Nikkei225 Lags on USD/JPY Drop After NFP Shocker
Asian Mid-session Market Update: Nikkei225 lags on USD/JPY drop after NFP shocker; Sterling plummets on rising Brexit momentum
- (AU) AUSTRALIA MAY ANZ JOB ADVERTISEMENTS M/M: +2.4% V -0.6% PRIOR; 8-month high
- (AU) AUSTRALIA MAY TD SECURITIES INFLATION M/M: -0.2% (3-month low) V +0.1% PRIOR; Y/Y: 1.0% (multi-year low) V 1.5% PRIOR
Index Snapshot (as of 03:30 GMT)
- Nikkei225 -1.1%, S&P/ASX +1.0%, Kospi closed, Shanghai Composite flat, Hang Seng -0.1%, Jun S&P500 flat at 2,096
- Aug gold +0.1% at $1,244/oz, Jul crude oil +0.9% at $49.07/brl, Jul copper +1.1% at $2.14/lb
- GLD: SPDR Gold Trust ETF daily holdings rise 6.2 tonnes to 881.4 tonnes; highest since Oct 2013
- (SA) Saudi Aramco said to have raised most of its Asia and US oil prices for July due to strong demand - financial press
- (SA) Saudi Arabia lowers oil prices to Europe in response to ramp-up of exports from Iran - financial press
- (CN) PBOC SETS YUAN MID POINT AT 6.5497 V 6.5793 PRIOR; strongest setting since May 27th
- (CN) PBOC to inject CNY40B in 7-day reverse repos
- (AU) Australia MoF (AOFM) sells A$300M in 3.75% 2037 Bonds; avg yield: 2.7993%; bid-to-cover: 2.48x
Market Focal Points/FX
- Asian equity markets are mixed, even with investment sentiment soured by extremely underwhelming 6-year-low non-farm payrolls out of the US on Friday. Recall that while ADP payrolls and weekly claims data maintained the altitude of recovery in the labor market, other indicators such as Conference Board Online job ads data have been turning from bad to worse. Numbers were also likely impacted by the ongoing Verizon strike as was forecast in recent US press. Report from Fed watcher Hilsenrath over the weekend suggested that June is now "almost surely off the table" and July is still possible though less likely. Futures markets for Fed Funds see less than 5% chance of a rate increase in June, 31% on a move in July and 48% on a move by September.
- USD was hit hard by the soft jobs data, particularly USD/JPY which extended its declines below 106.40 at the open before recovering to 107 handle. Friday's weakness is USD/JPY pair has dragged down the Nikkei225 index below 16,400 - a 3-week low. Japan currency chief Asakawa and Chief Cabinet Sec Suga both noted that the govt is closely watching FX moves, reiterating that excessive volatility is undesirable. Concurrently, Japan's ruling LDP party is preparing for next month's Upper House elections, and a report in financial press noted that party's campaign platform curiously makes no mention of monetary policy or BOJ action.
- GBP/USD was also under severe strain with a number of Brexit polls all showing the camp in favor of Brexit picking up support ahead of June 24th referendum. The most stark contrast was in the poll of Daily Telegraph subscribers showing just 29% planning to vote for staying in EU and 69% for leaving. Opinium poll saw Brexit supporters gain 1pt to 41% v 43% for Stay, TNS poll saw Brexit camp gain 2pts to 43% vs 41% for Stay, and YouGov Brexit support rose 4pts to 45% vs 41% for Stay. GBP/USD fell below 1.4360 - down about 150pips from Friday close - even as UK trade unions implored its 6M members to vote in opposition of Brexit.
- In economic data, Australia Melbourne Institute / TD Securities inflation figures were soft, hitting a 3-month low m/m and a multi-year low of 1% y/y - well below 2-3% RBA's target range. MI researcher said the "May result was driven by falls in fruit and vegetable prices, as well as falls in non-durables and international holiday travel." Separately, ANZ job ads data were surprisingly strong at an 8-month high, though ANZ economist noted "ongoing weak wage growth" supporting employment gains amid economic transition to lower-paying non-mining activity. AUD/USD was little changed on the reports, trading within about a 50pip range above 0.7320.
- Bilateral annual US-China summit in Beijing yielded some tough rhetoric from both sides, particularly as it pertains to the tense situation on South China Sea. China Admiral Sun Jianguo noted the region has become overheated because of the provocations of certain countries for their own selfish interest, adding he was still confident that China has become overheated because of the provocations of certain countries for their own selfish interest. US State Sec Kerry said recent China plans to set up a air defense identification zone (ADIZ) over the disputed South China Sea would be "a provocative and destabilizing act." In terms of economic issues, US US Treasury Sec Lew noted great progress made in currency talks with China, as it committed to moving in an orderly way to a more market oriented exchange rate. Lew added that PBoC should work on its communication, referencing the August devaluation giving " rise to fears that China's economy was in a much weaker place than it actually appears to be."
Notable movers by sector:
- Consumer discretionary: Wanda Cinema 002739.CN +10.0% (trading resumes following restructuring)
- Financials: Biostime 1112.HK -1.2% (repurchase convertible bonds)
- Industrials: FAW Car Co 000800.CN -10.0%, Tianjin FAW Xiali Automobile Co 000927.CN -10.0% (Parent company delays plan); UGL UGL.AU -31.9% (delays projects)
- Technology: Taiwan Semiconductor Manufacturing Co 2330.TW % (to raises R&D expense); TCL Corp.000100.CN +0.9% (to privatize unit); GungHo Online Entertainment 3765.JP +3.0% (Softbank plans stake sales); AU Optronics Corp. 2409.TW +1.6% (speculation for panel makers may see narrower losses)
- Materials: Zhaojin Mining Industry 1818.HK +6.2%, Newcrest Mining NCM.AU +10.9%, Northern Star Resources NST.AU +13.2% (gold gains)