Asian Market Update: US govt crisis averted following 11th hour vote in the House to approve the Senate-brokered deal
***Observations/Insights*** - The two-week standoff between the Republican-led House and the White House came to a head late on Wednesday, just hours before the Treasury-imposed default deadline of midnight. Cooler heads prevailed, as Senate leaders Reid and McConnell brokered a deal in the US hours, subsequently receiving the commitment from House leadership to go along with the accord which some have quickly dismissed as "kicking the can down the road." Indeed, under the provisions of the agreement, the govt will be funded through Jan 15 and debt limit extended through Feb 7th, with the Treasury granted the authority to use extraordinary measures to extend debt limit through March of 2014. Arguably however, the White House may have emerged out of this crisis stronger. Pres Obama will now hold the veto power to proceed with an increase in the debt ceiling, requiring a 2/3rd Congressional majority for an override and potentially diminishing the likelihood of another standoff in early 2014. Instead, the two sides will be forced into a more active discussion on the implications of controversial Obamacare reform and other fiscal matters with the mandated formation of a bipartisan budget panel established by mid-December to facilitate negotiations on a longer term debt reduction agreement. In the mean time, US Senate voted overwhelmingly 81-18 in favor of the end of govt shutdown and debt limit extension. In the House, over 80 Republican lawmakers crossed over to vote with the unanimous Democrat bloc for an overall 285 Yea to 144 Nay count. - Regional indices are generally higher, tracking bullish sentiment on Wall Street that followed the confirmation of a govt deal. Nikkei225 is outperforming, tracking weaker JPY, while Shanghai is also up despite the PBoC reportedly slowing its open market operations - after last week's net injection, the Chinese central bank drained funds from the system after stating that liquidity is ample earlier in the day.
***Economic Data*** - (CN) CHINA SEPT ACTUAL FOREIGN DIRECT INVESTMENT (FDI) Y/Y: +4.9% v +5.7%E; YTD Y/Y +6.2% V +6.4% PRIOR - (AU) AUSTRALIA SEPT RBA FX TRANSACTIONS (A$): 663M V 482M PRIOR - (NZ) NEW ZEALAND OCT ANZ CONSUMER CONFIDENCE: +2.9% V -3.4%; INDEX: 122.3 V 118.8 PRIOR - (NZ) NEW ZEALAND SEPT ANZ JOB ADS M/M: +1.1% V -1.3% PRIOR - (KR) SOUTH KOREA SEPT PPI Y/Y: -1.8% V -1.3% PRIOR - (SG) SINGAPORE SEPT ELECTRONIC EXPORTS Y/Y: -5.5% V +0.2%E; NON-OIL DOMESTIC EXPORTS M/M: 5.7% v 2.6%E; Y/Y: -1.2% v -2.8%E - (US) API PETROLEUM INVENTORIES: CRUDE: +5.94M (3rd consecutive build; Largest build since June) v +1.5Me
***Fixed Income/Commodities/Currencies*** - (CN) PBoC will not conduct open market operations (OMO) in today's session; Drains net CNY44.5B this week v injected CNY33B prior - GLD: SPDR Gold Trust ETF daily holdings fall by 4.6 tonnes to 885.5 tonnes (lowest since Feb 2009) - (JP) BOJ offers to buy ¥300B in 1-3yr JGB, ¥350B in 3-5yr JGB and ¥200B in JGB with maturity over 10-yr
- US dollar is modestly softer despite the govt funding / debt extension deal in Washington, as sell-the-news flows reversed some of the initial optimism in the US session. USD/JPY briefly tested the ¥99 handle but traded down toward ¥98.50 following confirmation of the Senate deal in the House. Likewise, EUR/USD rose some 30pips from the lows above $1.3550, GBP/USD was up over 40pips above $1.5980, while AUD/USD and NZD/USD traded in 30-40pip ranges around $0.9550 and $0.8430 respectively. CNY continued to hit record highs in OTC trade, with USD/CNY once again probing below the 6.10 level.
***Speakers/Political/In the Papers*** - (CN) China PBoC: Reiterates to maintain prudent monetary policy and fine tune when appropriate; Liquidity relatively ample; fx inflows have increased sharply - (CN) China PBoC: Supports residents' needs for first home mortgage loan; Overall banking system liquidity is still relatively abundant - (CN) China MOFCOM researcher: China's decline in export may be beneficial - Chinese press - (CN) Moody's: China liquidity rules for banks is credit Credit Positive - (CN) China NDRC Climate Chief: Reiterates time is not right for China to introduce carbon tax; carbon-trading pilot program has been effective - (JP) Japan PM Abe: Not visiting Yasukuni Shrine, has made offering - Kyodo News
- (US) PIMCO's Gross: Sees US interest rates to increase by 5-10bps as a result of political gridlock in Washington - CNN interview - (US) Fed's George (hawkish and dissenting voter on the FOMC): Wide range of voices make policy stronger
***Equities*** Market Snapshot (as of 03:30 GMT): - Nikkei225 +1.2%, S&P/ASX +0.2%, Kospi +0.1%, Shanghai Composite +0.5%, Hang Seng +0.2%, Dec S&P500 -0.1% at 1,712, Dec gold -0.2% at $1,280, Nov crude oil -0.1% at $102.20/brl
US markets: - SCSS: Reports Q3 $0.36 v $0.42e, R$264M v $278Me; -26.2% afterhours - IBM: Reports Q3 $3.99 v $3.95e, R$23.7B v $24.8Be; -6.0% afterhours - EBAY: Reports Q3 $0.64 v $0.63e, R$3.89B v $3.90Be; -5.3% afterhours - XLNX: Reports Q2 $0.58 (ex $0.09 litigation expense) v $0.52e, R$599M v $588Me; Guides Q3 Rev -2 to +2% q/q implies $587-611M v $609Me; -3.7% afterhours - AXP: Reports Q3 $1.25 v $1.22e, R$8.30B v $8.22Be; +0.3% afterhours - SNDK: Reports Q3 $1.59 v $1.32e, R$1.63B v $1.56Be; Guides Q4 R$1.65-1.725B v $1.67Be, bringing FY13 Rev outlook above the high end of prior forecast range (prior $5.95-6.05B; $6.04Be) - conf call; +1.8% afterhours - STLD: Reports Q3 $0.25 v $0.24e, R$1.91B v $1.82Be; +3.0% afterhours
Notable movers by sector: - Consumer discretionary: Daphne International Holdings Ltd 210.HK -5.3% (Q3 results); Shenzhen Huaqiang Industry 000062.CN -3.1% (Q3 results) - Industrials: IHI Corp 7013.JP +2.8% (speculation on H1 results); Boral Ltd BLD.AU +5.9% (JV agreement); Kelin Environmental Protection Equipment Inc 002499.CN +10.0% (pollution management policies) - Materials: Van Shung Chong Holdings Ltd 1001.HK -5.1% (announces acquisition); Fortescue Metals Group Ltd FMG.AU -4.4% (Sept quarter results; provides FY guidance) - Technology: HTC Corp 2498.TW +1.2% (product launch) - Energy: Kansai Electric Power 9503.JP +2.6% (raises guidance); Woodside Petroleum Ltd WPL.AU -1.5% (Q3 results); Linc Energy LNC.AU +5.9% (FY production results) - Utilities: Korea Electric Power Corp 015760.KR -6.6% (delays operation);Beijing Jingneng Power Co Ltd 600578.CN +2.9% (provides Q3 guidance) - Telecom: ZTE Corp 763.HK +4.4% (awarded contract)