Asian Mid-session Update: Soft Australia CPI raises expectations for more RBA easing
***Economic Data***
- (AU) AUSTRALIA Q3 CONSUMER PRICES (CPI) Q/Q: 0.5% V 0.7%E; Y/Y: 1.5% V 1.7%E; TRIMMED MEAN Q/Q: 0.3% (1-year low) V 0.5%E ; Y/Y: 2.1% (3-year low) V 2.4%E
- (JP) JAPAN SEPT RETAIL SALES M/M: 0.7% V 1.1%E; Y/Y: -0.2% (first decline in 6 months) V +0.4%E; LARGE RETAILERS' SALES: 1.7% V 1.1%E
- (CN) China Oct Westpac Consumer Confidence index: 109.7 v 118.2 prior
- (KR) South Korea Sept Department Store Sales y/y: +2.8% v -6.5% prior; Discount store sales y/y: +7.0% v -7.6% prior
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +0.6%, S&P/ASX -0.1%, Kospi -0.4%, Shanghai Composite -0.2%, Hang Seng -0.5%, Dec S&P500 +0.1% at 2,062
***Commodities/Fixed Income***
- Dec gold +0.2% at $1,167/oz, Dec crude oil +0.1% at $43.25/brl, Dec copper -0.3% at $2.35/lb
- (US) API Petroleum Inventories: Crude: +4.1M v +3.5Me; 3rd straight build
- UNG: CME raises margin requirements on Natural Gas
- (CN) China MOF sells 3-yr bonds, avg yield 2.65%
- (JP) BOJ offers to buy ¥240B in 10-25yr JGBs, ¥140B in JGBs with maturity over 25-yr, and ¥120B in floating rate JGBs
***Market Focal Points/FX***
- Asian equity markets are down slightly, tracking a modestly cautious US session, as investors look ahead to any new hints of rate liftoff from the FOMC decision on Wednesday. No policy changes are expected, though the Fed could attempt to clarify how close it is to tightening after a surprise hold last month.
- Policy implications for the BOJ and the RBA from economic data have been tilted in favor of further easing, with worse than expected retail sales from Japan and softer Q3 CPI from Australia. USD/JPY hit its best levels above 120.50 on the release, while AUD/USD was down over 60pips below $0.7120. Ahead of the retail sales data in Japan, a Nikkei report speculated the BOJ will already have to increase its annual purchases of JGBs to ¥119T within the next year because JGB holdings expected to mature within a year were about ¥39T at the end of September. A separate Japanese press report forecasted the BOJ likely to push back the date of achieving its 2% CPI target beyond the H1 of 2016 currently expected. In Australia, the softer than expected CPI has lifted the probability of next week's easing well above 50%. In other USD majors, NZD/USD tracked the decline in AUD with a 40pip slide below 0.6730, and EUR/USD was down about 20pips after cautious comments from ECB's Coueure who confirmed the central bank is having discussions about asset buying expansion and whether it can do more on CPI.
- Over in China, a researcher with the State Council called on PBoC to continue cutting RRR until PPI measure turns positive. Note that wholesale inflation has been negative for 43 straight months. UBS also cut its 2016 GDP target for China to 6.2% from 6.5%, while banking regulator CBRC official said the financial industry is healthy despite the rising non-performing loans.
***Equities***
US equities / ADRs:
- NOC: Wins USAF long range strike bomber contract to build 100 bombers at estimated cost of about $80B; Beats out Boeing-Lockheed Martin; +6.4% afterhours
- NCR: Reports Q3 $0.78 v $0.70e, R$1.61B v $1.65Be; +1.9% afterhours
- CNI: Reports Q3 C$1.26 v C$1.04 y/y, Rev C$3.22B v C$3.12B y/y; +1.1% afterhours
- AAPL: Reports Q4 $1.96 v $1.88e, R$51.5B v $50.8Be; +0.6% afterhours
- APC: Reports Q3 -$0.72 v -$0.72e, R$1.69B v $2.27Be; -0.5% afterhours
- ESRX: Reports Q3 $1.45 v $1.44e, R$25.2B v $26.3Be; -1.3% afterhours
- KKR: Reports Q3 adj -$0.37 v -$0.33e, R$188.6M v $253Me; adopts a $500M unit repurchase program (6.3% of market cap); -6.0% afterhours
- GILD: Reports Q3 $3.22 v $2.90e, R$8.30B v $8.08Be; -1.5% afterhours
- RAD: Confirms to be acquired by Walgreens Boots Alliance for $17.2B or $9.00/shr in all-cash deal; -7.2% afterhours
- TWTR: Reports Q3 $0.10 v $0.05e, R$569M v $561Me; -12.7% afterhours
- AKAM: Reports Q3 $0.62 v $0.58e, R$551M v $551Me; -12.9% afterhours
Notable movers by sector:
- Consumer discretionary: China Eastern Airlines 600115.CN +1.4% (9-month result); Tsingtao Brewery Co 168.HK -4.9% (9-month result); Dick Smith Holdings DSH.AU -29.9% (Q1 result, cuts guidance); SK Networks 001740.KR +2.8% (Q3 result)
- Financials: China Vanke Co 2202.HK +0.2% (9-month result); China CITIC Bank 998.HK -1.2% (9-month result); National Australia Bank NAB.AU -1.8% (FY15 result, demerger unit); Mitsui & Co L8031.JP +1.0% (asset sale to Dow Chemical)
- Industrials: China Communications Construction 601800.CN -1.7% (new shares); Mitsubishi Motors 7211.JP +7.3% (H1 result); Fanuc Ltd 6954.JP +5.1% (H1 result); Isuzu Motors Ltd 7202.JP -2.0% (H1 result speculation); Mazda Motor Corp 7261.JP+2.9% (raises H1 guidance)
- Technology: ZTE Corp 000063.CN +2.3% (9-month result); Canon Inc 7751.JP -3.4% (9-month result); Tokyo Electron Ltd 8035.JP +7.5% (H1 result); Veda Group Ltd VED.AU +0.4% (guidance)
- Materials: Maanshan Iron & Steel 323.HK -1.7% (9-month result); Jiangxi Copper Company 358.HK -3.0% (9-month result)
- Energy: China Coal Energy 1898.HK -2.2% (9-month result); Sinovel Wind Group Co Ltd 601558.CN -2.7% (9-month result)
- Healthcare: Sinopharm Group Co 1099.HK +1.6% (9-month result); China Resources Double Crane Pharmaceutical Co 600062.CN +4.8% (approval for acquisition)
- Telecom: Softbank Corp 9984.JP +3.0% (Third Point said to have sold shares)
- Utilities: Huadian Power International Corp 1071.HK +1.5% (9-month result)