AUD slides as RBA's Stevens sees further slowdown in growth

Asian Market Update: AUD slides as RBA's Stevens sees further slowdown in growth; Japan's Aso repeats pledge to shy away from FX intervention

 

Economic Data

- (VN) Vietnam May CPI y/y: 2.3% v 2.0%e

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.7 v 115.1 prior

 

Index Snapshot (as of 04:00 GMT)

- Nikkei225 -0.7%, S&P/ASX -0.1%, Kospi -0.6%, Shanghai Composite -0.8%, Hang Seng -0.4%, Jun S&P500 flat at 2,046

 

Commodities/Fixed Income

- June gold -0.4% at $1,246/oz, Jul crude oil -0.4% at $47.92/brl, Jul copper -0.1% at $2.05/lb

- GLD: SPDR Gold Trust ETF daily holdings rise 3.2 tonnes to 872.5 tonnes; 12th straight increase; highest since Oct 2013

- SLV: iShares Silver Trust ETF daily holdings fall to 10,442 tonnes from 10,451 tonnes prior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.5468 V 6.5455 PRIOR

- (CN) PBOC to inject CNY65B in 7-day reverse repos

- (AU) Australia MoF (AOFM) sells A$150M in 3% 2025 indexed Bonds; avg yield: 0.5321%; bid-to-cover: 5.53x

 

Market Focal Points/FX

- Asian equity indices are in the red, tracking late-session sell-down on Wall Street. More hawkish Fed speak remains among the top hurdles to a bounce in equities, as investors continue to monitor the 6-week range of 2,040-2,100 in S&P500. With little new economic data, the end of the earnings season, and significant event risk in the coming month, sentiment has turned more cautiously in favor of "wait and see". USD majors had been generally range-bound early on, though late in the session AUD/USD fell some 30pips below $0.72 on RBA Gov Stevens comments and NZD/USD also slid 50pips below 0.6720, while USD/JPY traded in a 109.20-45 range and EUR/USD was supported by 1.12 level.

- RBA's Stevens spoke for the first time since the surprise Australia rate cut, reiterating that inflation is too low, economy is taking longer to gain traction, and budget still requires some work. Stevens also spoke favorably of his incoming replacement - Dep Gov Lowe. On FX, Stevens said AUD is doing what you would expect. AUD/USD moved lower by nearly 40pips on those remarks toward $0.7180, while 3-year Aussie govt yield slid 2bps below 1.62%. In Australia financials, ANZ spokesperson said the bank is considering options for its wealth management unit, and Westpac moved to ease restrictions on investor mortgages, lowering downpayment threshold to 10% from 20%.

- Japan's Fin Min Aso indicated the latest G7 discussions among Fin Mins last weekend work to boost demand by fiscal, monetary and regulatory means. Aso also said the upcoming discussions among G7 nations' leaders this week will likely not break any new ground. He also deflected the criticism on FX from US Treasury's Lew, noting different countries will have various view on fx market, adding that moves of ¥5 over 2 days should be considered as "one-way" but reiterating that Japan has no intention to further lower FX. Aso also said he should generally tone down his remarks on FX going forward. In the mean time, an analyst with Daiwa stated Japan is unlikely to intervene above ¥100, and BoA/ML speculated USD/JPY could reach ¥113 as markets prepare for even more stimulus at the June meeting in advance of what is likely to be a contraction in Japan GDP in Q2.

- Among other notable developments in an otherwise quiet Asian session, South Korea govt think tank KDI lowered 2016 GDP target to 2.6% from 3.0% due to sluggish exports and global slowdown. In China, a Xinhua report stated the govt should avoid large scale of stimulus in property sector, adding that the problem of excess inventory cannot be solved with more leverage.

- Outside of Asia, the latest Brexit poll by UK's Daily Telegraph saw the Stay camp maintaining a double-digit lead on Leave supporters by 55% to 42% margin. Stateside, Philly Fed President Harker - a hawkish non-voter - called for 2-3 rate hikes by the FOMC this year in response to expected acceleration in wage growth and inflation along with improvement in US Q2 GDP.

 

Equities

US equities/ADRs:

- XLNX: Guides initial FY17 Rev +4-8% y/y, implies R$2.3-2.4B v $2.35Be - analyst day; flat afterhours

- PE: Announces $200M private placement of senior unsecured notes due 2024; -2.3% afterhours

- BAH: Announces secondary offering of 13M shares by affiliate of the Carlyle Group (9% of shares outstanding); -2.5% afterhours

 

Notable movers by sector:

- Consumer discretionary: Flight Centre FLT.AU -5.4% (guidance)

- Financials: GPT Metro Office Fund GMF.AU +0.4% (receives non-binding proposal); Westpac Banking Corp WBC.AU -0.3% (said to restrictions on investor mortgages)

- Industrials: BAIC Motor Corp 1958.HK +0.3% (plans electric car unit's IPO)