CN Real Estate Market and Growth Concerns Remain Top of Mind

Asian Market Update: Chinese real estate and banking indices continue their declines; Concerns about the real estate market and CN’s growth remain front and center; Data from China was mixed.

General trend

– Metals traded in China fell sharply on concerns about growth and the real estate market.

– USD trading mixed ahead of upcoming US data [including retail sales].

– Equity markets are trading mixed; The Chinese and Australian indices are lagging behind.

– Finances decline amid US bank profits, China worries.

– Shanghai real estate index drops more than 4% due to mortgage payment boycott issues; Prices for new homes in China also continue to fall.

– Chinese consumption indices supported by better retail sales.

– The Hang Seng Tech index again weighed down by regulatory concerns [Alibaba].

– Nikkei 225 outperforms after Fast Retailing results.

– Australia’s resource index declines on concerns over China; Rio Tinto declines after releasing a quarterly production update.

– US equity FUTs rise.

– Taiwan Semi and Fast Retailing rise after earnings reports.

– Companies due to report during the New York morning include UnitedHealth, Wells Fargo, BlackRock, Citigroup, Bank of NY.

Securities/Economic data

Australia/New Zealand

– The ASX 200 opened -0.4%.

– (NZ) New Zealand Jun Manufacturing PMI: 49.7 vs. 52.6 before (1st contraction in 10 months).

– (AU) Australia sells A$700m vs. A$700m quoted in April 2027 4.75% bond; Average return: 3.1454% vs. 2.9758% before; bid to cover: 3.99xv 3.29x before [from May 20th].

Japan

– Nikkei 225 open +0.3%.

– Toyota Motors 7203.JP Said to have delayed Crown Sedan launch due to parts shortages – Nikkei.

– (JP) The Bank of Japan (BOJ) is offering to buy 5 to 10 year JGBs at a fixed rate of 25 basis points; Opens a window to buy unlimited 10-year JGBs at 0.25% [as expected].

– (JP) Minister of Industry of Japan: Aims to have 9 nuclear reactors ready by winter due to adjustment of construction and inspection deadlines.

Korea

– Kospi opened +0.3%.

– Hynix 000660.KR Said to consider reducing CAPEX by up to 25% to KRW16.0T for 2023; sees a slowdown in demand for electronics – Press.

– (KR) South Korean President Yoon: Call for preventive measures against the spread of financial risks.

– (KR) South Korean President Yoon’s approval rating 32% vs. 37% before – Gallup poll.

China/Hong Kong

– Hang Seng opened -1.1%; Shanghai Composite opened -0.6%.

– (CN) China Q2 GDP Q/Q: -2.6% V -2.0%E (slower since Q1 2020); A/A: 0.4%V 1.2%E.

– (CN) Year-to-date June residential property sales in China: -31.8% vs. -34.5% previously.

– (CN) June industrial production in China A/A: 3.9% V 4.1%E; Year-to-date: 3.4% V 3.5%E.

– (CN) Unemployment rate surveyed in June in China: 5.5% against 5.7%e.

– (CN) June retail sales in China Y/Y: 3.1% V 0.3%E; YTD Y/Y: -0.7%V -1.2%E.

– (CN) China Jun YTD real estate investment Y/Y: -5.4% V -4.2%E.

– (CN) China June fixed urban assets YTD Y/Y: 6.1% V 6.0%E.

– (CN) Electricity consumption in China in June 745.1 billion KWh, +4.7% y/y; Production 709.0B KWh, +1.5% y/y.

– (CN) China Securities Daily expects foreign purchases of A-shares to increase in the second half; notes economic recovery in China, market liquidity conditions – China Press.

– (CN) Chinese National Bureau of Statistics (NBS): the downward pressure on the national economy increased considerably during the second quarter; The foundations for a sustained economic recovery are “not solid”; Difficulties in reaching the GDP target for the full year.

– (CN) China performs CNY100B VS. CNY100B maturing in a one year medium term loan facility (MLF) at 2.85% VS. 2.85% before.

– (CN) China June PRICE OF NEW HOUSES M/M: -0.1% V -0.2% BEFORE (10TH RIGHT DROP); Y/Y: -0.5% V -0.1% FORWARD.

– (CN) Shanghai reports 45 cases of coronavirus against 47 before, 0 outside quarantine; Adds 30 high to medium risk areas to lockdown.

– (HK) Hong Kong buys HK$5.3 billion to defend its currency peg.

– (CN) The Chinese PBOC sets the reference rate for the yuan: 6.7503 against 6.7265 previously.

– (CN) China PBOC Open Market Operation (OMO): sells CNY 3.0 billion in 7-day reverse repos against CNY 3.0 billion previously; Net CNY0B against Net CNY0B before.

— (CN) Chinese Foreign Ministry Wang Yi: Relations with Australia face challenges and opportunities as China stands ready to recalibrate its relationship in the spirit of mutual respect.

– (CN) Zhuhai has halted quarantine hotel reservations for Macau visitors – Press.

North America

– (US) Sen. Manchin (D-WV): Will not support any new climate spending or tax increases – WaPo.

– Amazon [AMZN]: Said he was considering closing his private label business over regulatory reasons and weak sales – Financial Press.

Europe

– (EU) The EU would be ready to increase the financing of Ukrainian armaments to 2.5 billion euros – press.

– (IT) The Italian President rejects the resignation of Prime Minister Draghi; Asks Draghi to address Parliament to “evaluate the political situation” – Italian press.

– *(IT) Italian Prime Minister Draghi resigns; The non-participation of the Five Star Party in the vote of confidence “was very important from a political point of view” – statement.

Levels starting at 1:20 a.m. ET

– Nikkei 225, +0.6%, ASX 200 -0.8%, Hang Seng -1.7%; Shanghai Compound -0.5%; Kospi +0.1%.

– S&P500 equity futures: +0.1%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.2%.

– €1.0041-1.0011; JPY139.12-138.76; AU$0.6765-0.6726; NZ$0.6144-0.6083.

– Gold +0.1% at $1,706/oz; Crude Oil +0.5% to $96.25/brl; Copper -1.5% to $3.1795/lb.