China PMI's tread water; AUD rallies on strong Australia GDP

Economic Data

- (CN) CHINA MAY MANUFACTURING PMI (GOVT OFFICIAL): 50.1 (3rd month of expansion) V 50.0E; NON-MANUFACTURING (SERVICES) PMI: 53.1 (3-month low) V 53.5 PRIOR
- (CN) CHINA MAY CAIXIN PMI MANUFACTURING: 49.2 V 49.2E; 15th consecutive month of contraction
- (CN) China May new home prices +1.7% m/m and +10.34% y/y to CNY11.7K/sqm - Soufun.com
- (JP) JAPAN Q1 CAPITAL SPENDING Y/Y: 4.2% V 2.4%E; EX-SOFTWARE Y/Y: 4.3% V 4.0%E
- (JP) JAPAN MAY FINAL PMI MANUFACTURING: 47.7 V 47.6 PRELIM (40-month low)
- (JP) JAPAN APR CORPORATE LOANS & DISCOUNTS Y/Y: 3.1% V 2.6% PRIOR
- (AU) AUSTRALIA Q1 GDP Q/Q: 1.1% V 0.8%E; Y/Y: 3.1% (biggest increase in nearly 4 years) V 2.8%E
- (AU) AUSTRALIA MAY AIG MANUFACTURING INDEX: 51.0 V 53.4 PRIOR; 7-MONTH LOW; 11TH MONTH OF EXPANSION
- (AU) Australia May Corelogic RPData House Prices M/M: 1.6% v 1.7% prior
- (NZ) NEW ZEALAND Q1 TERMS OF TRADE INDEX Q/Q: 4.4% V 1.0%E; 2 1/2 year high
- (NZ) NEW ZEALAND MAY QV HOUSE PRICES Y/Y: 12.4% V 12.0% PRIOR
- (NZ) According to realestate.co.nz, New Zealand May Residential Property Listings -7.1% y/y at 9.6K properties - press
- (KR) SOUTH KOREA MAY TRADE BALANCE: $7.1B V $9.6BE; Exports Y/Y: -6.0% v -0.4%e; Imports Y/Y: -9.3% v -9.7%e
- (KR) SOUTH KOREA APR CURRENT ACCOUNT BALANCE: $3.4B V $10.1B PRIOR; GOODS BALANCE: $9.6B V $12.4B PRIOR
- (KR) SOUTH KOREA MAY CPI M/M: 0.0% V 0.2%E; Y/Y: 0.8% V 0.9%E; CPI CORE Y/Y: 1.6% V 1.6%E
- (KR) South Korea May PMI Manufacturing: 50.1 v 50.0 prior
- (ID) Indonesia May PMI Manufacturing: 50.6 v 50.9 prior (3rd consecutive month of expansion)
- (UK) MAY BRC SHOP PRICE INDEX Y/Y: -1.8% V -1.7% PRIOR (37th month of decline)

Index Snapshot (as of 04:00 GMT)

- Nikkei225 -0.8%, S&P/ASX -0.8%, Kospi flat, Shanghai Composite +0.1%, Hang Seng flat, Jun S&P500 flat at 2,096
 

Commodities/Fixed Income

- Aug gold flat at $1,217/oz, Jul crude oil -1.0% at $48.64./brl, Jul copper -1.2% at $2.07/lb
- (CN) China MoF sells 1-yr bonds at 2.3405%, bid-to-cover 2.1x; 10-yr bonds at 2.9951%; bid-to-cover ratio 3.02x
- (CN) PBOC SETS YUAN MID POINT AT 6.5889 V 6.5790 PRIOR (3rd consecutive setting to 2011 low)
- (CN) PBOC to inject CNY95B in 7-day reverse repos
 

Market Focal Points/FX

- Asian equity markets are mixed on the first day of June, with May PMIs showing little progress on recovery and Australia GDP featuring a pleasant surprise on the strength of exports. China mainland and Hong Kong are flat, consolidating the biggest gains in weeks overnight on Goldman Sachs rumors of impending MSCI A-share inclusion. Nikkei225 and ASX200 have underperformed - the former on retreat in USD/JPY and the latter on reduced expectations for more RBA easing. Among FX majors, EUR/USD was in a 20pip range above 1.1115 and USD/JPY in a 40pip range above 110.40. NZD/USD rallied some 50pips above 0.68 after 2 1/2 year high in New Zealand Terms of Trade for Q1, while AUD/USD rallied nearly 60pips toward 0.73 after robust Australia GDP prints.

