Asia Mid-Session Market Update: China Caixin manufacturing PMI holds in expansion; Deutsche Bank uncertainty grips market sentiment
***Asia Notes/Observations***
- Sentiment in Asia is cautious with the focus shifting from rallying energy on OPEC output cut to financials as Deutsche Bank bears the brunt of liquidity concerns; Late in US session, equities swung sharply lower after reports that 10 hedge funds have reduced exposure to Deutsche Bank and clients have reduced collateral on trades; DB spokesperson confident that majority of trading clients understand group has stable financial position.
- China Caixin Manuf PMI in expansion for the 3rd straight month and in line with consensus; New Orders and Inventories improved; Manufacturing employment deteriorated for the 9th straight month; Economist warns that slowing rate of fiscal income suggests insufficient momentum to drive future economic growth.
- China markets will be closed until next Monday for Golden Week.
- Japan inflation data show continued deterioration despite the rebound in the energy market; AUG National AUG CPI down for 6th month at 3-year lows; SEPT Tokyo core-core CPI turns negative for the first time since 2013; Japan industrial output is the silver lining in data set with a 2-year high rate of y/y growth.
- BOJ summary of opinion for most recent meeting stresses flexibility - will inspect yield curve shape at every meeting and not attached to the current 10-yr JGB yield of near zero.
***Top US session headlines***
- (US) Q2 FINAL GDP ANNUALIZED Q/Q: 1.4% V 1.3%E; PERSONAL CONSUMPTION: 4.3% V 4.4%E
- (US) Fed's George (hawk, dissenting voter): job market is showing continued momentum - CNBC interview
- (US) Fed's Powell (moderate, FOMC voter): Fed can continue to be patient; supports gradual path for rate increases
- DBK.DE: Reportedly 10 hedge funds have reduced exposure to Deutsche Bank, hedge fund clients have reduced collateral on trades - press
***US markets on close: Dow -1.1%, S&P500 -0.9%, Nasdaq -0.9%***
- Best Sector in S&P500: Basic Materials
- Worst Sector in S&P500: Healthcare / Financials
- Biggest gainers: CAG +7.2%, QCOM +6.3%, RIG +6.1%, MUR +4.9%, MRO +4.7%
- Biggest losers: CHK -9.3%, MPC -6.8%, TSO -6.4%, ENDP -6.4%, VLO -6.2%
***VIX 14.02 (+1.6pts); Treasuries: 2-yr 0.73% (-2bp), 10-yr 1.56% (-1bp), 30-yr 2.28% (-1bp)***
***US movers afterhours***
- MENT +5.3%; Elliott Associates, L.P. discloses 8.1% stake; have initiated dialogue with management - 13D filing
- CEMP +4.1%; Announced interim results showing anti-NASH effects in the first six nonalcoholic steatohepatitis (NASH) patients dosed with solithromycin in a Phase 2 study
- COST +1.7%; Reports Q4 $1.77 v $1.73e, R$36.6B (total) v $36.6Be
- ABUS -10.2%; Reports interim multi-dose results from Phase II clinical trial of ARB-1467 in patients with Chronic HBV Infection
- CAMP -13.7%; Reports Q2 $0.27 v $0.28e, R$90.5M v $92.1Me; Guides Q3 $0.24-0.30 v $0.32e, R$81-87M v $93.7Me
***Equity Futures (23:30ET): S&P e-mini -0.3%, Dax -0.3%, FTSE100 -0.4%***
***FX / Commodities ranges (23:30ET):***
- EUR 1.1205-1.1225; JPY 100.90-101.75; AUD 0.7615-0.7635, NZD 0.7230-0.7260
- Gold -0.1% at 1,325/oz; Oil -0.5% at $47.56/brl; Copper -0.3% at $2.18/lb
