AUD falls on lower than expected retail sales

Asian Mid-session Update: AUD falls on lower than expected retail sales; Shanghai plummets again

Economic Data

- (CN) CHINA JUN HSBC SERVICES PMI: 51.8 V 53.5 PRIOR (5 month low); COMPOSITE PMI: 50.6 V 51.2 PRIOR

- (JP) JAPAN MAY MARKIT SERVICES PMI: 51.8 (9 month high) V 51.5 PRIOR; COMPOSITE PMI 51.5: V 51.6 PRIOR

- (AU) AUSTRALIA MAY RETAIL SALES M/M: 0.3% V 0.5%E

- (AU) AUSTRALIA JUN AIG PERF OF SERVICES INDEX: 51.2 V 49.6 PRIOR (1st expansion in 3 months)

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -0.4%, S&P/ASX -1.8%, Kospi -0.6%, Shanghai Composite -5.0%, Hang Seng -0.4%, Sept S&P500 flat at 2,068

Commodities/Fixed Income

- Aug gold +0.2% at $1,165/oz, Aug crude oil -0.5% at $56.67/brl, Sept copper -0.2% at $2.63/lb

- GLD: SPDR Gold Trust ETF daily holdings fall 1.7 tonnes to 709.7 tonnes

- (JP) BOJ offers to buy ¥400B in 5-10 yr JGBs, ¥240B in 10-25 JGBs, ¥140B in JGBs with maturity over 25-yr, as well as ¥1.75T in T-bills

- (AU) Australia MoF (AOFM) sells A$800M in 2020 Bonds; avg yield: 2.3140%; bid-to-cover: 3.89x

Market Focal Points/FX

- Shanghai Composite continued its string of particularly large Friday losses, falling by as much as 7% in the morning session before settling off by about 3% going into the break. Policymakers are showing some desperation with chatter of market manipulation by shortsellers. The latest monetary easing measures are either falling on deaf ears or, as we mentioned yesterday in the critique of easing margin restrictions, actually being met with an adverse response. A report in today's Shanghai Daily suggested Beijing may have to tackle the issue with more aggressive regulator support - namely the reduction in securities stamp tax - known to have been effective in boosting prices in the past.

- A series of services/composite PMI reports were mixed, tracking manufacturing prints earlier this week. China HSBC services figure hit a 5-month low and resident economist said latest data signalled a further loss of growth momentum, with service sector, business activity, new orders and employment all expanded at slower rates. HSBC continues to anticipate further policy support in H2 in order for policymakers to achieve 7% growth target. Japan PMI hit a 9-month high rate, and here the economists noted business sentiment strengthening in spite of soft employment prints.

- Australia's retail sales recovered from 1-year low flat rate on the month but at a slower than expected pace, sending AUD/USD to 2 1/2 month lows below 0.7580.

- South Korea formally unveiled a stimulus package in the amount of $14.3B to help deal with MERS and slowing exports. The spending would raise 2015 fiscal deficit to 3.0% from 2.1% prior forecast and add 0.3pts to this year's GDP. Package includes KRW6.2T of new spending and KRW5.6T to cover tax cut related revenue loss.

- With all eyes are on the Greek referendum on Sunday, Fin Min Varoufakis in an interview with BBC announced there is a "100% chance" of a Greek agreement with creditors after Sunday's referendum, regardless of YES or NO vote.

- In key M&A, financial press reported Aetna is close to a near to purchase Humana for $230/shr [about 22% implied premium] in combined cash/stock deal valued around $34B, and the deal could be formalized before the weekend. The two names have been speculated in merger discussion in the past, though it appears the talks have progressed.

Equities

US equities / ADRs:

- HUM: Aetna said to be near deal to buy Humana for $230/shr [about 22% implied - premium in combined cash/stock deal valued around $34B - financial press

- KYO: Kyocera, Microsoft Expand Technology Sharing Agreement

Notable movers by sector:

- Consumer discretionary: G8 Education Ltd GEM.AU -2.8% (makes a takeover offer); Asahi Group Holdings 2502.JP +0.2% (H1 result speculation); Fast retailing 9983.JP -4.0% (Uniqlo SSS decline)

- Financials: Shimao Property 813.HK +0.8% (June result)

- Industrials: James Hardie Industries JHX.AU +1.4% (FY16 outlook)

- Technology: Konica Minolta Holdings Inc 4902.JP +0.4% (acquisition); Samsung Electronics 005930.KR -2.1% (Q2 result speculation)

- Materials: Anhui Conch Cement 914.HK -3.4% (China to limit certain cement production)

- Healthcare: Askul Corp 2678.JP +14.3% (FY14/15 result)