Equities, risk FX stage a snapback rally as Brexit concerns subside

Economic Data

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 116.8 v 118.8 prior

- (KR) South Korea May Consumer Confidence: 99 v 99 prior

Index Snapshot (as of 04:00 GMT)

- Nikkei225 +0.7%, S&P/ASX -0.7%, Kospi +0.4%, Shanghai Composite flat, Hang Seng -0.9%, Sep S&P500 +0.8% at 2,002

Commodities/Fixed Income

- Aug gold -0.3% at $1,321/oz, Aug crude oil +1.3% at $46.93/brl, Jul copper +1.5% at $2.15/lb

- GLD: SPDR Gold Trust ETF daily holdings rise 13.1 tonnes to 947.4 tonnes; highest since July 2013

- SLV: iShares Silver Trust ETF daily holdings rise to 10,350 tonnes from 10,333 tonnes prior

- (AU) Australia MoF (AOFM) sells A$150M in 1.25% 2022 Indexed bonds; avg yields 0.3569%; bid-to-cover 1.73x

- JGB: Japan's MoF sells ¥2.09T in 0.1% (0.1% prior) 2-yr JGBs; avg yield -0.295% (record low) v -0.237% prior; bid-to-cover 4.96x v 5.52x prior

- (CN) PBOC SETS YUAN MID POINT AT 6.6528 V 6.6375 PRIOR (lowest setting since Dec 2010, 2nd consecutive multi-year low)

- (CN) PBOC to inject CNY180B in 7-day reverse repos

Market Focal Points/FX

- US indices fell sharply for the 2nd straight day, but Asian markets are trading mixed and S&P500 futures are up about 1%. The initial shock of Brexit may be wearing off, even as Fitch followed S&P to cut UK sovereign rating after US market close. Officials in Japan reiterate they are prepared to curb JPY strength, while Korea govt unveiled a plan for a KRW20T fiscal stimulus package. In FX majors, USD/JPY tracked lower to 101.60 in the early hours, but then bounced to 102.20 high. AUD/USD and NZD/USD were both up about 0.8% to 0.74 and 0.7055 session highs, while GBP/USD spiked up about 100pips above 1.3320. Gold prices were down over $10 below $1,318 in electronic trade.

- Fitch cut UK sovereign rating to AA from AA+ with a negative outlook just after US market close, also providing more concreate assumptions behind Brexit spillover. Fitch estimated 2016 real GDP falling to 1.6% v 1.9% prior forecast and 2017-18 GDP at 0.9 v 2.0% prior forecast for both years. General government deficit was seen at an average of 3.6% of GDP over the next three years, compared with 2.8% in our prior 'Remain' base case. The Fitch cut follows S&P cut to AA earlier and a Moody's revision in Outlook to Negative overnight.

- Japan govt spokesperson Suga reiterated pledge to take firm action on markets as needed, while Fin Min Aso again noted market stability is important. Japan officials also remarked that financial markets have regained calm, though they continue to monitor conditions for signs of strain. on FX, Aso noted rates are more stable than feared from post-Brexit "worst case scenario". PM Abe also spoke again, noting uncertain outlook against some evidence of calm. Earlier, LDP party General Council, Toshihiro Nikai called for a fiscal stimulus as high as ¥20T, with ¥15T of govt funds be compiled into second extra budget and ¥5T to be used for govt investment and loans.

- China Academy of Social Sciences forecast Q2 GDP at 6.7% and CPI at 2%, with 2016 GDP seen at 6.6% - down from 6.9% last year - and PPI declines slowing. PBoC set Yuan sharply lower for the 2nd straight day, tracking firmer greenback against other major currencies. Premier Li urged close cooperation in dealing with Brexit spillover risks, adding that some short term volatility in China capital markets could be expected. Moody's warned on margin pressures for China property developers, noting "growth in nationwide home sales has peaked and will moderate to a single-digit percentage for the twelve months ending May 2017."

- South Korea govt has lowered its 2016 GDP target to 2.8% from 3.1% prior as anticipated and also lowered CPI to 1.1% from 1.5% prior. Korea's Presidential office also announced plans for fiscal stimulus estimated at over KRW20T, which includes KRW10T extra budget. Fin Min Yoo remarked that more specific plans for extra budget would be submitted shortly.

Equities

US equities/ADRs:

- RGLS: Announces clinical hold of RG-101; reports second serious adverse event of jaundice; -53.9% afterhours

- GE: To sell bulk of U.S. restaurant finance assets in separate transactions to three buyers for $1.4B in ending net investment; STL, WTFC and FHN to acquire the assets

- ANTM: Said to be prepared to walk away from the $48B Cigna deal - NY Post

- YUM: Yum China stake sale said to be delayed on missed bid deadline; Temasek, Primavera bidders said to hold off bids due to new conditions - financial press

- VOW3.DE: US settlement related to emissions scandal now estimated around $15B, up from $10B anticipated last week - financial press

Notable movers by sector:

- Consumer discretionary: Shimamura 8227.JP +8.3% (Q1 result); Murray Goulburn MGC.AU -6.8% (guidance)

- Financials: Greentown China 3900.HK -1.7% (Greentown Service share offer)

- Industrials: China Airlines 2610.TW -4.8% (may face another strike); Xinyi Glass Holding Co 868.HK -3.8% (update on spinoff)

- Technology: ynix Semiconductor 000660.KR -1.9% (expects to record Q2 op profit decline)

- Materials: Evolution Mining EVN.AU -0.4% (FY16 prelim result)

- Telecom: ZTE Corp 763.HK -1.3% (update on US export restrictions)