Australia GDP slows to 4-year lows but avoids contraction

Asian Mid-session Update: Asia equities, US futures reverse initial declines; Australia GDP slows to 4-year lows but avoids contraction

Economic Data

- (AU) AUSTRALIA Q2 GDP Q/Q: 0.2% (slowest growth in over 4 years) V 0.4%E; Y/Y: 2.0% V 2.2%E

- (NZ) NEW ZEALAND AUG ANZ COMMODITY PRICE M/M: -5.2% V -11.2% PRIOR; 5th straight decline

- (JP) JAPAN AUG MONETARY BASE Y/Y: 33.3% V 32.8% PRIOR; MONETARY BASE END OF PERIOD: ¥327.4T V ¥325.7T PRIOR

- (KR) SOUTH KOREA JULY CURRENT ACCOUNT: $10.1B V $12.2B PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +0.8%, S&P/ASX -1.2%, Kospi -0.5%, Shanghai Composite -1.4%, Hang Seng -1.1%, Sept S&P500 +0.7% at 1,929

Commodities/Fixed Income

- Dec gold -0.1% at $1,138/oz, Oct crude oil -2.3% at $44.38/brl, Dec copper flat at $2.30/lb

- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: +10.9% v +14.8% prior auction; 2nd straight increase

- (US) API Petroleum Inventories: Crude +7.6M v 0e (first build in 6 weeks)

- SLV: iShares Silver Trust ETF daily holdings fall to 10,110 tonnes from 10,137 tonnes

- USD/CNY: (CN) PBoC sets yuan mid point at 6.3619 v 6.3752 prior setting; 4th straight stronger Yuan setting

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

- (AU) Australia MoF (AOFM) sells A$600M in 1.75% 2020 Bonds; avg yield: 2.0927%; bid-to-cover: 3.68x

Market Focal Points/FX

- Wild volatility on display in the US hours has reverberated in Asia, but this time the pendulum is swinging the other way. After opening down nearly 4.5%, Shanghai Composite has entered midday break up 0.3%. Likewise, S&P futures are up over 20pts or over 1% around 1,940. High-beta AUD and NZD currencies are up on USD by 50pips from the lows above 0.7030 and 0.6350 respectively, while JPY is sold across the board as USD/JPY spiked up over 100pips from the lows above 120.40.

- Once again, there is little in terms of significant fundamental catalysts to attribute the bounce, although more stimulus measures out of China are helping sentiment. Local press reports noted a number of mainland brokerages agreed to comply with govt requests to provide additional funds to CSFC for market intervention. In addition, the State Council has reportedly set up a CNY60B fund to support small and medium-sized enterprises (SMEs). Furthermore, earlier US financial press report speculated that China has imposed controls to prevent large capital outflows and also intensify crackdown on underground banks. In FX, PBoC continues to scale back its devaluation, setting Yuan fix sharply higher for the 4th straight day.

- Australia Q2 GDP avoided a contraction feared by some analysts, particularly in light of soft exports component of current account released overnight, but still registered its weakest growth in over 4 years. Final consumption component held up, rising +0.9% v +0.5% prior, but Terms of Trade decline worsened to -3.4% v -2.9% prior. Speaking after the data release, Australia Treasurer Hockey said the slowing GDP is consistent with forecasts, but exports of services were resilient due to demand from Asia.

- In other notable speakers, BOJ Dep Gov Nakaso said stable finance and prices contribute to potential growth, as central bank's JGB purchases have not impacted liquidity. IMF's Lagarde warned that recent market turmoil underlines spillover risks, as all economies are impacted by rebalancing China and slowing Japan.

Equities

US equities/ADRs:

- FLXN: Granted Fast Track Status by the FDA for FX006 for treatment of Osteoarthritis of the knee, expects to complete planned NDA submission in H216; +8.5% afterhours

- HRB: Reports Q1 -$0.35 v -$0.41e, R$138M v $136Me; Approves $3.5B (38.5% of market cap) buyback and capital structure program; +7.8% afterhours

- GWRE: Reports Q4 $0.35 v $0.26e, R$125.9M v $122Me; -5.0% afterhours

- AVAV: Reports Q1 -$0.30 v -$0.18e, R$47.1M v $52.8Me; -5.9% afterhours

- AMBA: Reports Q2 $0.88 v $0.81e, R$84.2M v $79.8Me; Guides Q3 R$90-93M v $89.5M - earnings call; -9.2% afterhours

Notable movers by sector:

- Consumer discretionary: Seven Group Holdings SVW.AU -2.6% (speculation to divest asset) ; Wynn Macau 1128.HK -5.1%, Sands China 1928.HK -1.5%, Galaxy Entertainment Group 27.HK -4.2% (Macau casino revenue continues to decline)

- Financials: Ping An Bank Co 000001.CN -2.6% (approval for private placement); CITIC Securities 600030.CN -2.0%, GF Securities 000776.CN -3.2%, HTSC 6886.HK -2.6% (provide funds to CSF, to clear illegal financing accounts)

- Technology: Sharp Corp 6753.JP -0.6% (speculation to set up LCD jv); Acer Inc 2353.TW +0.8% (speculation to raise notebook prices)

-Telecom: SmarTone Telecommunications Holdings 315.HK -2.4% (FY15 result)