Asia Mid-Session Market Update: China property prices continue to rise; Arrests reportedly made related to NYC bombing on Saturday; Oil rallies on geopolitical / supply concerns
***Economic Data***
- (NZ) NEW ZEALAND AUG PERFORMANCE OF SERVICES INDEX: 57.9 V 54.5 PRIOR; highest since Dec 2015
- (NZ) NEW ZEALAND Q3 WESTPAC CONSUMER CONFIDENCE: 108.0 V 106.0 PRIOR
- (UK) UK SEPT RIGHTMOVE HOUSE PRICES M/M: +0.7% (3-month high) V -1.2% PRIOR; Y/Y: 4.0% (16-month low) V 4.1% PRIOR
***Index Snapshot (as of 04:30 GMT)***
- Nikkei225 closed, S&P/ASX flat, Kospi +0.6%, Shanghai Composite +0.6%, Hang Seng +0.8%, Dec S&P500 +0.3% at 2,139
***Commodities/Fixed Income***
- Dec gold +0.6% at $1,318/oz, Nov crude oil +1.8% at $44.42/brl, Dec copper -0.6% at $2.15/lb
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.6786 V 6.6895 PRIOR
- (CN) PBOC to inject CNY180B in 7-day reverse repos and CNY70B in 28-day reverse repos; suspends 14-day reverse repos until Sept 23rd due to National Day holiday
- (AU) Australia MoF (AOFM) sells A$400M in 3.25% 2029 Bonds; avg yield: 2.3558%; bid-to-cover: 3.89x
***Market Focal Points/FX***
- Asian equity markets and US futures are modestly higher despite the down day on Wall St on Friday and bomb explosions in NYC and suburbs over the weekend. Japan was closed for holiday and Australia trading session was curbed by technical glitches, but China returned from two days of holidays to stage a rally led by property developers and financials. In commodities, Oil was up nearly 2% from the close of pit trading on Friday, even though OPEC Sec Gen said this month's meeting in Algeria is for consultation only, diminishing any prospects of a framework toward a production freeze. Instead, there's some focus on Lybia and the halt of its Ras Lanuf oil terminal exports due to clashes with militants. Recall last week, the terminal was taken over by troops loyal to Gen Khalifa Haftar who declared war on the Islamist govt some 2 years ago. Among USD majors, the greenback was under pressure across the board as traders begin to position for a most likely hold by the FOMC this week. USD/JPY slid about 40pips to 102, AUD/USD rose about 60pips to 0.7540, and NZD/USD was up over 60pips to trade above the 0.73 handle.
- China August property prices have continued to rebound, though there's increasing concern of a bubble in the top-tier cities. M/M new home prices across the 70 top cities were up 2.3% v 1.3% prior and y/y rose 16.6% v 14.6% prior. New home prices also rose in 64 cities out of 70 v 51 prior m/m, and existing home price rose m/m in 57 cities v 51 prior. Coincidentally, a PBoC quarterly survey found that 53.7% of respondents believe China property prices are "too high to accept". Property and corporate credit bubble concerns were also on the forefront, with BIS report out this weekend that China's credit to GDP gap reached 30.1% in Q1 - highest on record dating to 1995.
- Explosions in New York City's Chelsea area injuring 29 people, another explosion in a New Jersey suburb, and a stabbing of 9 people at a Minnesota mall by a Somali man have lifted terror concerns. Note that while the New York bombs were not formally connected to an international terror motive, late on Sunday the FBI made some arrests near the Verrazano Bridge in Brooklyn. New York is also headed for its UN summit this week. Fed's Rosengren commentary was largely in line with prior sentiment, calling for some consideration of gradual removal of accommodation to reflect "two-sided" risks to economic forecast.
- In Europe, Russian Parliament elections saw a strong showing for Putin's United Russia party, as it took just over 50% of the vote next to about 16 for 2nd place ultranationalist Liberal Democratic Party. German Chancellor Merkel's Christian Democrats had another poor showing in regional Berlin elections, losing to center-left opposition and allowing euro-skeptic AfD to take more seats. Ahead of next month's referendum in Italy, PM Renzi was disdainful toward other European leaders and their broken promises with Europe, stating: "The size of Spain's deficit is twice ours and France does not even respect the Maastricht Treaty."
***Equities***
US equities / ADRs:
- GM: Leader of Canadian union Unifor: Thousands of factory workers will strike at 2 GM plants if the two sides do not reach agreement by Monday night deadline; Will not extend strike deadline - financial press
- AAPL: Reportedly iPhone 7 is emitting a faint hissing sound when running many applications that appears to be coming from its CPU - tech blogs
Notable movers by sector:
- Consumer discretionary: Pacific Textiles Holdings 1382.HK -7.2% (profit warning); Kumho Tire Co 073240.KR +3.7% (creditors to announce stake sale)
- Consumer staples: Mengniu Dairy 2319.HK -2.3% (new CEO)
- Financials: Sunac China Holdings 1918.HK +5.7%, Legend Holdings Corporation 3396.HK +3.3% (acquisition); Macquarie Group MQG.AU -1.1% (guidance)
- Industrials: Cardno CDD.AU -0.6% (guidance)
- Technology: Samsung Electronics 005930.KR +2.2% (sold equity stakes); Hon Hai Precision Industries 2317.TW +3.5% (Apple said to increase iPhone7 production); Nan Ya Plastics 1303.TW +2.2% (investment plan)
- Materials: Apac Resources 1104.HK +0.9% (profit warning); Fortescue Metals Group FMG.AU +2.0% (Credit Suisse raised to Neutral); Iluka Resources ILU.AU -1.2% (Credit Suisse raised to Neutral)
- Energy: China Gas Holdings 384.HK +2.2% (bid for UK business); Santos STO.AU +2.6% (Goldman Sachs raised to Neutral)
- Healthcare: Estia Health EHE.AU +0.2% (considers potential sale)