China Services PMI Falls To A Multi-Month LowEconomic Data
(CN) CHINA MAY NON-MANUFACTURING PMI: 55.2 V 56.1 PRIOR (3-month low)
(AU) AUSTRALIA Q1 COMPANY OPERATING PROFIT Q/Q: -4.0% V -2.5%E; INVENTORIES Q/Q: 0.9% V 0.7%E
(JP) JAPAN MAY MONETARY BASE Y/Y: +2.4% V -0.3% PRIOR (3-month high)
(KR) SOUTH KOREA MAY FOREIGN EXCHANGE RESERVE: $310.9B V $316.8B PRIOR (5 month low and biggest decline in 8 month)
(AU) AUSTRALIA MAY ANZ JOB ADVERTISEMENTS M/M: -2.4% V -0.8% PRIOR (second consecutive m/m decline)
(AU) AUSTRALIA MAY TD SECURITIES INFLATION M/M: 0.0% V 0.3% PRIOR (6-month low); Y/Y: 1.8% V 1.9% PRIOR
Markets Snapshot (as of 05:00GMT)
Nikkei225 -2.1%
S&P/ASX -1.9%
Kospi -3.0%
Singapore Straits Times Index -1.5%
Shanghai Composite -1.8%
Hang Seng -2.4%
June S&P Futures -0.7% at 1,265
Aug gold -0.1% $1,621/oz
July Crude -1.8% at $81.76
Overview/Top Headlines
Markets slumped with all markets now in negative territory for 2012, with the exception of Shanghai Composite, in the wake of worse-than-expected US nonfarm payroll numbers on Friday and the tick up in US unemployment. Also weighing on the markets was China services PMI for May, which saw a 3-month low at 55.2, combined with the lower reading in the manufacturing PMI China is clearly headed for a slowdown. Analysts are increasingly expecting more aggressive policy response out of China after recent soft economic data. PBoC Governor Zhou said that European stimulus measures will have a limited and temporary impact.
The yuan has the ability to become a widely accepted global currency. Zhou made no comment on stimulus measures. He also said it is not necessary now to commit to a figure for IMF fundraising. Gold benefited from the renewed risk aversion and fears of a global slowdown rising back to the $1,630 level. USD/JPY rose over 0.3% to ¥78.15 after briefly spiking up about 40 pips above ¥78.40. Japan Finance Minister Azumi refused to comment on talks of stealth intervention and reiterated that the decline in equities and strong yen are not reflective of Japan's true economy. Japan PM Noda replaced 5 ministers in his cabinet in order to garner support for the sales tax hike bill.
Australian markets fell to a low of 3,987, while the AUD tested below $0.9630 ahead of tomorrow's RBA meeting. HSBC chief economist Paul Bloxham expects additional 25bps in policy easing from the RBA tomorrow, this is less than the 50bps he saw on May 1st. According to one of the more recent surveys on tomorrow's RBA rate decision expectations, 50% of analysts expect a 25bp cut, 30% expect a 50bp cut, and 20% expect a hold. Australia Treasurer Swan said the most recent budget factored in a slowdown in Europe; reiterated RBA has room to move on policy rates.
Over the weekend in Europe it was said that Europe is coming up with a "Master Plan" which is being spearheaded by Italy's Draghi. A rough copy will be ready by the end of June. Germany remains against eurobonds until these new measures and further fiscal integration are in place. Spain Finance Minister de Guindos is negotiating with EU leaders for a European bank funding mechanism. EUR/USD was slightly weaker in the Asia session falling to a low of $1.2390.
Speakers/Geopolitical/In The Press
(CN) China said to have started studying plans related to possible exit of Greece from the euro. - US financial press
(HK) ANZ cuts Hong Kong 2012 GDP forecast from 4.4% to 3.8%; Cuts 2012 CPI from 4.0% to 3.8%.
(CN) China third tier city, Shijiazhuang, has ordered housing curbs to be relaxed in 5 areas; Hunan province has lowered mortgage rates for first-time homebuyers. - Chinese press
(AU) S&P director of sovereign ratings Kyran Curry said if Australia delayed plan to return to budgetary surplus this would be inconsistent with its AAA sovereign rating. - Australian Press
(HK) Hong Kong Financial Secretary Tsang: May have to lower GDP targets if European economy deteriorates. - financial press
(CN) China Port of Qingdao has no space to take more goods (responsible for 14% of the country's imports); Iron ore stock piles estimated at 15M tons and growing. - Australian press
(JP) Bank of Japan (BoJ) Gov Shirakawa: Reiterates view that watching effects of JPY currency appreciation on sentiment and the economy, it is a source of uncertainty for domestic economy.
Equities
VAH.AU: Reports Apr load factor 77.0% v 80.5% y/y; passengers +6.7% y/y.
Hutchison Whampoa, 13.HK: In advanced talks to acquire control of Scailex; Deal said to be $1.08B in cash and $300M in secured debt. - HK Standard
GCL.AU: Shareholders approve merger with Yancoal Australia.
FMG.AU: CEO Power: Expects that iron ore prices will fall 19% to approx $110/ton before reaching a long term sustainable price level, while China's economy slowdown. - The Age