Japan merchandise trade remains in deficit

Asian Mid-session Update: China market rout continues; Japan merchandise trade remains in deficit

Economic Data

- (JP) JAPAN JULY MERCHANDISE TRADE BALANCE: -¥268B V -¥53.0BE; ADJ TRADE BALANCE: -¥369B V -¥159BE; Widest deficit in 5 months

- (AU) AUSTRALIA JULY SKILLED VACANCIES M/M: +0.1% V -0.9% PRIOR

- (AU) AUSTRALIA JULY WESTPAC LEADING INDEX M/M: 0.0% V 0.0% PRIOR

- (NZ) NEW ZEALAND Q2 PPI OUTPUT Q/Q: -0.2% V -0.9% PRIOR; PPI INPUT Q/Q: -0.3% V -1.1% PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -0.4%, S&P/ASX +1.3%, Kospi -1.1%, Shanghai Composite -1.5%, Hang Seng -0.1%, Sept S&P500 flat at 2,094

Commodities/Fixed Income

- Dec gold flat at $1,117/oz, Oct crude oil -0.3% at $42.98/brl, Sept copper -0.1% at $2.28/lb

- (US) API Petroleum Inventories: Crude -2.3M v -1Me (4th straight draw)

- (CN) China MOF sells 7-year bond; Yield: 3.50%

- USD/CNY: (CN) PBoC sets yuan mid point at 6.3963 v 6.3966 prior setting; 4th straight firmer Yuan setting

- USD/VND: Vietnam Central Bank devalues VND by 1% vs USD; widens trading band to 3% from 2% for 2nd time in 2 weeks

- (JP) BOJ offers to buy ¥400B in 3-5yr JGBs, ¥240B in 10-25yr JGBs and ¥140B in JGBs with maturity over 25-yr

- (AU) Australia MoF (AOFM) sells A$900M in 3.25% 2025 Bonds; avg yield: 2.7844%; bid-to-cover: 3.54x

Market Focal Points/FX

- Shanghai Composite remains in focus with a volatile morning session that saw the index plummet as much as 5% to a new 2-week low below 3,600. Investors' concerns over SOE reform and implications of the latest aggressive open market operations as a remedy for rising outflows continue to cloud sentiment. In the mean time, the Yuan fix was once again marginally increased relative to yesterday, which marks the 4th straight lift. China State Information Center also recommended that policymakers accept expanding fiscal deficit in H2 to stabilize the economy.

- Economic calendar was highlighted by Japan merchandise trade data that saw its widest deficit in 5 months at -¥268B V -¥53.0BE. A look inside the numbers revealed a more benign report however, with exports rising for the 11th straight month at 7.6% v 5.9%e, and imports decline much smaller at -3.2% v -7.6%e. Shipments to US and Europe were up double-digits at +18.8% and +10.0%, while China exports were up just over 4%. Market focus in terms of economic data falls on the release of US CPI figures in early US session, and a strong result will solidify the newly building expectations of September Fed liftoff. USD majors tracked the overall risk-off there, with USD/JPY falling about 20pips to 124.20's, AUD/USD down 25pips below 0.7320, and NZD/USD paring the advance after a strong dairy price auction in New Zealand with a 25pip slide below 0.6580.

- Results from key basic materials names down under are helping the Australia index outperform in the region. Woodside Petroleum and Arrium were particularly notable, both rising about 2% on earnings. Woodside saw H1 Net slow to $0.7B v $1.1B y/y and interim dividend cut to A$0.66/shr v A$1.11/shr y/y, but FY15 production target of 86-94MMBOE was left unchanged. ARI posted FY15 Net loss A$1.9B v profit A$205M y/y, while Rev fell 13% to A$6.09B. Arrium noted it still expects demand for seaborne iron ores to remain strong however, guiding FY16 to see earnings growth from increase in volumes and on-going stable margins.

Equities

US equities/ADRs:

- HILL: Halted; Seagate Technology to acquire Dot Hill Systems for approximately $694M in all-cash transaction or $9.75/shr; +87% afterhours

- ADI: Reports Q3 $0.77 v $0.74e, R$863M v $846Me; +7.1% afterhours

- WB: Reports Q2 $0.05 v -$0.03 y/y, R$107.8M v $77.3M y/y; +4.1% afterhours

- YUM: Micky Pant named CEO of Yum Brands China division effective immediately; +2.1% afterhours

- SINA: Reports Q2 $0.06 v $0.05e, R$211M v $200Me; +1.1 % afterhours

- LZB: Reports Q1 $0.27 v $0.21e, R$341.4M v $342Me; +0.7% afterhours

- DV: Reports Q4 $0.57 v $0.63e, R$473M v $482Me; -7.4% afterhours

- CSIQ: Reports Q2 $0.31 v $0.13e, R$637M v $627Me; -10.1% afterhours

Notable movers by sector:

- Consumer discretionary: Treasury Wine Estates TWE.AU +9.8% (FY15 result); Recall Holdings REC.AU +0.5% (FY15 result); SEEK SEK.AU -12.2% (FY15 result); Stockland SGP.AU +1.0% (FY15 result)

- Consumer staples: Yuan Longping High-tech Agriculture Co 000998.CN -0.6% (H1 result); Aeon Stores Hong Kong Co 984.HK -0.4% (H1 result)

- Financials: China CITIC Bank 601998.CN -4.3% (H1 result); Shaanxi International Trust Co 000563.CN -2.6% (H1 result); Biostime International Holdings 1112.HK -4.3% (H1 result); Avic Investment Holdings Co 600705.CN +9.2% (H1 result, capital increase in aircraft companies)

- Industrials: Hong Kong Aircraft Engineering Co 44.HK -1.0% (H1 result); Sinotrans 598.HK -1.9% (H1 result); Zhuzhou CSR Times Electric Co 3898.HK +0.9% (H1 result); Sinotrans Air Transportation Development Co 600270.CN -3.3% (H1 result); Beihai Port Co P:000582.CN -1.4% (H1 result); Fujian Xiamen Xiangyu Co 600057.CN -4.9% (H1 result)

- Technology: Hithink Flush Information Network Co 300033.CN -8.3% (investigation); Kingsoft Corp 3888.HK -4.2% (H1 result); Chinasoft International 354.HK -1.8% (H1 result)

- Materials: China Minmetals Resources 1208.HK -0.9% (H1 result); Arrium ARI.AU +2.0% (FY15 result)

- Energy: China Longyuan Power Group 916.HK +1.1% (H1 result); Huaneng Renewable Corp 958.HK +1.3% (H1 result); Woodside Petroleum WPL.AU +1.8% (H1 result)

- Utilities: Shenzhen Gas Co 601139.CN +0.4% (H1 result); Hubei Energy Group Co 000883.CN -1.8% (H1 result); Beijing Originwater Technology Co 300070.CN -3.3% (H1 result); China Suntien Green Energy Corp 956.HK +6.9% (H1 result); China Resources Power 836.HK +2.7% (H1 result)

- Healthcare: North China Pharmaceutical Co 600812.CN -10.0% (H1 result)