; Y/Y: PRICES RISE IN 65 OF 70 CITIES V 69 PRIOR

- (AU) AUSTRALIA JULY NEW MOTOR VEHICLE SALES M/M: -1.3% V 2.2% PRIOR; Y/Y: -0.2% V -2.0% PRIOR

- (NZ) NEW ZEALAND JULY PERFORMANCE SERVICES INDEX: 58.4 (3-month high) V 55.2 PRIOR

- (TH) THAILAND Q2 GDP Q/Q: 0.9% V 0.7%E; Y/Y: 0.4% V 0.0%E

- (SG) SINGAPORE JULY ELECTRONIC EXPORTS Y/Y: -7.9% V -15.9%E; NON-OIL DOMESTIC EXPORTS M/M: 2.5% V 0.9%E; Y/Y: -3.3% V -4.0%E

- (UK) UK AUG RIGHTMOVE HOUSE PRICES M/M: -2.9% V -0.8% PRIOR (2nd consecutive decline, biggest decline in 20 months); Y/Y: 5.3% V 6.5% PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +0.1%, S&P/ASX +0.1%, Kospi -0.3%, Shanghai Composite +0.4%, Hang Seng -0.2%, Sept S&P500 +0.3% at 1,957

Commodities/Fixed Income/Currencies

- Dec gold -0.4% at $1,300, Sept crude oil -0.5% at $96.89/brl, Sept Copper flat $3.11/lb

- (KR) South Korea Finance Ministry sells 10-yr govt bonds at average yield of 3.069%

- (JP) BOJ offers to buy ¥450B in CP

- (CN) China may cut gasoline and diesel price by as much as CNY200/ton on Aug 19th (local time) due to falling oil price - financial press

Market Focal Points/Key Themes

- Ukraine downplayed the border crossing and subsequent altercation with Russian military vehicles that sent the markets reeling on Friday. Instead, investors are more enthused by reports of an agreement between Russia and Ukraine authorities on processing humanitarian aid across the border under direct supervision of the Red Cross. Meanwhile, foreign ministers from the two countries joined their counterparts from Germany and France in Berlin on Sunday for talks to set out a roadmap toward a ceasefire. While the progress is reportedly slow, more meetings are scheduled for Monday. Markets are taking comfort in more genuine indication of efforts to end hostilities by Moscow, sending S&P futures modestly higher.

- Several notable developments in China indicate more turbulence in the property market and declining investor confidence. July home prices in all 70 cities fell for the 3rd straight month and by a larger margin of 1.2% m/m. Prices were also down in 64 out of 70 cities, a record high and up from last month's 52. China's largest property developer Vanke also posted a 1% drop in H1 revenue and flat profit growth, even though sales area and contracted sales still grew double digits. Authorities continue to manage the descent, as China Construction Bank (CCB) looked to re-define "first home mortgages" for homes in Shanghai to boost demand. Outside the property space, July FDI fell on YTD y/y basis for the first time in well over a year, and China Commerce Ministry warned the economy is facing pressure in meeting annual trade growth forecast of 7.5%

- Among key Australia earnings, gold producer Newcrest was off by about 1% as profits fell even though the company affirmed FY15 output targets. NAB is off by over 1% on Q3 update, noting 1% slide in revenue was doe to lower markets income causing subdued volatility and reduced trading opportunities. BHP was speculated to spin off a new mining company with A$14B in "unwanted assets" when it also reports results this week.

- USD majors are little changed with the exception of cable, where a hawkish set of comments from BOE Gov Carney undid some of the damage from the BOE inflation report and reined in central bank expectations. Carney said BOE does not need wage growth to start raising rates, and that the economy is more than half way to full recovery. GBP/USD opened higher and extended the rally to 40pips above $1.6730 ahead of the London open.

Equities

US markets:

- UNP: Collision of two UNP-operated trains in Arkansas left one person dead and two injured - press

- BIIB: PLEGRIDY(Peginterferon Beta-1a) Approved in the US for the Treatment of Multiple Sclerosis

- TSLA: Increases warranty duration for the Model S drive unit to 8 years and unlimited miles; will have a "moderately negative" effect on earnings in the short term

- IBM: Receives CFIUS approval for x86-Based Server Divestiture to Lenovo

- APA: Makes an oil discovery offshore in W Australia; Location may hold up to 300M barrels of crude oil - financial press

Notable movers by sector:

- Consumer Discretionary: Ansell ANN.AU +2.3% (FY14 results)

- Financials: Ardent Leisure Group AAD.AU +2.5% (FY14 results); Chongqing Rural Commercial Bank 3618.HK -2.5% (H1 results); National Australia Bank NAB.AU -1.4% (Q3 results); China Vanke 000002.CN -0.2% (H1 results)

- Materials: Newcrest Mining -0.8% (FY14 results); OZ Minerals OZL.AU +3.0% (Carrapateena Project pre-feasibility study)

- Energy: Sinopec Engineering Group 2386.HK -4.2% (H1 results); China Coal Energy 1898.HK flat (H1 results)

- Industrials: Boart Longyear BLY.AU +5.1% (amends credit facility); Harbin Electric 1133.HK -7.7% (H1 results); James Hardie Industries JHX.AU +3.2% (analyst action); Aurizon Holdings AZJ.AU -3.2% (FY14 results)

- Technology: Sunny Optical Technology Group 2382.HK +6.0% (H1 results); Brambles Limited BXB.AU +1.3% (BlackRock ceasing to be substantial holder); Lenovo 992.HK +2.4% (receives approval on IBM server deal)

- Healthcare: Chugai Pharmaceutical 4519.JP +14.3% (denies speculation over acquisition by Roche)