Japan cabinet popularity plummets further

Asian Mid-session Update: China markets resume decline as industrial profits contract; Japan cabinet popularity plummets further

Economic Data

- (CN) CHINA JUNE INDUSTRIAL PROFITS Y/Y: -0.3% V +0.6% PRIOR; YTD: -0.7% v -0.8% PRIOR

- (JP) JAPAN JUNE PPI SERVICES Y/Y: 0.4% V 0.6%E; 2-year low

Index Snapshot (as of 03:30 GMT)

- Nikkei225 -0.7%, S&P/ASX -0.1%, Kospi -0.5%, Shanghai Composite -1.2%, Hang Seng -2.3%, Sept S&P500 +0.1% at 2,078

Commodities/Fixed Income

- Aug gold +1.1% at $1,097/oz, Sept crude oil -0.2% at $48.03/brl, Sept copper -0.1% at $2.38/lb

- (KR) South Korea sells 20-yr govt bond, avg yield at 2.560%

- USD/CNY CICC: China may widen trading band to 3% from 2% within next 2 months

Market Focal Points/FX

- China markets are leading the selloff in the Asia Pacific, tracking another down day on Wall Street on Friday. Industrial profits decline and some profit-taking going into this week's Fed meeting are also cited behind the cautious sentiment, even though commentary from local officials was optimistic. State Information Center expects foreign trade stabilizing in H2 of this year, with 4% y/y rise in exports and imports falling just over 10%. Unemployment rate is seen at just above 4%, lower than 4.5%. Former PBoC adviser Li also anticipating economic slowdown to be short-lived, with medium term growth estimated around 7%. Lastly, National Energy Administration (NEA) forecast 2015 power consumption - one of Premier Li's preferred indicators to rise 3%, down from 3.8% last year.

- Controversial expansion of authorization for use of Japan's defense capacity continues to bear heavy political cost for PM Abe and his cabinet. Two separate press sources now see disapproval rating for Abe around 50% - his personal high - while one saw approval rating falling to a new low of 38%. That report also suggesting only 26% support the defense legislation. On the monetary front, BOJ Dep Gov Nakaso reiterated the central bank is prepared to adjust policy if needed based on upside and downside risks. Nakaso also pointed to lower oil prices slowing recovery in inflation, noting CPI would be 1% higher if oil price did not decline.

- In FX, USD majors saw modest greenback weakness across the board, tracking declines in US rates for much of last week. USD/JPY fell about 40pips below 123.50, EUR/USD was up nearly 50pips above 1.1010 at its high, and NZD/USD was up about 40pips above 0.66 at its highs. AUD/USD gains were more marginal of just over 30pips toward 0.73. Economists with Westpac said the aussie could fall below $0.70 if commodities continue to fall and Federal Reserve comes out with two 25bp hikes this year in Sept and December.

- Of note in Greece, former Fin Min Varoufakis denied speculation that he and other left-wing members of Syriza govt plotted on raiding Greek central bank reserves and hacking taxpayer accounts to pave the way for return of Drachma currency. Separately, ECB has rejected proposals by Greece to reopen financial markets on Monday and will likely set some temporary trading restrictions on funds from Greek bank accounts before stock trading can resume.

Equities

Notable movers by sector:

- Consumer discretionary: Shenguan Holdings Group Ltd 829.HK -5.8% (H1 guidance); Gome Electrical Appliances Holdings 493.HK -8.2% (acquisition); Navitas Ltd. NVT.AU -5.7% (FY15 result)

- Financials: DBS Group Holdings DBS.SG -1.3% (Q2 result)

- Industrials: China Railway Erju Co Ltd 600528.CN -4.2% (parent company being probed); Orient Overseas International 316.HK -2.8% (Q2 result); Sany Heavy Equipment International Holdings Co 631.HK -5.8% (H1 guidance); Yuexiu Transport Infrastructure 1052.HK -2.1% (H1 result); Doosan Infracore 042670.KR +15.6% (Q2 result); Fuji Heavy Industries Ltd 7270.JP +0.2% (Q1 result speculation); Nippon Yusen 9101.JP +2.1% (Q1 result speculation)

- Materials: Allied Cement 1312.HK -7.0% (H1 guidance); Asia Cement China Holdings Corp 743.HK -3.1% (H1 guidance); Millennium Minerals MOY.AU +12.0% (Q2 result); Nippon Steel & Sumitomo Metal Corp 5401.JP -1.3% (FY115/16 result speculation)

- Technology: Boyaa Interactive International Ltd 434.HK -12.8% (H1 guidance); Shenzhen Infogem Technologies Co 300085.CN +2.2% (draft plan for internet insurance)

- Energy: Shaanxi Coal and Chemical Industry Group Co 601225.CN -4.9% (H1 guidance); China Shenhua Energy 1088.HK -2.9% (separate listing of wind farm assets speculation)