RBA meeting minutes reinforce neutral stance

Asia Mid-Session Market Update: RBA meeting minutes reinforce neutral stance; PBOC reduces OMO purchases and weakens Yuan fix

US Session Highlights

- (US) Fed’s Dudley (dove, FOMC voter): Confident that the current expansion has quite a long way to go; generally pleased with US economy

- (MX) US Commerce Sec Ross: neither Mexico nor Canada are currency manipulators - Bloomberg interview

- UPS establishes new surge pricing surcharge for Nov-Dec residential packages, large packages and packages over maximum limits

- (US) Senate Democrats reportedly plan legislative slowdown over lack of disclosure and debate of GOP health care bill - press

- Stock markets regained steam today as techs led the way in Asia and Europe, continuing into the US session. Both the Dow and S&P reached new all-time highs, with closes at 21,528 and 2,453. For the S&P, the best performing sector was technology, gaining 1.5%, while the Energy sector lost 0.8% on the back of continued weakness in crude oil prices.

 

US markets on close: Dow +0.7%, S&P500 +0.8%, Nasdaq +1.4%

- Best Sector in S&P500: Technology

- Worst Sector in S&P500: Energy

- Biggest gainers: PKI +6.5%; NAVI +5.8%; MNK +4.7%

- Biggest losers: EQT -9.0%; RRC -5.1%; FTR -5.0%

- At the close: VIX 10.4 (-0.1pts); Treasuries: 2-yr 1.36% (flat), 10-yr 2.19% (+3bps), 30-yr 2.79% (+1bps)

 

US movers afterhours

-TDOC Said to acquire medical consultation business Best Doctors for $375M in cash and $65M in stock - press; -0.8% afterhours

-RS Cuts Q2 $1.30-1.40 v $1.59e (prior $1.50-1.60); -6.6% afterhours

 

Politics

- (CN) China President Xi: "Higher education must adhere to correct political orientation" - press

- (DE) Germany's Social Democratic Party said to plan €15B in tax cuts if elected - German press

 

Key economic data

- (AU) AUSTRALIA Q1 HOUSE PRICE INDEX Q/Q: 2.2% V 2.2%E; Y/Y: 10.2% V 8.9%E

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 112.4 v 112.9 prior

- (NZ) NEW ZEALAND JUNE ANZ CONSUMER CONFIDENCE INDEX: 127.8 V 123.9 PRIOR; M/M: +3.1% V +1.8% PRIOR

 

Notes and Observations

- Asia indices mixed with Nikkei225 leaning the way on weaker JPY; USD/JPY pair rose to 3-week highs above 111.70 amid comments from FOMC voting doves Dudley and Evans talking up the extension of current recovery.

- RBA polity meeting minutes further reinforced the central bank is on hold, even though fixed income markets priced in some 20% of a rate cut this year. RBA noted improvement in global economic conditions and sustained property construction investment in China.

- PBoC open market operations was notably reduced to CNY10B, but the Yuan fix was also the weakest since last month. Separately, CBRC bank regulator official warned that risks in the banking sector may be exposed by economic downturn.

 

Speakers and Press

China

- (CN) Fitch: China economic growth to fall slightly below 6.0% in 2018 and 2019 - press

- (CN) China insurance regulator (CIRC)'s Huang: May YTD insurance premiums +26% y/y; Some insurers ability to pay out on claims were impaired by an overstatement of their capital

- (CN) China Banking Regulator (CBRC) Vice Chairman Wang Zhaoxing: Bank capital adequacy still at high level, but risks may be exposed during economic downturn

- (CN) PBOC Gov Zhou: Global economy still has uncertainties

Australia/New Zealand

- (AU) Australia PM Turnbull: To implement gas regulations affecting exports, effective July 1st, 2018

Korea

- (KR) South Korea military planning to conduct joint drills with US B-1B bombers today as part of scheduled exercises - press

 

Asian Equity Indices/Futures (00:00ET)

- Nikkei +1.2%, Hang Seng -0.1%, Shanghai Composite +0.1%, ASX200 -0.5%, Kospi flat

- Equity Futures: S&P500 +0.1%; Nasdaq +0.2%, Dax +0.2%, FTSE100 +0.2%

 

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

- EUR 1.1140-1.1160; JPY 110.50-111.80; AUD 0.7585-0.7605; NZD 0.7220-0.7240

- Aug Gold flat at 1,247/oz; Aug Crude Oil +0.1% at $44.45/brl; July Copper -0.4% at $2.58/lb

- (CN) PBOC SETS YUAN MID POINT AT 6.8096 V 6.7972 PRIOR; Weakest Yuan fix since May 31st

- (CN) Offshore Yuan overnight Hibor rate falls to 8-moth low

 

Asia equities notable movers

Australia

- Tatts (TTS) +4.0%; Tabcorp bid for Tatts has been cleared by Australia regulators; Tabcorp will need to sell Odyssey Gaming unit in Queensland

- Oroton (ORL) +4.4%; Gives strategic review: Certain parties expressed interest in its strategic options including sale or recapitalization; Affirms FY17

- Scentre Group (SCG) -2.5%; Morgan Stanley Cuts SCG.AU to Underweight from Overweight

Japan

- Askul (2678) +9.2%; Guides FY16/17 net ¥1B, -81% y/y; Op ¥8.8B v ¥8.0B prior guided; Rev ¥335.9B v ¥335.0B prior guided

- Sharp (6753) +6.4%; To apply for TSE Section 1 listing on June 29th

- Gree (3632) +6.3%; Guides FY17 Net ¥11B v ¥13Be (prior ¥15B); due to ¥3.8B writedown

Hong Kong

- Bloomage BioTechnology Corp (963) +7.6%; Gets privatization offer at HK$16.30/shr from Grand Full Development

- Century Ginwa Retail Holdings (162) -5.3%; Guides FY17 net loss CNY352M v profit y/y

- Sino Propser (766) -8.5%; Profit warning

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