Asian Market Update: BOJ downgrades assessment of inflation as Yen losses mount
***Economic Data***
- (JP) BANK OF JAPAN (BOJ) POLICY STATEMENT: REITERATES TO INCREASE MONETARY BASE AT ANNUAL PACE OF ¥80T (As Expected); Lowers assessment of CPI; Raises assessment of Exports
- (JP) Japan Sept Final Leading Index: 105.6 v 105.6 prelim; Coincident Index: 109.8 v 109.7 prelim
- (AU) AUSTRALIA OCT WESTPAC LEADING INDEX M/M: 0.0% V -0.1% PRIOR (4-month high)
- (AU) AUSTRALIA OCT SKILLED VACANCIES M/M: 0.0% V 0.3% PRIOR (6-month low)
- (KR) South Korea Oct PPI Y/Y: -0.7% v -0.5%prior; 3rd month of decline
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +0.2%, S&P/ASX -0.4%, Kospi -0.3%, Shanghai Composite -0.2%, Hang Seng -0.3%, Dec S&P500 -0.1% at 2,046
***Commodities/Fixed Income***
- Dec gold -0.5% at $1,191, Dec crude oil -0.5% at $74.25/brl
- (US) API PETROLEUM INVENTORIES: CRUDE: +3.7M (first build in 3 weeks) v -1Me, GASOLINE: +0.52M v +0.5Me, DISTILLATE: -3.3M v -1.5Me
- SLV: iShares Silver Trust ETF daily holdings rise to 10,864 tonnes from 10,789 tonnes prior; highest level since Oct 5th
- (AU) Australia MoF (AOFM) sells A$500M in 3.25% bonds due 2029; Avg yield: 3.5578%; Bid-to-cover: 4.53x
- (CN) China Ministry of Finance (MoF) sells 10-yr bonds at 3.58% yield - financial press
- USD/CNY: (CN) PBoC sets yuan mid point at 6.1397 v 6.1430 prior setting (strongest setting since Nov 9th)
***Market Focal Points/Key Themes/FX***
- Coming less than 3 weeks after the unexpected expansion of easing, the latest BOJ monetary policy statement further solidified more restrained central bank policy stance. The BOJ reiterated the economy continued to recover moderately, but also pointed to weakness on production side remaining from the run-up to initial consumption tax lift. BOJ was more upbeat on Exports ending downward momentum, and also reiterated that Public investment leveled off at high level and Private consumption was resilient as a trend. The downgrade of inflation assessment is perhaps the most notable - BOJ estimates y/y rate of increase in CPI around 1% vs the previously seen 1.25% and also forecasting the outlook for inflation to around current levels for the time being.
- After much fanfare on the opening day, the activity related to the Shanghai-Hong Kong trading link has been underwhelming. A Chinese press report said the 2nd day of trading saw mainland investors buying up just 7.6% of daily allowance of Hong Kong shares. Also of note, despite another decline in China property prices for October reported overnight, a local press report profiled the sale of a Shanghai plot of land to Minsheng Investment at CNY24.9B - record level for the city.
- In Australia, Westpac leading index stopped falling for the first time in 4 months. Resident economist stated Westpac expects Australia's growth rate in 2015 to reach an above trend 3.2% despite a larger drag from mining investment, adding the next RBA move would be a tightening considering "improving growth momentum in consumer spending, non-mining business investment, and the labour market."
- Upward trend in the greenback has been much more pronounced across the dollar majors. USD/JPY hit fresh 7-year highs above 117.40, while AUD/USD and NZD/USD both fell by as much as 60pips to $0.8660 and $0.7870 respectively going into Wednesday's release of the latest FOMC meeting minutes.
***Equities***
US markets:
- JACK: Reports Q4 $0.54 (adj) v $0.53e, R$345M v $342Me; +3.8% afterhours
- PETM: Reports Q3 $1.02 (adj) v $0.95e, R$1.74B v $1.73Be; KKR, CD&R said to prepare a joint $7.5B+ bid (current market cap about $7.3B) to take PetSmart private - financial press; +2.6% afterhours
- TRP: (US) Keystone XL pipeline bill fails to pass procedural vote in US Senate by 59-41 vote - financial press; -1.7% afterhours
- VIPS: Reports Q3 $0.08 v $0.07e, R$882.6M v $850Me; -5.1% afterhours
Notable movers by sector:
- Consumer Discretionary: Huayi Brothers 300027.CN +10.0% (Alibaba, Tencent, Ping An, CITIC acquire shares)
- Materials: BC Iron BCI.AU -9.5% (comments from annual general meeting)
- Industrials: Samsung Heavy Industries 010140.KR -5.4%, Samsung Engineering 028050.KR -7.5% (Samsung Heavy, Samsung Engineering merger canceled); Takata Corp 7312.JP -5.1% (NHTSA expands recalls); James Hardie Industries JHX.AU +5.2% (H1 results)
- Technology: Chinasoft International Ltd 354.HK +1.2% (awarded contract from China Mobile)