Australia unemployment higher as participation rate rises

Asian Market Update: Australia unemployment higher as participation rate rises; China trade surplus narrows, missing consensus estimate

Notable Economic Data

- (CN) CHINA JUN TRADE BALANCE: $31.6B V $37.0BE; Exports Y/Y: +7.2% v +10.4%e; Imports Y/Y: +5.5% v +6.0%e

- (AU) AUSTRALIA JUN EMPLOYMENT CHANGE: 15.9K V 12.0KE; UNEMPLOYMENT RATE: 6.0% (4-month high) V 5.9%E

- (KR) BANK OF KOREA (BOK) LEAVES 7-DAY REPO RATE UNCHANGED AT 2.50% (AS EXPECTED); 14TH STRAIGHT PAUSE

- (JP) JAPAN JUN PPI (CGPI) M/M: 0.2% V 0.1%E; Y/Y: 4.6% (5-year high) V 4.5%E

- (JP) JAPAN MAY MACHINE ORDERS M/M: -19.5% (multi-year low) V +0.7%E; Y/Y: -14.3% V +10.1%E; Govt CUTS assessment on Machine Orders

- (NZ) NEW ZEALAND JUN BUSINESS MANUFACTURING PMI: 53.3 (first rise in 3 months) V 52.7 PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -0.2%, S&P/ASX +0.1%, Kospi +0.1%, Shanghai Composite flat, Hang Seng +0.3%, Sept S&P500 -0.1% at 1,965

Commodities/Fixed Income/Currencies

- Aug gold +0.5% at $1,330/oz, Aug crude oil -0.5% at $101.82/brl, Sept Copper +0.1% at $3.25/lb

- JGB: (JP) Japan MoF sells ¥646B in 1.7% (1.7% prior) 30-yr notes; Avg yield: 1.703% v 1.714% prior; Bid to cover: 3.12x v 3.00x prior

- (JP) Japan GPIF investment committee head Yonezawa: will seek to limit impact of domestic bond prices when reducing holdings - financial press

- (JP) Japan investors sold net ¥287.1B (2nd week of net sales) in foreign bonds vs sold net ¥1.05T prior week; Foreign Investors bought net ¥330.9B in Japan Stocks last week vs sold net ¥32.5B in prior week

- (CN) PBoC to drain CNY10B in 28-day repos (4th consecutive drain); Injects net CNY50B this week v injected CNY55B prior (9th consecutive week of net injection)

- (CN) PBoC sets yuan mid point at 6.1443 v 6.1565 prior setting (strongest Yuan setting since Mar 26th)

- AUD/USD was the most volatile pair among the dollar majors, briefly rising above $0.9450 after Australia employment data and then falling below $0.94 after the China trade figures. USD/JPY briefly fell below 101.50, down nearly 20pips from opening highs.

Market Focal Points/Key Themes

- China June trade surplus was up 16% y/y but still came in shy of consensus at $31.6B. Exports were up over 7% which was below the 10% estimate, while exports to US, EU, and Japan were all up in the single digits. H1 shipments of crude oil, iron ore, and Copper were up 10%, 19%, and 26% respectively. Customs office spokesperson Zhang attributed this month's surplus to fiscal policy measures, and also forecasted Q3 exports growth to top Q2 levels. Note that China Q2 GDP data will be released next week.

- Australia jobs data is mixed, with employment change of +15.9K topping consensus but jobless rate rising to a 4-month high of 6.0% due in part to rising participation rate. A closer look at the numbers also reveals a fall of 3.9K in full-time component along with a rise of 19.7K in part-time work, leading to lower increase in overall hours of worked of 15.1M v 33.5M in May. Subsequent comments from ANZ economist target unemployment rate to remain around 6% over the next year, with employment growth to pick up to just shy of 15K per month.

- Bank of Korea held rates unchanged for 14th consecutive month but this time one central bank member voted in favor of a policy easing. BOK also lowered its 2014 and 2015 targets for GDP to 3.8% and 4.0% from 4.0% and 4.2% prior. Inflation rate projections were reduced to 1.9% and 2.7% from 2.1% and 2.8% respectively. Separately, Korean press reported the govt may also cut its GDP projections to mid-3% level from 3.9% amid longer than anticipated impact of the ferry disaster and strong KRW.

- St Louis Fed President Bullard (not a FOMC voter) was surprisingly more hawkish given some of his recent measured tone. Bullard said the US unemployment could fall below 6% in the next 2 reports, leading to higher inflation and a more expedient tightening response from the FOMC than investors expect.

Equities

US markets:

- ZUMZ: Reports June SSS +3.1% v 1.5%e; raises Q2 outlook; +10.0% afterhours

- UAL: Reports June load factor 87.1% v 87.7% y/y; Q2 PRASM +3.5% y/y; +4.9% afterhours

- BAC: Said to have requested $0.05 quarterly dividend again; request follows capital miscalculation forcing it to suspend plans in Apr - financial press; -0.1% afterhours

- TSCO: Reports Q2 SSS +1.9%; guides FY14 to low end of range; -5.6% afterhours

- PBPB: Guides Q2 $0.06 v $0.12e, R$83.6M v $87Me, SSS -1.6% (ex-Easter holiday shift -0.9%); -17.0% afterhours

- LL: Guides Q2 $0.59-0.61 v $0.92e; R$263M v $306Me; -18.7% afterhours

Notable movers by sector:

- Consumer Discretionary: Chow Tai Fook 1929.HK -3.9% (Q2 SSS results)

- Financials: China Vanke 000002.CN +1.6%, Poly Real Estate 600048.CN +1.0% (China City of Xiamen, Jinan said to have eased home purchasing curbs)

- Materials: Syrah Resources SYR.AU +18.7% (Glencore to take closer look); Energy Resources of Australia ERA.AU -3.7% (Jun quarter operation review)

- Energy: Titan Energy Services TTN.AU +4.2% (prelim FY14 results)

- Industrials: Shenzhen Auto Electric Power Plant 002227.CN +1.5%, Sieyuan Electric 002028.CN +3.5%, XJ Electric 000400.CN +2.7%, Beijing Dynamic Power 600405.CN +10.0%; BYD Corp 1211.HK +4.0%, Wanxiang Qianchao 000559.CN +1.0% (China to remove sales tax on new energy vehicles)

- Utilities: J-Power 9513.JP -1.5% (thermal facility suspended)