China Yuan fix firmer again as PBoC pledges two-way trade

Asian Mid-session Update: Japan Q2 GDP back in contraction after two quarters of growth; China Yuan fix firmer again as PBoC pledges two-way trade

Economic Data

- (JP) JAPAN Q2 PRELIMINARY GDP Q/Q: -0.4% (first contraction in 3 quarters) V -0.5%E; ANNUALIZED GDP: -1.6% V -1.8%E

- (NZ) NEW ZEALAND JULY PERFORMANCE SERVICES INDEX: 56.5 V 58.1 PRIOR; lowest since Feb 2015

- (TH) THAILAND Q2 GDP Q/Q: 0.4% V 0.2%E; Y/Y: 2.8% V 2.8%E

- (SG) SINGAPORE JULY ELECTRONIC EXPORTS Y/Y: 2.3% V 7.6% PRIOR; NON-OIL DOMESTIC EXPORTS M/M: +2.4% V -0.6%E; Y/Y: -0.8% V -1.0%E

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +0.4%, S&P/ASX +0.4%, Kospi -0.4%, Shanghai Composite -0.7%, Hang Seng -1.0%, Sept S&P500 -0.1% at 2,086

Commodities/Fixed Income

- Dec gold +0.3% at $1,115/oz, Sept crude oil -1.4% at $41.91/brl, Sept copper -1.0% at $2.33/lb

- USD/CNY: (CN) PBoC sets yuan mid point at 6.3969 v 6.3975 prior setting; 2nd straight firmer Yuan setting

- (KR) South Korea sells 10-yr govt bond, avg yield at 2.315%

Market Focal Points/FX

- Asian equity markets are mixed, as the worries over Chinese devaluation last week abated and the focus turning back on monetary policy - US releases FOMC meeting minutes and BOJ announcing its latest policy statement on Wednesday. For the 2nd straight day, the PBoC set its Yuan fix slightly firmer than the day before and very close (less than 1% away) to the closing rate of prior session. PBoC chief economist Ma Jun stated just that much over the weekend, reiterating the depreciation of the exchange rate is over and anticipating a period of two-way volatility with "chances for appreciation and depreciation." Ma added China has no desire to participate in a currency war while also affirming commitment to meet 7% 2015 GDP target in spite of some doubt in those plans expressed by the IMF over the weekend.

- Also of note in China, the NEA put out its July power consumption data showing its first decline since May at -1.3% y/y v +1.8% prior. Note the electricity use data is one of Beijing's preferred economic "heat map" components. NEA did suggest that August will see a return to positive growth. China's (and global) top property developer Vanke reported H1 results showing a 23% rise in sales but less than 1% rise in profits. New construction growth of 5% was also eclipsed by contracted sales growth of 9%, even though Vanke president said China "cities have emerged from their lows and market confidence has gradually picked up." Shares of Vanke were down over 2% in the morning session.

- Japan put out its initial estimate of Q2 GDP that showed its economy returning to contraction after 2 quarters of expansion. While the slump was slightly less than analyst consensus, the key GDP components of private consumption and corporate CAPEX were especially troubling at -0.8% v -0.4%e and -0.1% v 0.0%e respectively. Exports were also notably weaker, falling over 4% after a near 2% rise in Q2. Japan Econ Min Amari attributed slower spending to bad weather, slower external demand, and tax hike on mini vehicles, anticipating recovery in both components going forward. Amari did add that more efforts are needed to boost wages.

- USD majors are seeing little volatility in the early going of the new week. USD/JPY firmed up about 15pips above 124.40 following GDP release, while EUR/USD retreated modestly for the 2nd straight day to trade below 1.11. AUD/USD and NZD/USD were little changed from Friday levels above 0.7360 and 0.6530. Markets will tune in for tomorrow's RBA policy meeting minutes from this month tomorrow, closely followed by Fonterra dairy auction in early US hours on Tuesday.

***Equities***

US equities/ADRs:

- BXLT: Shire was reportedly asked to boost its bid for Baxalto to $35B (about 16% premium to prior offer) or $50/shr - UK press

- WMB: Reportedly Spectra Energy planning bid for Williams Companies - press

Notable movers by sector:

- Consumer discretionary: China Eastern Airlines 600115.CN +0.2% (H1 result, to buy new jets); Zhejiang Dahua Technology Co 002236.CN +5.8% (H1 result)

- Financials: China Vanke Co 000002.CN -2.3% (H1 result); Beijing Urban Construction Investment & Development Co 600266.CN -3.1% (H1 result); Shimao Property 813.HK -1.6%(July result); Westpac Banking WBC.AU +1.5% (CET1 update); Newcrest Mining FXL.AU +4.2% (FY15 result)

- Industrials: China Merchants Energy Shipping Co 601872.CN +2.6% (H1 result); Luxshare Precision Industry Co 002475.CN -7.1% (H1 result); China Haisum Engineering Co 002116.CN +5.0% (H1 result); Shenzhen Yantian Port Holding Co 000088.CN +2.3% (H1 result); Daewoo Shipbuilding & Marine 042660.KR -0.2% (exec resignations); Macquarie Group AZJ.AU +4.6% (FY15 result)

- Technology: BesTV New Media Co Ltd:Technology 600637.CN -2.0% (H1 result); Shaanxi Aerospace Power Hi-Tech Co 600343.CN +2.9% (H1 result); Shanghai Great Wisdom Co 601519.CN -3.7% (H1 result); Beijing Ultrapower Software Co 300002.CN -3.0% (H1 result); Mesoblast Ltd MSB.AU -3.2% (FY15 result)

- Materials: Zhaojin Mining Industry 1818.HK -2.0% (H1 result); China National Materials Company 1893.HK +1.4% (H1 result); Newcrest Mining NCM.AU +4.2% (FY15 result)

- Healthcare: Guangzhou Baiyunshan Pharmaceutical Holdings Co 600332.CN +10.0% (H1 result); Tianjin ZhongXin Pharmaceutical Group Co 600329.CN +7.7% (H1 result)

- Utilities: Guangdong Investment 270.HK +4.1% (H1 result)

-Energy: Datang International Power Generation 601991.CN -1.0% (H1 result); Santos Ltd STO.AU -0.3% (clarification); Energy Developments ENE.AU -0.1% (FY15 result)