Asian Market Update: USD gains as investors conclude Yellen shifted into "Neutral"
***Economic Data*** - (HU) Hungary Aug GKI Business Confidence: 2.2 v 1.4 prior, Consumer Confidence: -21.9 (9-month low) v -18.9 prior
***Index Snapshot (as of 02:30 GMT)*** - Nikkei225 +0.2%, S&P/ASX -0.3%, Kospi +0.1%, Shanghai Composite -0.8%, Hang Seng -0.6%, Sept S&P500 +0.1% at 1,990
***Commodities/Fixed Income/Currencies*** - Dec gold -0.1% at $1,279, Oct crude oil -0.2% at $93.50/brl, Sept Copper flat at $3.20/lb - (KR) South Korea sells 20-yr bond at average yield of 3.305% - (JP) BOJ offers to buy ¥450B in CP - USD/CNY: (CN) PBoC sets yuan mid point at 6.1653 v 6.1617 prior setting (weakest setting since Aug 6th)
***Market Focal Points/Key Themes*** - USD was firmly bid in the opening hours of the Asia session, rising about 0.3% against EUR (50 pips below 1.3190) and JPY (40 pips above 102.20) to hit respective 7- and 11-month highs. FX market action implying a greater conviction that Yellen was less dogmatically dovish - giving credence to a more even handed debate about risks of normalizing policy too early AND too late. Reports also suggesting Yellen may be more willing to accept the possibility of structural changes producing labor slack, which would deem extended use of easy monetary policy less effective. In contrast, there is no debate that Friday comments from ECB's Draghi and BOJ's Kuroda were substantially more dovish. Draghi was increasingly vocal to prefer more policy adjustment to austerity and fiscal consolidation. Kuroda noted inflation is still just halfway to meeting its target, and that he will not hesitate to adjust policy "if we fall short of the inflation goal."
- Merger-mania Monday is abuzz with two large deals announced over the weekend. InterMune agreed to be acquired by Roche at $74/shr in a $8.3B deal, which is also weighing heavily on Japan's Chugai Pharmaceutical after recent speculation that it would be Roche's acquisition target. Fast-food giant Burger King confirmed press reports it was in preliminary talks to merge with Tim Horton that would result in the world's third-largest quick service restaurant company. BK did note the transaction remains subject to negotiation of definitive agreements.
- Ahead of Monday's Minsk summit, German Chancellor Merkel struck a measured tone, calling for a solution that does not harm Russia and allows Ukraine to pick its own fate. Merkel said she is welcoming the summit, but warned they probably will not bring any "decisive breakthrough". Recall earlier on Friday, Russian humanitarian convoy refused to wait for Ukraine approval, rolling through the border without full inspection by the Red Cross and prompting accusations of an invasion from Kiev's Defense Ministry officials.
***Equities*** US markets: - THI: Burger King in talks to acquire Tim Hortons; Deal could be reached soon - financial press - ITMN: To be acquired by Roche at $74.00/shr in an all-cash deal valued at approx $8.3B on fully diluted basis - QIHU: Reports Q2 $0.50 v $0.43e, Rev $317.9M v $295Me - AMZN: Said to be developing its own advertising software aimed at competing with Google adwords - financial press - GS: Announces settlement agreements with FHFA over RMBS sales; Goldman to repurchase $3.15B in RMBS sold to Fannie and Freddie
Notable movers by sector: - Materials: Bluescope Steel BSL.AU -12.5% (FY14 results); Western Areas WSA.AU +1.9% (FY14 results); Orora Ltd ORA.AU +9.9% (FY14 results) - Energy: Beach Energy BPT.AU 0.7% (FY14 results); Goldwind 2208.HK +18.3% (H1 results); Sinopec 386.HK +1.7% (H1 results) - Industrials: Leighton Holdings LEI.AU -0.2% (to sell marine unit); BYD 1211.HK -3.4% (H1 results); Great Wall Motor 2333.HK +3.6% (final H1 results) - Healthcare: Chugai Pharmaceutical 4519.JP -8.9% (Roche CEO declines to comment on acquisition speculation); Sinopharm 1099.HK +2.3% (H1 results)