Asia Market Update: Asian equity markets rise as Trump confirmed trade ‘truce’ with China; AUD/JPY pares gain amid focus on China PMIs and upcoming RBA decision

General Trend:

- Trade-sensitive IT and Telecom Services firms outperform in Shanghai

- Chinese telecom equipment firm ZTE outperforms, Trump said he will partially ease restrictions on Huawei

- Chipmaker Sanan Optoelectronics rises over 7% in China, may be removed from US ‘red flag’ list

- China’s official and Caixin manufacturing PMIs both contracted in June, new orders decline

- BoJ Q2 Tankan Large Manufacturers survey eases in Q2 (in line with BSI data released in early June)

- Trade dispute now erupts between South Korea and Japan

- Brent Crude Futures rise over 2%, Russia and Saudi Arabia said the oil production cut agreement will be extended

- AUD/JPY reverses gain ahead of Tuesday’s RBA meeting (July 2nd)

- US Soybean Futures rise over 3%, Trump said China will resume purchases of some US farm products

- Trump’s makes surprise visit to North Korea

- Few comments seen from China’s Xi after his meeting with Trump

 

Headlines/Economic Data

Australia/New Zealand

-ASX 200 opened +0.3%

-(AU) Australia Jun AIG Performance of Manufacturing Index: 49.4 v 52.7 prior

-(NZ) Reserve Bank of New Zealand (RBNZ) releases submissions on bank capital review, expects final decision in November; Some note that plan may raise borrowing costs; Some question whether increases are too large

-HZN.AU Raises FY19 oil sales 1.86M bbl; Rev ~$126M (prior $100-120M); expects to be in net cash position mid-2020

-ADA.AU Guides FY19 pretax loss A$1.7-1.9M; Names Daniel Verret as acting CEO

-(NZ) New Zealand Treasury: Forward indicators of activity are mixed; mixed outlook poses downside risk to growth

Japan

-Nikkei 225 opened +1.4%

- (JP) JAPAN Q2 TANKAN LARGE MANUFACTURING INDEX: 7 V 9E ; OUTLOOK SURVEY: 7 V 6E; LARGE ALL INDUSTRY CAPEX: 7.4% V 8.1%E

-(JP) Japan Jun Final PMI Manufacturing: 49.3 v 49.5 prelim

- (JP) Japan METI confirms will adopt stricter rules on some exports related to key display panel and chip materials, including polymide, resist, HF to South Korea, effective July 4th due to worsening relations with South Korea

-(JP) Japan Tax Agency: In 2018 domestic land prices rose for the 4th consecutive year

- (JP) Japan Deputy Chief Cabinet Sec Nishimura: No change to Japan's plan to raise sales tax, economic fundamentals are solid, economy remains in moderate recovery

Korea

-Kospi opened +0.5%

- (KR) South Korea Jun Trade Balance $4.2B v $4.1Be; Exports Y/Y: -13.5% v -13.5%e (7th straight decline, fastest decline since Jan 2016); Semiconductor exports Y/Y: -25.5% y/y

-(KR) South Korea Deputy Industry Min Park: South Korea will sternly respond to Japan's export curbs, curbs would violate WTO rules

-(KR) US President Trump: "I am in South Korea now. President Moon and I have "toasted" our new Trade Deal, a far better one for us than that which it replaced...Today I will visit with, and speak to, our Troops - and also go to the the DMZ (long planned). My meeting with President Moon went very well!" - tweet

-(KR) On Sunday (June 30th), US President Trump shook hands with North Korea leader Kim Jong Un, Trump also took 20 steps into North Korea – Press

-(KR) South Korea Jun PMI Manufacturing: 47.5 v 48.4 prior (4 month low)

- (KR) Bank of Korea Deputy Gov Yoon: June export data confirms recovery in semiconductor market; medium to long-term uncertainty still high despite US/China agreement

- (KR) South Korea sells 3-year Govt bonds, avg yield 1.47% v 1.575% prior; bid to cover 3.16x v 2.93x prior

China/Hong Kong

-Hang Seng opened closed; Shanghai Composite opened +1.5%

- (CN) CHINA JUNE OFFICIAL MANUFACTURING PMI: 49.4 V 49.5E (second straight contraction)

-(CN) CHINA JUN CAIXIN PMI MANUFACTURING: 49.4 V 50.1E (1st contraction reading since Feb)

- (G20) Pres Trump: negotiations with China are continuing, believe we are "back on track" with China; Had an excellent meeting, as good as it was going to be; Will allow US companies to sell their equipment to Huawei

-(G20) China and US have agreed to restart trade talks; US agrees not to impose any new tariffs - Chinese state media

-(CN) China PBOC sets yuan reference rate: 6.8716 v 6.8747 prior

-(CN) China PBoC Open Market Operation (OMO): Skips for the 6th consecutive session; Net drains CNY150B v nil prior

-(HK) Macau June Gaming Rev (MOP) 23.8B v 25.9B prior; Y/Y: +5.9% v +1.8% prior

-600703.CN Has been removed from the US government's 'red flag' list - Chinese Press

-(CN) China has asked PPP projects to avoid excess debt financing

-(CN) Armyworms said to be discovered at large corn producer in the Shandong province (China) - financial press

Other Asia

- (SG) Singapore Q2 Private Residential Prices q/q: +1.3% v -0.7% q/q - URA

North America

- BA Reportedly DOJ has expanded Boeing investigation to look at allegations of shoddy workmanship on 787 Dreamliners produced in South Carolina - Seattle Times

Europe

- (G20) Russia Energy Min Novak: agreement to extend the oil production cut deal is consolidated; other countries are supporting an extension; Russia agreed with Saudi Arabia to extend the supply reductions for another 6-9 months

-(FR) France sees possible securing of ECB Presidency

-(UK) PM Candidate Hunt announces £20B no-deal Brexit 'war chest' to financially support industries; plans to 'ramp up' no deal preparations; plans to cut corporate taxes to 12.5% regardless of Brexit deal - UK Press

-(UK) British Chambers of Commerce (BCC): Balance of UK manufacturing firms reporting improved domestic orders at 7-year low

 

Levels as of 01:20ET

- Hang Seng closed; Shanghai Composite +2.0%; Kospi +0.1%; Nikkei225 +2.1%; ASX 200 +0.6%

- Equity Futures: S&P500 +1.0%; Nasdaq100 +1.4%, Dax +0.7%; FTSE100 +0.4%

- EUR 1.1326-1.1372; JPY 108.11-108.50; AUD 0.6996-0.7035; NZD 0.6700-0.6727

- Commodity Futures: Gold -1.4% at $1,393/oz; Crude Oil +2.5% at $59.90/brl; Copper +0.7% at $2.75/lb

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