South Korea cuts 2018 GDP outlook and job creation target

Asia Market Update: South Korea cuts 2018 GDP outlook and job creation target; HK and China exchanges reach agreement on inclusion

General Trend:

- Asian equity markets trade generally higher, US markets ended mostly in positive territory

- Shanghai Composite rises for the first time in 4 sessions

- Xiaomi rises after the HK and Shanghai Exchanges reach agreement on dual-class shares

- BHP rises over 3%, issued Q4 production and initial FY19 guidance

- US Treasury Sec Mnuchin has no plans for a bilateral meeting with China at the G20 in Argentina (July 21-22), according to a US Treasury official

- PBoC fixed the yuan weaker for the 5th straight session

- Money market rates in China are seen at a bottom, said the China Securities Journal

- Fed’s George (hawk) said there is still uncertainty about how far and how fast the Fed should raise rates; unclear about inverted yield curve

- USD/JPY trades above ¥113 for the first time since Jan, later pares gain

- Fed Chair Powell to testify before Congress for second day on Wed

- Taiwan Semi expected to report earnings on Thursday (July 19th)

- US and European companies which may report earnings on Wed include: ASML, Abbott Labs, Akzo Nobel, Alcoa, American Express, Canadian Pacific, IBM, Ericsson, Morgan Stanley, Novartis, SL Green, Swedbank, T-Mobile US, WW Grainger and eBay

Headlines/Economic Data

Japan

- Nikkei 225 opened +1.0%

- TOPIX Real Estate index +0.8%, Information & Communications +0.7%

- Toyota outperforms amid the earlier gain in USD/JPY

- (JP) Japan Financial Services Agency revamps itself to make it more able to respond to new challenges in the field, such as the rise of cryptocurrencies - Nikkei

- 6954.JP Fanuc, Mitsubishi Electric and DMG Mori will interconnect their systems for managing production data to better serve manufacturers and raise the profile of Japanese competitors in this field – Nikkei

- (JP) EU and Japan sign trade agreement in Tokyo; vows to continue to fight protectionism (yesterday after the close)

Korea

- Kospi opened +0.7%

- (KR) South Korea Govt and ruling party agree for reinforcement of tax refunds, basic pension, job-seeking allowance to expand support for lower income in H2 - Korean press

- (KR) South Korea Fin Min Kim confirms Govt will expand subsidies for small business, low income and elderly; will increase fiscal spending by $3.6B within existing budget; Sees 2018 GDP at 2.9% (prior 3%)

- (KR) US President Trump: No time limit on North Korea denuclearization (prior had called for immediate action) - Korean press

- (KR) South Korea Govt has picked banks for offshore sovereign bond

China/Hong Kong

- Hang Seng opened +0.6%, Shanghai Composite +0.1%

- Hang Seng Consumer Goods index +1.4%, Industrial Goods +0.7%, Info Tech +0.6%, Property/Construction +0.4%, Financials +0.3%; Energy -0.8%

- (CN) China MOF Academy Researcher says sees no 'big room' for tax cut - Chinese Press

- (CN) Hong Kong Exchange and Mainland China Exchanges reach agreement on adjusting inclusion related to 'Stock Connect' program; there will be an initial special stability trading period for weighted voting rights shares

- (CN) China PBoC Open Market Operation (OMO): Injects CNY80B in 7-day and 14-day reverse repos v CNY100B prior; Net: CNY80B injects v CNY90B injection prior

- (CN) China PBoC set yuan reference rate at 6.6914 v 6.6821 prior

- Air China, 00753.HK China regulator to launch 3-month safety crackdown after smoking pilot incident, includes fine, reduction in flight hours and removal of licenses

-(CN) China Ministry of Finance sells 1-yr bonds at 3.0328% v 2.99%e, bid to cover 2.27x; 10-yr bonds at 3.4338% v 3.46%e; bid to cover 2.5x

 

Australia/New Zealand

- ASX 200 opened +0.3%

- ASX 200 Consumer Discretionary index +1.1%, Resources +1.1%, Financials +0.5%; Energy -0.7%

- BHP.AU Reports Q4 iron ore production 72.0Mt v 70.0Mt y/y; attributable iron ore production 63.6Mt v 60.3Mte v 60.0Mt y/y

- (AU) Australia Jun Westpac Leading Index m/m: 0.0% v -0.2% prior

- (AU) Analysts note Australia could benefit from US/China trade war - press

- (NZ) New Zealand Debt Management Office (DMO) to offer NZ$150M in April 2037 bonds on Thursday July 19th

Other Asia

- (MY) Malaysia Jun CPI Y/Y: 0.8% v 1.3%e (4th staright month below target range)

- Taiwan’s Nanya Technologies declines over 2%; reported Q2 results, said the DRAM ‘supercycle’ is ending

North America

- US equities ended mostly higher: Dow flat, Nasdaq +0.2%, S&P500 +0.2%, Russell 2000 +0.6%

- S&P500 Consumer Staples +0.8%, Real Estate -0.7%

- Berkshire Hathaway [BRKb]: Amends Share Repurchase Program, under the amendment repurchases can be made at any time that Buffett and Vice Chairman Munger believe that the repurchase price is below the intrinsic value of the company

- (US) Weekly API Oil Inventories: Crude: +0.6M v -6.8M prior

- (US) Court filing shows DNC seeking to subpoena Jared Kushner in Russia civil suit

- (US) Fed George (hawk): Sees significant upside risks from fiscal policy, downside risks from trade policy; financial stress may be building in some sectors; more gradual Fed hikes needed to lift rate to neutral - Kansas City speech

- (US) Senator Orrin Hatch (R-UT) threatens to push for legislation that would curb President Trump’s trade authority if he moves ahead with more tariffs - US financial press

-(US) Former Fed chair Bernanke: Yield curve inversion have been a good predictor of economic downturns, but important to look at more than just the curve for future of economy

Europe

- (G20) Efforts to produce consensus on a G20 communique are on track and have faced no meaningful opposition from the US - financial press

- (UK) PM May wins vote on Trade Bill amendment, defeating rebellion by pro-EU conservatives; vote 307 to 301

- (EU) European Union reportedly exploring talks with President Trump on reducing car tariffs - press

-(UK) UK PM May reportedly had threatened hardliners with election - UK press

Levels as of 01:30ET

- Hang Seng +0.1%; Shanghai Composite +0.6%; Kospi -0.1%; Nikkei225 +0.7%; ASX 200 +0.6%

- Equity Futures: S&P500 +0.1%; Nasdaq100 +0.0%, Dax +0.0%; FTSE100 +0.0%

- EUR 1.1613-1.1745; JPY 112.85-113.08; AUD 0.7370-0.7395;NZD 0.6764-0.6788

- Aug Gold -0.1% at $1,225/oz; Sept Crude Oil -0.4% at $66.92/brl; Sept Copper +0.2% at $2.75/lb