- China PMIs were mixed, as official Non-Manufacturing slid to a 3-month low and Manufacturing narrowly beat estimates to stay in expansion for the 3rd straight month. Manufacturing components saw a 3-month low in New Orders and New Export orders, but a 7-month high in Inventories and a 1-year high in Employment. Caixin manufacturing PMI surveying SMEs was a less upbeat contraction at 49.2 - the 15th consecutive print below the 50 threshold. Caixin report noted renewed fall in total new business, as new work fell for the first time in 3 months. New export orders decline was also the biggest in 3 months, as employment decline "remained similar to Februarys multi-year record." Resident economist said "China's economy has not been able to sustain the recovery it had in Q1", calling for policymakers to "make full use of proactive fiscal policy measures accompanied by a prudent monetary policy to prevent the economy from slowing further." A separate Chinese press report ahead of PMIs also speculated 2016 GDP would slow to 6.7% from 6.9% last year.

- In Japan, PM Abe has finally confirmed latest press speculation that he would push back the increase in sales tax by 2.5 years to late 2019. More detail is expected later in the evening in Tokyo, along with anticipated announcement of fiscal measures accompanying the tax delay. Japan's latest Q1 corporate results data justify the added caution - profits fell by -9.3% v -1.7% prior, the biggest decline since Q4 of 2011. May final manufacturing PMI also hit a 3-year low in the aftermath of Kumamoto earthquake and tepid international demand for new orders.

- Australia's annual GDP of 3.1% was the biggest rise in nearly 4 years thanks to particularly strong trade components. Exports contributed 1.0pt thanks to rebound in mining production, while Household final consumption expenditure contributed 0.4pts. Fixed capital formation was the biggest detriment, falling 2.2% due to soft construction. More recent Australia AiG May manufacturing in turn hit a 7-month low but stayed in expansion for 11th month. Australia PM Turnbull said the economy was experiencing strong jobs growth, as acceleration in economy confirms govt's anticipated direction.
 

Equities

US equities/ADRs:
- ZOES: Reports Q1 $0.06 v $0.04e, R$80.4M v $79.5Me; +4.8% afterhours
- BYD: Boyd agrees to sell its 50% stake in Borgata Casino to MGM Resorts International and MGM Growth Properties LLC for $900M; +4.6% afterhours
- TIVO: Reports Q1 $0.04 v $0.07e, R$107.3M v $121Me; -1.5% afterhours
- WDAY: Reports Q1 $0.05 v -$0.02e, R$345.4M v $339Me; -2.1% afterhours
- BABA: Softbank to sell $7.9B in Alibaba shares, reducing its stake from 32% to 28%; -2.9% afterhours
- UA: Cuts FY16 R$4.925B v $5.02Be, cuts FY16 op income $440-445M (prior R$5.0B, op income $503-507M); -3.0% afterhours
- ASNA: Reports Q3 $0.15 adj v $0.13e, R$1.67B v $1.75Be; -4.4% afterhours

Notable movers by sector:
- Consumer discretionary: 3P Learning 3PL.AU -29.2% (guidance); Midea Group Co 000333.CN +8.6% (resume trading following offer to expand in Kuka)
- Industrials: BOC Aviation 2588.HK -2.1% (IPO debut); Japan Aviation Electronics 6807.JP +13.9% (NEC's tender offer)
- Materials: Nippon Steel & Sumitomo Metal Corp 5401.JP -3.8% (speculation about dividing up production assets); Newcrest Mining NCM.AU +2.0%, Evolution Mining EVN.AU +1.5% (Gold gains)
- Energy: Beach Energy BPT.AU -2.7% (oil extends decline)