Offshore Yuan falls after reports the IMF will postpone decision on SDR basket

Asian Mid-session Update: Offshore Yuan falls after reports the IMF will postpone decision on SDR basket; Services PMIs come in mixed

Economic Data

- (CN) CHINA JULY CAIXIN SERVICES PMI: 53.8 (11-month high) V 51.8 PRIOR; COMPOSITE PMI: 50.2 V 50.6 PRIOR

- (HK) HONG KONG JULY NIKKEI PMI: 48.2 V 49.2 PRIOR (5th consecutive month of contraction)

- (JP) JAPAN JULY NIKKEI SERVICES PMI: 51.2 (4-month low) V 51.8 PRIOR; COMPOSITE PMI 51.5 V 51.5 PRIOR

- (AU) AUSTRALIA JULY AIG PERF OF SERVICES INDEX: 54.1 V 51.2 PRIOR (2nd month of expansion; highest since Feb 2014)

- (NZ) NEW ZEALAND Q2 EMPLOYMENT CHANGE Q/Q: 0.3% (2-year low) V 0.5%E; Y/Y: 3.0% V 3.4%E

- (NZ) NEW ZEALAND Q2 UNEMPLOYMENT RATE: 5.9% (5-quarter high) V 5.9%E; PARTICIPATION RATE 69.3% (3-month low) V 69.6%E

- (PH) Philippines July CPI M/M: 0.1% v 0.2%E; Y/Y: 0.8% v 0.8%E; CPI Core Y/Y: 1.9% v 1.9%E

- (KR) South Korea July Foreign Reserves: $370.8B v $374.8B prior

- (UK) UK JULY BRC SHOP PRICE INDEX Y/Y: -1.4% V -1.3% PRIOR; 27th straight decline

Index Snapshot (as of 04:30 GMT)

- Nikkei225 +0.7%, S&P/ASX -0.5%, Kospi flat, Shanghai Composite -1.3%, Hang Seng +0.3%, Sept S&P500 +0.2% at 2,087

Commodities/Fixed Income

- Dec gold -0.5% at $1,085/oz, Sept crude oil +0.4% at $45.92/brl, Sept copper -0.7% at $2.35/lb

- (US) API Petroleum Inventories: Crude -2.4M v -1.5Me (2nd straight draw)

- (CN) China MOF sells 10-yr bonds, avg yield 3.446%

- USD/CNY: PBoC sets yuan mid point at 6.1186 v 6.1177 prior setting (weakest Yuan setting since July 21st)

- (JP) BOJ offers to buy ¥375B in 1-3yr JGBs, ¥425B in 3-5yr JGBs, and ¥400B in 5-10yr JGBs

- (AU) Australia MoF (AOFM) sells Bonds; avg yield: 2.7166%; bid-to-cover: 2.42x

Market Focal Points/FX

- Asian markets are trading mixed as heavy tone from late US session carries over into regional indices. Hawkish comments from a typically moderate FOMC voter Lockhart suggesting it may be appropriate to start tightening next month weighed on stocks and metals, while sending the greenback sharply higher. USD/JPY and EUR/USD consolidated USD gains around 124.40 and 1.0870 respectively.

- Shanghai Composite is the worst performer, falling well over 1% and at its lows going into its midday break. Recall overnight the index rallied over 3%, ending the day on its highs. Offshore Yuan weakened by nearly 1% at one point, rising above 6.2250 after press reports suggested the IMF has postponed its decision on SDR basket inclusion until Oct 2016 on concerns about Yuan as a potential reserve currency. IMF official said a "key focus of the review will be the determination on whether the RMB is a freely usable currency... Significant work remains outstanding to inform the Board's determination with regard to the RMB's inclusion in the SDR basket." In other notable Chinese press, CREIC speculated it would be challenging for the property market to recover, adding Tier 3 and 4 cities will be especially vulnerable during the adjustment period. Separate report suggested policymakers could further loosen policy for property market to stimulate sales, leading to some stabilization in prices.

- July services PMI were also mixed, with multi-month highs in China Caixin print, ongoing contraction in Hong Kong, and a retreat in Japan. China PMI was underscored by "acceleration of new orders, stronger underlying client demand and new customer wins led to increased new work at service providers." Employment component in China was also notably improved, with rate of hiring picking up since June. Hong Kong PMI was in contraction for 5th month, and Markit estimated that "latest PMI reading is consistent with an annual rate of economic growth of only 1.3%, down from an average pace of 1.5% signaled for the second quarter." Japan's PMI remained in expansion but fell to a 4-month low amid "marginal" rate of job creation.

- NZD/USD fell over 20pips below 0.6530 after the release of softer than expected labor data. Employment change slowed to a 2-year low, while jobless rate rose to a 1-year high. NZD was already under pressure after another poor Global Dairy Trade auction result in US hours, showing prices fell for the 10th straight time to their lowest levels since 2002.

Equities

US equities/ADRs:

- USNA: Reports Q2 $1.92 v $1.71e, R$233.2M v $219Me; +15.1% afterhours

- Z: Reports Q2 -$0.01 (adj) v -$0.21e, R$171.3M v $169Me; +14.7% afterhours

- FSLR: Reports Q2 $0.93 (GAAP) v $0.42e, R$896M v $769Me; +7.8% afterhours

- ATVI: Reports Q2 $0.14 v $0.09e, R$759M v $680Me; +6.7% afterhours

- LC: Reports Q2 $0.03 v $0.01e, R$96.1M v $89.7Me; +5.6% afterhours

- CERN: Reports Q2 $0.52 v $0.52e, R$1.13B v $1.20Be; -3.6% afterhours

- DIS: Reports Q3 $1.45 v $1.39e, R$13.1B v $13.2Be; -6.2% afterhours

- TRMB: Reports Q2 $0.28 v $0.27e, R$586M v $590Me; -13.4% afterhours

Notable movers by sector:

- Consumer discretionary: MGM China 2282.HK +5.3% (H1 result); Fast Retailing Co Ltd 9983.JP -4.0% (July Japan Uniqlo SSS); Skilled Group SKE.AU +4.8% (FY15 result)

- Financials: Huayuan Property Co 600743.CN -2.4% (H1 result); Greattown Holdings 600094.CN -10.0% (H1 result); China Everbright Bank Co 601818.CN -0.2% (lower margin lending leverage); Huatai Securities Co 6886.HK -0.9%, CITIC Securities 600030.CN -1.0%, Huatai Securities Co 601688.CN -1.7% (suspend short selling business)

- Industrials: China Railway Construction Corp 1186.HK +1.8% (awarded contract); Toyota Motor Corp 7203.JP -2.1% (Q1 result)

- Technology: Guangdong East Power Co 300376.CN +9.4% (H1 result)

- Materials: Fortescue Metals FMG.AU +8.6% (China investment speculation); Asia Cement China Holdings 743.HK -0.9% (H1 result); Sojitz 2768.JP -1.4% (Q1 result); Mitsubishi Corp 8058.JP -0.6% (Q1 result); Itochu Corp 8001.JP +5.1% (Q1 result); Anhui Conch Cement 600585.CN +4.8% (China to support infrastructure)

- Energy: Shunfeng Photovoltaic International 1165.HK -6.3% (H1 guidance); Idemitsu Kosan Co 5019.JP -7.1% (Q1 result)

- Telecom: Hutchison Telecom Hong Kong 215.HK +3.3% (H1 result)

- Healthcare: Huadong Medicine Co Ltd 000963.CN +5.3% (private placement)