Japan CPI stumbles again despite higher energy prices

Asia Mid-Session Market Update: China recovers as banks' NPL ratios stop deteriorating; Japan CPI stumbles again despite higher energy prices

Economic Data

- (JP) JAPAN JULY NATIONAL CPI Y/Y: -0.4% V -0.4%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.5% V -0.4%E; CPI Ex Food and Energy (core-core) Y/Y: 0.3% v 0.4%e; lowest since Oct 2013

- (JP) JAPAN AUG TOKYO CPI Y/Y: -0.5% V -0.4%E; CPI EX-FRESH FOOD Y/Y: -0.4% V -0.4%E; CPI Ex Food/Energy Y/Y: 0.1% v 0.3%e; 1-year low

- (KR) South Korea Aug Consumer Confidence: 102 v 101 prior; 8-month high

Index Snapshot (as of 03:30 GMT)

- Nikkei225 -0.7%, S&P/ASX -0.2%, Kospi -0.3%, Shanghai Composite +0.6%, Hang Seng +0.6%, Sep S&P500 +0.1% at 2,175

Commodities/Fixed Income

- Dec gold +0.2% at $1,327/oz, Oct crude oil -0.2% at $47.26/brl, Sep copper +0.6% at $2.09/lb

- GLD: IMF: Russia raises Gold holdings by 7.3 tonnes to 1,506; China raises holdings by 5.3 tonnes to 1,828

- GLD: SPDR Gold Trust ETF daily holdings fall to 956.6 tonnes from 958.4

- SLV: iShares Silver Trust ETF daily holdings cut to 11,100 tonnes from 11,159 tonnes prior

- (CN) PBOC to inject CNY95B in 7-day reverse repos; inject CNY50B (3rd straight 14-day injection) in 14-day reverse repos; injects CNY310B for the week (11-week high) v injects CNY15.5B last week

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6488 V 6.6602 PRIOR

- (JP) BOJ offers to buy ¥70B in JGBs with maturity under 1 year, ¥430B in 5-10 yr JGBs, ¥250B in inflation-linked JGBs, and ¥1.0T in T-bills

- (AU) Australia MoF (AOFM) sells A$900M in 1.75% 2020 Bonds; avg yield: 1.488%; bid-to-cover: 2.53x

Market Focal Points/FX

- Asian equity markets are trading mixed going into the key risk event of the week - Fed Chair Yellen's testimony at the Jackson Hole symposium scheduled for 10amET on Friday. Her comments will follow a revised reading of US Q2 GDP expected to show a slightly softer rate of growth and should continue to walk the tightrope of keeping more tightening on the table before the end of the year with an eye on recovery in employment, persisting soft inflation, and global uncertainty risks. Ahead of Yellen comments, Fed vice chair Fischer said the policy board is considering the risks of overheating in the economy - presumably with rates staying too low for too long - while San Francisco Fed's Williams noted there was no threat of high inflation and the central bank will keep the economy "running hot". Dollar majors are in predictably narrow ranges going into tomorrow's events, with USD/JPY in a 20pip range below 100.60, NZD/USD rising 20pips to 0.7315, and AUD/USD up 20pips above 0.7630.

- After yesterday's relative underperformance in China on perceived expectations of a central bank policy hold, mainland markets have rebounded thanks to better news out of the financial sector. Two of China's top 5 banks - China Construction and BoCom - reported their results, and both saw a notable drop-off in the rate of growth of non-performing loans. Recall overnight PBoC had also reportedly advised bank execs to lend in installments and spread out the loan terms as part of closer liquidity management. Today, PBoC deputy Gov Yi Gang said that interbank market liquidity plentiful, and the recent use of 14-day reverse repos in daily OMO's gives the market more options. China state planner NDRC also panned the interpretation of reduced likelihood of looser policy from the latest PBoC actions, stating China still has ample room to guide interest rates lower. Also of note overnight, a Xinhua report called China's registered urban unemployment rate "authentic", with expectations of the jobless rate remaining stable.

- In Japan, despite the rebound in the energy prices, the forward looking Tokyo area CPI continued to decelerate in August while the nationwide July data showed no signs of improvement in spite of weaker JPY for much of the month. Slow progress on inflation could add to pressure on the BOJ to yield to market participants clamoring for more easing after it gave itself a month in late July to assess economic conditions and review its policy settings.

Equities

US equities/ADRs:

- EPAY: Reports Q4 $0.37 v $0.30e, R$88.1M v $87.4Me; +4.5% afterhours

- ADSK: Reports Q2 $0.05 v -$0.13e, R$551M v $513Me; Guides Q3 -$0.27 to -$0.22 v -$0.27e, R$470-485M v $472Me; +3.3% afterhours

- BRCD: Reports Q3 $0.21 v $0.17e, R$591M v $576Me; Guides Q4 $0.21-0.23 v $0.23e; R$630-650M v $636Me; -1.0% afterhours

- ULTA: Reports Q2 $1.43 v $1.39e, R$1.07B v $1.06Be; Guides Q3 $1.25-1.30 v $1.29e, R$1.07-1.09B v $1.08Be, SSS +11-13%; -1.3% afterhours

- SPLK: Reports Q2 $0.05 v $0.04e, R$212.8M v $201Me; -6.6% afterhours

- GME: Reports Q2 $0.27 v $0.26e, R$1.63B v $1.72Be; Guides Q3 $0.53-0.58 v $0.55e, SSS -2.0% to +1.0%; -7.8% afterhours

- TLND: Reports Q2 -$1.84 v -$0.32e, R$25.4M v $25.1Me; -18.2% afterhours

Notable movers by sector:

- Consumer discretionary: Coca-Cola Amatil CCL.AU -4.5% (H1 results); Dongfeng Motor 489.hk +0.6% (H1 results); Hisense Kelon Electrical Holdings 921.HK +3.3% (H1 results); Nitori Holdings Co 9843.JP -5.1% (H1 press speculation); Li & Fung Ltd 494.HK -4.3% (H1 results)

- Consumer staples: Lianhua Supermarket Holdings 980.HK +2.4% (H1 results)

- Financials: BoCom 3328.HK +0.4% (H1 results), Citic Bank 998.HK -0.4% (H1 results), China Construction Bank 939.HK -0.3% (H1 results); China Life Insurance 2628.HK +2.6% (H1 results)

- Industrials: Decmil DCG.AU -3.8% (FY16 results); CITIC Limited 267.HK +0.5% (H1 results); Tianjin Port Development 3382.HK -2.4% (H1 results); Beijing Capital International Airport 694.HK -2.9%
(H1 results);

- Materials: Chalco 2600.HK +0.4% (H1 results)

- Technology: Brambles BXB.AU -1.5% (CEO to retire)

- Telecom: ZTE Corp 763.HK -4.2% (H1 results)