FT Thoughts & Asian update. Xi's speech, Digital Yuan a threat, Japan's +VE outlook and more

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Asian markets (at noon HK time) mainly slightly +VE but cautious ahead of US jobs data and the long weekend in the US. The exceptions being China and Hong Kong which sold off with no sign of team China and concerns over regulation of ecommerce and wider credit/debt issues.

Australia 
Market opened higher; initial testing above 7,300; hitting resistance at 7,312. Market sold down to 7,280 where it found support and then trended higher but hit resistance at 7,300.
Data due
Home Loans May +1.9% MoM vs +4.3% Apr (F/cast -1.1%)
Investment Lending for Homes May +13.3% vs +2.1% Apr (F/cast was +1.8%)
Japan 
Nikkei opened higher and trended higher through the morning to 28,850 around 10am. It then eased back to trade around 28,800 going into the lunch break +84pts (+0.3%) @ 28,791
Topix followed a similar pattern, hit resitance at 1,959 then traded around 1,955. At lunch was +15pts (+0.8%) @ 1,954
S Korea
KDCA reported 826 new covid cases during the morning hitting a 6 month high -VE for sentiment. 
Kospi opened flat but rallied in the first hour as inflation came in lower than expected. Hit resistance at 3,295 and then sold down to almost flat before starting to work higher again. Currently +5pts (+0.2%) @ 3,288
Kosdaq opened higher @ 1,036 but initially slipped to flat before ticking up to 1,037. Then sold down to 1,034 but now working better; currently (flat) 1,036
Data
Inflation Rate Jun +2.4% YoY vs +2.6% May (F/cast was +2.8%)
Inflation Rate Jun -0.1% MoM vs +0.1% May (F/cast was +0.2%)
Taiwan 
Taiex opened higher at 17,745 and worked higher, hit resistance at 17,780 after 30 minutes. Sold downto flat before bouncing back to retest 17,780 and couple of times. Then eased back, currently +24pts (+0.1%) @ 17,738
China 
CSI 300 opened lower and trended lower through the morning with support at 5,100 going into lunch. -124pts (-2.4%) No sign of Team China at present.
HK Pre market opened @ 28,859 +31pts vs +139pts ADR’s  Oil names firm, Evergrande +VE but Ecommence very weak. Market sold down sharpely to 28,600 in the first few minutes with ECommerce names heavily sold. Continued selling before seeing support at 28,310 and then worked slightly better into lunch. Currently -463pts (-1.6%) @ 28,365
Europe
Likely to follow Asia lower with caution ahead the US jobs numbers.  
Data ahead:
Eurozone PPI
French Budget Balance  
US Futures 
Opened Dow -9pts, S&P and NDX slightly -VE now slightly +VE Dow +6pts with S&P and NDX trading around flat ahead of the jobs report.


FT Front Page
Red letter day
Centenary of CCP celebrated
‘President Xi Jinping extolled the party’s role in “the great rejuvenation of the Chinese nation” but brought the crowd to life only when he turned on the west, saying he would not “tolerate sanctimonious preaching from those who think they have the right to lecture us”.’
Read also Xi warns China foes of ‘great wall of steel’
President says nation will not tolerate critics’ ‘sanctimonious preaching’
Worth noting that Taiwan took issue with China’s bullying; something President Xi said China did not engage in.

Link to full speech, in English, thanks to the People’s Daily.

Full Text: Speech by Xi Jinping at a ceremony marking the centenary of the CPC

World’s leading economies agree on global minimum corporate tax rate

• Companies to pay at least 15% • Rules to start in 2023 • Ireland and Hungary among holdouts
The G7 deal bring moved forward although there are still stumbling blocks both in the US and Europe but it does seem to be moving in the right direction.

Trump’s finance chief set to face charges in pivotal moment for New York probe.
Criminal charges against the CFO of the Trump Organisation and the company.

INSIDE
Bloc-wide digital travel certificate launched to boost tourism
An EU-wide travel system was launched yesterday, allowing European citizens to journey across the bloc without quarantine in a move designed to help boost tourism over the summer.’

A step in the right direction but governments need to do much more. Having gone through the stress of international travel recently I have seen first hand how there is a lack of standard documentation and understanding of various country’s regulations. The result is airline staff erring on the side of caution because the airlines are subject to fines if they transport passengers without the proper documentation.

US supply chain bottlenecks hit manufacturing growth
Looks at the ISM data out in the US data yesterday. Signs of rising prices and shortages but too early to say if the inflationary pressures really are transitory or not.

Optimism among Japan industries bodes well for growth
Looks at the Tankan data released Thursday which suggests that companies in Japan are expecting a better second half with a strong recovery.
‘Conditions were especially strong in industries that supply capital equipment to Chinese manufacturers. The index for production machinery came in at plus 26 and for electrical machinery at plus 28.’ That could come unstuck is the recovery in China, which is two track, continues to slow.
It also noted ‘But Japan’s mainstay automotive industry fell back from plus 10 to plus three, probably reflecting the impact of semiconductor shortages on output.’

Another key feature for Japan will be the roll out of vaccinations domestically and to a degree in the rest of the world too.

Companies and Markets
Nissan to build UK’s first £1bn electric vehicle battery plant

• Carmaker and Envision join forces
• Thousands of jobs for Sunderland
Good news for the UK but it also makes a lot of sense for Nissan because with electric vehicles, transportation of the batteries is a big issue; due to their weight.
See also LEX Nissan/Envision: highly charged partnership
Concludes ‘Nissan is making a big bet on Sunderland. China’s low-profile Envision, in turn, is making a big bet on Nissan. The Japanese carmaker is hardly a frontrunner in the transition from petrol cars to EVs.’ Worth a read.

Markets Insight
China advances in challenge to dollar hegemony By Diana Choyleva chief economist at Enodo Economics.
Looks at why the US and other governments should be more concerned of the effort China is putting into the digital yuans. It is something I have written about having joined a webinar by Mike Howell of Cross Border Capital, its still available to listen to, let me know if you are interested. I wrote an article ‘Beijing is working to kick the US dollar out of Asia’ a few weeks ago.
The digital yuan is even more important than Huawei was to 5G. As currencies move to Central Bank Digital Currencies (CBDC) the lack of a USD one is likely to undermines the USD appeal. Something that could be accelerated if US inflation turns out to be more permanent than the Fed is suggesting.