***Asian Equity Markets (23:30ET)***
- Nikkei -1.6%, Hang Seng -1.3%, ASX -0.6%, Shanghai +0.1%, Kospi -0.9%
***Key economic data:***
- (CN) CHINA SEPT CAIXIN PMI MANUFACTURING: 50.1 V 50.1E; 3rd straight month of expansion
- (JP) JAPAN AUG JOBLESS RATE: 3.1% V 3.0%E; First rise since Feb 2016
- (JP) JAPAN AUG PRELIMINARY INDUSTRIAL PRODUCTION M/M: 1.5% V +0.5%E; Y/Y: 4.6% (2-year high) V 3.4%E
- (JP) JAPAN AUG NATIONAL CPI Y/Y: -0.5% (biggest decline in 3 years; 6th straight decline) V -0.5%E; CPI EX FRESH FOOD (CORE) Y/Y: -0.5% V -0.4%E; CPI Ex Food and Energy (core-core) Y/Y: 0.2% v 0.2%e; 3-year low
- (JP) JAPAN AUG OVERALL HOUSEHOLD SPENDING Y/Y: -4.6% V -2.1%E; 5th straight decline and biggest decline in 5 months
- (JP) JAPAN SEPT TOKYO CPI Y/Y: -0.5% V -0.5%E; CPI EX-FRESH FOOD Y/Y: -0.5% V -0.4%E
- (AU) AUSTRALIA AUG PRIVATE SECTOR CREDIT M/M: 0.4% V 0.5%E; Y/Y: 5.8% V 5.9%E
- (AU) AUSTRALIA AUG HIA NEW HOME SALES M/M: +6.1% V -9.7% PRIOR
- (NZ) NEW ZEALAND AUG BUILDING PERMITS M/M: -1.0% V -8.1% PRIOR (2nd consecutive month of decline)
- (NZ) NEW ZEALAND SEPT ANZ ACTIVITY OUTLOOK: 42.4 (2-year high) V 33.7 PRIOR; BUSINESS CONFIDENCE: 27.9 V 15.5 PRIOR
- (KR) SOUTH KOREA AUG INDUSTRIAL PRODUCTION M/M: -2.4% V -0.6%E; Y/Y: 2.3% V 1.6%E
- (KR) SOUTH KOREA SEPT PMI MANUFACTURING: 47.6 V 48.6 PRIOR
- (KR) South Korea OCT Business Manufacturing Survey: 75 v 74 prior; Non-Manufacturing Survey: 75 v 75 prior
- (UK) SEPT GFK CONSUMER CONFIDENCE: -1 V -5E; 3-month high
***Speakers / Press / Fixed Income***
China:
- (CN) CBA economist: Latest China PMI number lower the hurdle for a Fed rate hike this year; Suggests greater stability in global economy - financial press
- (CN) Bank of China (BOC): China GDP estimated around 6.7% in Q4; Major economic indicators point to stabilization - China Daily
- (CN) According to one survey, PBoC may switch its policy stance to one of broad monetary tightening as soon as 2017 - financial press
- Treasury Sec Lew: inclusion of yuan in currency basket this year is still quite a ways away from yuan being considered reserve currency
Japan:
- (JP) BOJ Summary of Opinions for Sep 22nd (most recent) meeting: Felt it was imperative to ensure sustainability of policy; Uncertain if pace of JGB buys will slow down under YCC; Will examine appropriate yield curve shape at every meeting; Should adjust framework, be flexible to meet price goal.
- (JP) BOJ Gov Kuroda: Central banks today faced with number of challenges
- (JP) BOJ offers to buy ¥410B (down from ¥430B prior) in 5-10yr JGBs, ¥200B in 10-25yr JGBs, ¥120B in JGBs with maturity over 25yrs, and ¥1.75T in T-Bills
Australia:
- (AU) Australia MoF (AOFM) sells A$0.9B in 3.25% 2025 Bonds; avg yield: 1.888%; bid-to-cover: 1.66x
***Asia movers***
- Medibank MPL.AU +2.5%; Macquarie Raised to Outperform
- Woolworths WOW.AU -0.1%; Caltex said to be in final stages of talks to buy Woolworths petrol stations - press
- Worlepyparsons WOR.AU -1.1%; UBS lowers stake to 8.0% from 9.0%
- Beach Energy BPT.AU -1.5%; Shell said to sell its 2.4% stake in Beach Energy - Australian press
- Hyundai Heavy 009540.KR -1.8%%; UBS Cuts 009540.KR to Sell from Neutral
- China Everbright Internationa; 257.hk -5.4%; Cut at Daiwa
- Southern Cross Media SXL.AU -14.22%; Nine Entertainment NEC.AU +5.1%; Nine sells 9.99% stake