China data lower than expected

Asia Market Update: China data lower than expected; PBOC holds off on raising OMO rates after Fed; Aussie employment comes in soft

General Trend:

- Overall markets are trading lower, tracking late US session, absorbing Fed rate hike and increased expectations for future policy moves

- USD lower in the session, after several days of strength; bond yields also tracking slightly lower

- Trade tensions remain front and center as talk circulates that Trump will meet with advisers tomorrow in order to decided on China tariffs

- Australia employment changed registered lower than expected; though unemployment rate fell 0.1%; A$ weakened 0.2% on the data

- China data came in softer than expected, though NBS affirmed 2018 GDP of 6.5%. Also noted Cannot rule out possibility that China's firms rush to export in anticipation of trade war with US

- KRW opened for trade much lower against the dollar

- BOJ reduced purchases of 3-5 year JGBs

 

Headlines/Economic Data

Japan

- Nikkei 225 opened -0.5%

- Subaru, 7270.JP May delay release report on improper testing - Nikkei

- (JP) Japan Investors Net Buying of Foreign Bonds: -¥488.5B v -¥1.66T prior week; Foreign Net Buying of Japan Stocks: -¥108.5B v -¥527.8B prior week

- (JP) Japan PM Abe considering summit with N. Korea Kim Aug/Sept - Japan press

- (JP) BoJ announcement related to daily bond buying operation: cuts 3-5-yr buying by ¥30B

Korea

- Kospi opened -0.7%

- (KR) South Korea analysts trade between the Koreas could be profitable but will require large amounts of investment - Korean press

- (KR) President Trump: Would love to have troops out of South Korea but its not an option right now; will talk to South Korea about them paying the US for troop presence

- (KR) North Korea Kim said to have promised to destroy Tongchang-Ri ICBM site - Korean press

- (KR) South Korea Vice Fin Min Ko: Do not expect large capital outflows due to rate gap with Fed; expects limited short term market impact from Fed

- (KR) Bank of Korea (BOK) Gov Lee: Today's Fed move will have limited impact on markets

- (KR) Sec of State Pompeo: suspending war games with South Korea requires productive talks with the North; wants to see major disarmament from North Korea in two years

- (KR) US Sec State Pompeo: South Korea President Moon said that South Korea will cooperate to implement agreement; Moon helped set foundation for Trump/Kim meeting

China/Hong Kong

- Hang Seng opened -0.1%, Shanghai Composite -0.4%

- (CN) Reportedly Pres Trump to meet with trade advisors tomorrow to decide whether to go ahead with China tariffs – press

- (CN) China PBOC Adviser: Cut to RRR is still necessary; Expect 2018 M2 growth to be higher y/y - China press

- (HK) Hong Kong Monetary Authority (HKMA) raises base rate 25bps to 2.25% (in line with Fed)

- (HK) HKMA Chief Chan: HK$ rates will follow US rate normalization; HK banks will eventually raise prime rates

- (CN) China PBoC Open Market Operation (OMO): Injects combined CNY150B in 7-day, 14-day and 28-day reverse repos v CNY130B prior: Net injects CNY70B v injects CNY70B prior;Leaves rates unchanged

- (CN) China PBoC sets yuan reference rate at 6.3962 v 6.4156 prior

- (CN) China PBOC Gov Yi Gang: China's economy is shifting to high quality development era; to use RRR and relending tools to support SMEs - speaking at forum

- (CN) CHINA MAY SURVEYED JOBLESS RATE: 4.8% V 4.9% PRIOR

- (CN) CHINA MAY INDUSTRIAL PRODUCTION Y/Y: 6.8% V 7.0%E; YTD Y/Y: % V 6.9%E

- (CN) China May Foreign Direct Investment (FDI) YTD y/y: 1.3% v 0.1% prior

- (CN) CHINA MAY RETAIL SALES Y/Y: 8.5% V 9.6%E; YTD Y/Y: 9.5% V 9.7%E

- (CN) China NBS Spokesperson: Confident of reaching 6.5% GDP in 2018. economy has continued with steady growth in H2

- (CN) China Banking and Insurance Regulatory Commission (CBIRC) Chairman Shuqing: Overall default ratio is very low compared to other countries; to appropriately deal with bond defaults

- (CN) China MOFCOM: China will push for a change in its exports pursuing size and speed to quality and efficiency

- (CN) China Securities Regulatory Commission (CSRC): Overseas investors have an obvious tendency to hold yuan assets, explains yuan strength against backdrop of weakness in some other currencies

- ZTE, 763.HK White House said to be working to prevent Congress from re-imposing penalties - US press

 

Australia/New Zealand

- ASX 200 opened 0.0%

- (AU) AUSTRALIA MAY EMPLOYMENT CHANGE: +12.0K V 19.0KE; UNEMPLOYMENT RATE: 5.4% V 5.5%E

- FCG.NZ NZ Commerce Commission believes method for calculating estimate of risk in the cost of financing milk processing operations is too low; creating a higher calculated milk price than competitors - NZ press

- Atlas Iron, [-19%], AGO.AU Gives update on North West Infrastructure: Got notice from WA Govt saying NWI does not have priority right to develop Stanley Point berths 3 &4 in Port Hedland

- (AU) Australia Jun Consumer Inflation Expectation: 4.2% v 3.7% prior

- (NZ) New Zealand sells NZ$200M v NZ$200M indicated in 2025 bonds; avg yield 2.6042%; bid to cover 2.13x

North America

- (US) FOMC RAISES TARGET RATE RANGE BY 25BPS TO 1.75-2.00% (AS EXPECTED)

- (US) FOMC UPDATED ECONOMIC FORECAST FOR JUNE MEETING (V. MAR): now forecasts 4 rate hikes in 2018; Raises Median forecast for end-2018 rate 2.375% (prior 2.125%)

- FOXA Comcast makes all-cash $35/shr proposal to acquire Twenty-First Century Fox after spinoff of "New Fox", values 21CF at $65B

- (US) FCC Chairman Pai said to be planning to vote on limits of TV station ownership at July 12th meeting; not clear on how he will propose changing it

Europe

- (UK) May RICS House Price Balance: -3% v -5%e

 

Levels as of 01:30ET

- Hang Seng -0.9%; Shanghai Composite -0.3%; Kospi -1.3%; Nikkei225 -0.7%; ASX 200 -0.2%

- Equity Futures: S&P500 +0.0%; Nasdaq100 -0.1%, Dax -0.1%; FTSE100 -0.2%

- EUR 1.1788-1.1810; JPY 110.09-110.38; AUD 0.7553-0.7582;NZD 0.7016-0.7036

- Aug Gold +0.2% at $1,303/oz; Jul Crude Oil -0.0% at $66.62/brl; Jul Copper -0.5% at $3.24/lb