Australia inflation remains below target

TradeTheNews.com Asia Mid-Session Market Update: Australia inflation remains below target, China signals a larger private role of SOEs

Asia Summary

- Asian markets opened mixed, after yesterday’s lackluster session; focus still remains on the Fed. China markets were weaker with some standouts due to H1 guidance. China Cabinet announced all centrally owned firms under state asset regulator to become limited liability firms or joint stock firms by the end of 2017.

- Australia Q2 CPI was the main risk event of the session, data showed that core inflation remains well below the 2-3% targeted by the RBA, which means that rates should be kept on hold for some time. Latest survey showed a 54.5% chance that the RBA will keep rates on hold until May 2018. The more muted inflation was attributed to weaker wages and lower fuel costs. The AUD fell 0.5% to session lows of 0.7892, 3-yr govt yield touched 2.037%. Later in the session RBA Govt Lowe warned that there could be financial stability risks from additional easing and affirmed some coverage of the RBA’s discussion of the neutral rate misinterpreted its intention. He also reiterated preference for a weaker currency.

Key economic data

- (AU) AUSTRALIA Q2 CONSUMER PRICES (CPI) Q/Q: 0.2% V 0.4%E; Y/Y: 1.9% V 2.2%E; TRIMMED MEAN Q/Q: 0.5% V 0.5%E ; Y/Y: 1.8% V 1.8%E

- (NZ) NEW ZEALAND JUN TRADE BALANCE (NZD): 242M V 150ME; 12-MONTH YTD: -3.66B V -3.68BE

- (JP) JAPAN JUN PPI SERVICES (CGPI) Y/Y: 0.8% V 0.8%E

- (AU) AUSTRALIA JUN SKILLED VACANCIES Q/Q: 0.9% V 1.0% PRIOR

Speakers and Press

China

- (CN) China Securities Regulatory Commission (CSRC): to regulate and expand access to China's capital markets

- (US) US expected to 'soon' issue new sanctions against China entities for violating UN sanctions against North Korea - US financial press

Australia

- (AU) Reserve Bank of Australia (RBA) Gov Lowe: RBA does not need to follow other central banks in policy moves; Q&A: Do not think RBA is overestimating the level of neutral rate, some coverage of neutral rate misinterpreted our intentions

Korea

- (KR) Revised assessment from US officials finds North Korea may be able to launch nuclear ICBM sooner than previously anticipated; could achieve capability to strike North America cities next year - Wash Post

Japan

- (JP) Bank of Japan Deputy Gov Nakaso: Reiterates still long way to go to meet 2% inflation target and will persistently pursue current powerful easing

Other

- (US) Senate Republican plan to repeal and replace Obamacare fails to get votes needed for approval - financial press

Asian Equity Indices/Futures (00:00ET)

- Nikkei +0.5%, Hang Seng +0.06%, Shanghai Composite -0.37%, ASX200 +0.96%, Kospi -0.29%

- Equity Futures: S&P500 -0.05%; Nasdaq -0.08%, Dax -0.09%, FTSE100 -0.10%

FX ranges/Commodities/Fixed Income (00:00ET)

- EUR 1.1654-1.1638; JPY 112.09-111.86; AUD 0.7941-0.7893; NZD 0.7436-0.7416

- Aug Gold +0.38% at 1,247/oz; Sept Crude Oil +1.02% at $48.38/brl; Sept Copper +1.30% at $2.88/lb

- USD/CNY (CN) PBOC SETS YUAN REFERENCE RATE AT 6.7529 V 6.7485 PRIOR

- (CN) China PBOC OMO injects CNY130B in 7 and 14 day reverse repos v CNY140B prior

- (PH) Philippines rejects all bids in 20-yr bond auction; received PHP11.2B in bids v PHP15B offered (1st failed auction this year) –late in yesterday’s session

- (CN) China Ministry of Finance (MOFCOM) sells 3-yr bonds at 3.46% v 3.47%e; bid-to-cover ratio 3.86x

- (TH) Thailand sells THB6B in 18.89-yr government bonds; avg yield 3.0645%; bid-to-cover ratio 3.47x

Equities notable movers

Australia/New Zealand

- Tower New Zealand, TWR.NZ NZ regulators block proposed merger with Suncorp over concerns about reduced competition; -23.8%

-Oz Minerals, OZL.AU Reports Q2 gold production 32.1K oz,+23% y/y; copper production 28.2Kt v 27.4Ke, +12% y/y, +8.6%

Hong Kong/China

- Evergrande Real Estate, 3333.HK Guides H1 Net to triple y/y; +12.9%

- ASM Pacific, 522.HK Reports Q2 (HK$) Net 756.2M v 671Me ; Rev 4.42B v 4.5Be; -10.1%

Japan

- Mitsubishi Motors, 7211.JP Reports Q1 Net profit ¥22.97B v loss ¥129.7B y/y; Op ¥20.6B v ¥4.62B y/y; Rev ¥440.9B v ¥428.7B y/y; +5.9%

Other

-UBER.IPO Said to narrow short-list for CEO position to less than 6 candidates which include HPE's Meg Whitman; an announcement could come in less than 6 weeks - US financial

US markets on close: Dow +0.5%, S&P500 +0.3%, Nasdaq 0.0%, Russell +0.9%

- Best Sector in S&P500: Financials

- Worst Sector in S&P500: Healthcare

- Biggest gainers: FCX +14.7%; NCM +6.9%; RRC +6.9%

- Biggest losers: STX -16.5%; IPG -13.3%; MU -5.6%

- At 17:00ET/21:00GMT: VIX 9.43 (+0.00pts); Treasuries: 2-yr 1.39% +1.8%), 10-yr 2.33% (+3.5%), 30-yr 2.91% (+2.8%)

US Market Summary

-(US) The Senate managed to pass a vote today to start debate on repeal of Obamacare. The vote was 50-50, with VP Pence vote casting the tie-breaker. The actual makeup of the healthcare bill remains unknown.

-(US) Commerce Secretary Ross said global steel overcapacity is quite massive, pointing out that China may account for half of global excess capacity in steel. In a conciliatory note, he said trade and economic ties with China are a work in progress, and that the TPP trade proposal had some very good features that we can try to build on. He hopes to address South Korea free trade agreement shortly, adding that the US economy is in reasonably good shape.

-(US) With stocks back in favor, Treasuries paid the price, with a strong sell-off across the curve. 10-year and 30-year yields gained 7 bps a piece, reaching 2.33% and 2.91% respectively; 10s30s spread steady at 58 bps.