Asia Mid-Session Market Update: Japan manufacturing PMI expands again while Trade remains in surplus; ATT confirms Time Warner deal
***Friday US markets on close: Dow -0.1%, S&P500 flat, Nasdaq -1.5%***
- At the close: VIX 13.34 (-0.4pts); Treasuries: 2-yr 0.83% (+1bp), 10-yr 1.74% (-1bp), 30-yr 2.49% (-1bp)
- Best Sector in S&P500: Consumer Discretionary (Services)
- Worst Sector in S&P500: Healthcare
***Weekend US Corporate Headlines***
- TWX: AT&T confirms to acquire Time Warner in a stock-and-cash transaction valued at $107.50/shr; total transaction value $108.7B
- T: Reports Q3 $0.74 v $0.74e, R$40.9B v $41.1Be; Raises dividend 2.1% to $0.49 (implied yield 5.2%); Full-year guidance on track to meet or exceed expectations
- TWX: Spokesperson for Hillary Clinton: Regulators need to closely scrutinize Time Warner - AT&T deal - press
- BEAV: Rockwell Collins to acquire B/E Aerospace for $8.3B; Total consideration of $62/shr comprised of $34.10/shr in cash and $27.90/shr in stock
- BEAV: Reports Q3 $0.83 v $0.80e, R$732.7M v $711Me
- COL: Reports Q4 $1.58 v $1.57e, R$1.45B v $1.48Be
- GNW: China Oceanwide to acquire Genworth Financial for $2.7B or $5.43/shr
- TD: TD Bank and Ameritrade said to be close to finalizing $4B deal for Scottrade - financial press
***Asia Session Notable Observations, Speakers and Press***
- Weekend full of M&A activity, with confirmed deal for Time Warner from AT&T, which is already attracting regulatory scrutiny from US regulators and both presidential candidates. Rockwell Collins also buying B/E Aerospace and China Oceanwide acquiring Genworth.
- Japan economic datapoints both better than expected - trade surplus of ¥498B was above consensus ¥366BE. Exports fell -6.9% (12th consecutive decline), but smaller than expected -10.8%. Imports were likewise down 16.3% but better than expected 17.0%. Eveports to Asia and US were off by just over 8% - smaller than in the prior month. Japan's prelim manuf PMI for this month grew again, with 2nd straight month of expansion and a 9-month high of 51.7. Among top components, new export orders increased at faster rate, input price decline was slower and employment increased faster. Lastly out of Japan, BOJ Semiannual Financial Stability Report indicated Japan financial system has been maintaining stability, but increasing number of regional banks unable to cover expenses with lending.
- Oil prices down slightly after Iraq Oil Min suggested Iraq should be exempt from OPEC production cuts because of its war with ISIS; Suggests Iraqi output in Sept was 4.7M bpd, may rise further from govt measures to welcome international oil field development. Recall last week, Iran also welcomed global energy names to help with post-sanction development of the sector.
- In the UK, PM May to meet with first ministers of Scotland, Wales and N Ireland on Monday as each side expects to request London's plans for Brexit. In Spain, opposition Socialist Party votes to stand aside and allow PM Rajoy to form a govt, ending 10-month political impasse after 2 inconclusive elections
***Asian Equity Markets (00:30ET)***
- Nikkei225 +0.3%, S&P/ASX -0.6%, Kospi +0.1%, Shanghai Composite +0.1%, Hang Seng -0.7%
***FX ranges/Commodities/Futures/Fixed Income (00:30ET):***
- EUR 1.0860-1.0885; JPY 103.82-103.99; AUD 0.7590-0.7615; NZD 0.7145-0.7170
- Dec gold -0.3% at $1,263/oz, Dec crude oil -0.5% at $50.60/brl, Dec copper +0.5% at $2.10/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 16.6 tonnes to 953.6 tonnes; first decline since Oct 5th
- SLV: iShares Silver Trust ETF daily holdings rise to 11,395 tonnes from 11,294 tonnes prior; multi-year high
- Equity Futures: S&P500 +0.1%, Dax +0.1%, FTSE100 +0.1%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.7690 V 6.7558 PRIOR; lowest CNY setting since 2010
- (CN) PBOC to inject CNY70B in 7-day reverse repos, CNY60B in 14-day reverse repos and CNY40B in 28-day reverse repos
- (AU) Australia MoF (AOFM) sells A$300M in 5.75% 2022 Bonds; avg yield: 1.928%; bid-to-cover: 6.57x
- (KR) South Korea sells 20-yr govt bond, avg yield 1.69%
***Key economic data:***
- (JP) JAPAN SEPT TRADE BALANCE: ¥498B V ¥366BE; ADJ TRADE BALANCE: ¥349B V ¥211BE
- (JP) JAPAN OCT PRELIM PMI MANUFACTURING: 51.7 V 50.4 PRIOR; 2nd straight month of expansion; 9-month high
- (TW) Taiwan Sept Unemployment Rate: 3.9% v 4.0%e
***Asia movers***
- Consumer discretionary: Coca-Cola Amatil CCL.AU -6.7% (Deutsche Bank cuts to Hold); Panasonic Corporation 6752.JP -0.6% (to broaden partnership with Tesla)
- Consumer staples: Inner Mongolia Yili Industrial Group Co 600887.CN +7.1% (acquisition); CJ CheilJedang Corp 097950.KR +1.1% (Goldman Sachs raised to Buy); Orion Corp/Republic of South Korea 001800.KR +1.2% (Goldman Sachs cuts to neutral)
- Financials: Bank of Ningbo Co 002142.CN +4.4% (Q3 result); Credit Corp CCP.AU -3.8% (Wilson Asset no longer a substantial Holder); GF Securities Co 000776.CN +4.0% (Q3 result)
- Industrials: China High-Speed Railway Technology Co 000008.CN +10.0% (plans to sell shares); China Resource Cement 1313.HK +6.3% (Q3 result); Mitsubishi Motors 7211.JP +0.3% (Goldman Sachs raised to Buy)
- Technology: Casetek Holdings 5264.TW -4.1%, Catcher Tech 2474.TW -2.0% (new iPhone casing); Chicony Electronics 2385.TW +2.4% (prospect for GoPro)
- Materials: Asia Cement China Holdings Corp 743.HK +3.7% (guidance); Perseus Mining PRU.AU +11.4% (production update)
- Energy: Yanzhou Coal Mining Co. 1171.HK +5.5% (Q3 result); Santos STO.AU % (raises to Neutral by JPMorgan); Tokyo Gas 9531.JP +0.2% (raises H1 guidance)
- Healthcare: Astellas Pharma Inc 4503.JP +2.4% (H1 result speculation)
- Telecom: China Unicom 762.HK -1.3% (quarterly result)