Good Morning from Ascot Securities

MARKETS

Happy Birthday Francis Scott Key

Our Olympians will no doubt do us proud in coming weeks but I think we all know we will be getting very tired of hearing the US national anthem by the time the closing ceremony comes around.

The lyrics to the Star Spangled Banner come from a poem written by Key.

The poem, “Defence of Fort M’Henry”, was inspired by a battle during the 1812 War.

So when you have to endure yet another rendition during a medal ceremony you know who to curse.

The Nikkei posted a 0.6% rise on Friday aided by the commitment by the BoJ to increase its buying of ETFs.

The BoJ’s policy combination of the ETF purchase program, easier access to US dollar funding and keeping interest rates steady gave Japan’s banks a push and the Topix Banks Index gained 6%.

Elsewhere Asian markets were pretty ordinary.

The Shanghai Composite gave up 0.5% while the Hang Seng lost 1.3%.

European banks were over 2% higher ahead of the latest bank stress test results.

Barclays rose 5.5% despite posting earnings for the first half which were down 21%.

Barclays CEO Jess Staley said that the European banking sector is challenged after saying the bank will get rid of some non-core businesses.

The Stoxx 600 gained 0.7% as a weaker dollar helped push oil higher for the first time in days.

WTI crude futures gained 1.1% but that wasn’t enough to help Exxon after it posted earnings well below expectations.

Exxon lost 1.4% but Chevron did rise 0.7% to help the Dow to close down just 24 points.

The preliminary reading of the second quarter GDP showed an annualised rise of just 1.2% compared to expectations for a 2.6% rise.

First quarter growth was revised down to just 0.8% from 1.1%

The weak GDP figure put pressure on the US dollar…

Gains of 3% for Alphabet and 0.8% by Amazon supported markets and helped the Nasdaq to post an all-time high at 5162.1

Ahead of local trade the SPI is up 17 points.

Chart(s) of the Day

The weaker dollar has given the gold price fresh impetus.

After testing support at the early July breakout, the metal is now poised to go higher

The price of iron ore into the port of Qingdao fell 2.2 % to US$59.37 a tonne.

Breaking News

TAH/ITQ – ITQ announced it has entered into a Scheme Implementation Agreement with TAH under which TAH will acquire 100% of ITQ’s issued capital by way of a Scheme of Arrangement. The total cash consideration of A$7.15 per share values ITQ’s fully diluted equity at approximately A$128m.

ASX – Dominic Stevens appointed as MD & CEO of ASX

APN – Announced the re-signing of the top rating KIIS 1065 FM breakfast team Kyle & Jackie O, on 5-year contracts.

OZL/CZI – CZI announced it has executed a binding Heads of Agreement with OZL to fast track development of the Company’s 100% owned West Musgrave Project located in Western Australia.

NST – Said it expects to sign a binding sale agreement on its Plutonic gold mine in Western Australia after reaching an in-principle agreement to sell the mining operation to closely held Canadian firm 2525908 Ontario Inc.

July PMI Numbers From Around the Globe Today and Tonight:

– Ai Group Australia Manufacturing, no est. (prior 51.8)

– Nikkei South Korea Manufacturing, no est. (prior 50.5)

– China:

*Caixin Manufacturing, no est. (prior 48.6)

*”Official”:

~Manufacturing, no est. (prior 50.0)

~Non-Manufacturing, est. (prior 53.7)

– Nikkei Japan Manufacturing, no est. (prior 49.0)

– Taiwan:

*Nikkei Manufacturing, no est. (prior 50.5)

*CIER Manufacturing, no est. (prior 53.3)

– Nikkei Indonesia Manufacturing, no est. (prior 51.9)

– Nikkei Malaysia Manufacturing, no est. (prior 47.1)

– Nikkei Vietnam Manufacturing, no est. (prior 52.6)

– Nikkei India Manufacturing, no est. (prior 51.7)

– Markit/BME Germany Manufacturing, no est. (prior 53.7)

– Markit Eurozone Manufacturing, no est. (prior 51.39)

– Markit UK Manufacturing, no est. (prior 49.1)

– US:

*Markit Manufacturing, no est. (prior 52.9)

*ISM Manufacturing, no est. (prior 53.2)

– JPMorgan Global Manufacturing, no est. (prior 51.3)

ASIA NEWS

JAPAN

So the BOJ has folded after Abe-san’s stimulus package and will buy more ETF’s to throw even more yen into the system. How far can they kick the can down the road? The only bright spot was the announcement that they will re-asses their whole thought process in September – apparently. They are just trying to buy time. Out of ideas, nowhere to go, push the whole problem out further.

CHINA

Mainland listed companies in Hong Kong kick off the reporting season tomorrow. One of the first out of the blocks is China’s largest power producer, Huaneng Power International. It is expected to report around a 26% Y/Y drop in profits in H1 while then next biggest China Resources Power is expected to see about a 23% drop for the same period. While this is being explained away as new capacity coming on line, lower prices and a move to a service sector economy, maybe it just points to a very weak economy. After all power consumption has always been used as a barometer of the health of the Chinese economy.

INDIA

Rainfall is at a decade high as the Indian Ocean Dipole and La Nina kick in. The main agricultural month is July in India and precipitation is around 7% above average, which has allowed not only more planting then previous but over a wider area. Inflation has to be less of a worry than a couple of months ago.

 

KOREA

Just to keep Asia Barriers negative theme on about South Korea’s bleak outlook going…

…The overall value of midterm dividends paid out by South Korea’s listed companies is unlikely to meet last year’s level despite improved earnings performances, the KRX said Sunday. Although the government has urged listed firms to pay more dividends to enhance shareholders’ value, many companies still appear to be reluctant to be aggressive in dividend payouts due to a prolonged economic slowdown. Instead, they have postponed making major investments in facilities due to weak demand and put aside a sizable amount of money in their coffers in preparations for any further downturns in the economy.

Today The Market Will Be Watching:

– Australia:

*TD Securities Inflation:

~M/M, no est. (prior 0.6%)

~Y/Y, no est. (prior 1.5%)

*June HIA New Home Sales. No est. (prior -4.4% M/M)

– South Korea July Trade Figures:

*Exports, est. -4.4% Y/Y

*Imports, est. -9.5% Y/Y

*Balance, est. $7.79B

– Indonesia July CPI, est. 3.32% Y/Y

– Thailand July CPI, est. 0.54% Y/Y

– Macao July Gross Gaming Revenue, no est. (prior -8.5%)

– Earnings including Japan Tobacco, Mitsubishi UFJ Financial Group, CLP, Sumitomo and Tech Mahindra

And Tonight:

– US:

*July ISM Prices Paid, no est. (prior 60.5)

*June Construction Spending, est. 0.5%

*Loan Officer Survey

– Earnings including Dun & Bradstreet and Williams

posted on August 1, 2016