sian Mid-session Update: China markets shrug soft trade data, rally on IPO resumption
Mon, 09 Nov 2015 0:51 AM EST
***Economic Data***
- (CN) CHINA OCT TRADE BALANCE: $61.6B V $62.2BE; Largest surplus since 1995
- (JP) JAPAN SEPT LABOR CASH EARNINGS Y/Y: 0.6% V 0.5%E; REAL EARNINGS (EX-INFLATION) Y/Y: 0.5% V 0.3%E; 7th straight increase
- (JP) JAPAN OCT OFFICIAL RESERVE ASSETS: $1.24T V $1.25T PRIOR
- (AU) AUSTRALIA OCT ANZ JOB ADVERTISEMENTS M/M: 0.4% V 3.8% PRIOR
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +1.9%, S&P/ASX -1.7%, Kospi -0.4%, Shanghai Composite +1.6%, Hang Seng +0.1%, Dec S&P500 +0.1% at 2,095
***Commodities/Fixed Income***
- Dec gold +0.4% at $1,092/oz, Dec crude oil +0.8% at $44.66/brl, Dec copper +0.2% at $2.24/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 2.7 tonnes to 669.1 tonnes; lowest since Aug 8th
- IMF's Lagarde: Global oil prices may remain low for years; Gulf countries should adjust their budgets
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥400B in 3-5yr JGBs, ¥240B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr
- (KR) South Korea sells 5-yr govt bonds, avg yield 2.00%
***Market Focal Points/FX***
- Asian indices are trading mixed after a much stronger non-farm payrolls report in the US on Friday lifted the Fed Funds futures market expectations of a Fed liftoff in December above 70%. USD was sharply higher across the board but particularly against JPY, helping Nikkei225 to a near 2% rally. USD/JPY hit a fresh 3-month highs near 123.50 in today's Asia session. Over the weekend, China saw soft trade data, but Shanghai Composite also rallied on reports of resumption of mainland IPOs. AUD/USD fell some 10pips at the open to 0.7020 but then reversed that decline later in the day. NZD/USD also initially slid 20pips to 0.6490 before a bounce above 0.6550.
- China October trade balance saw the highest surplus on record since 1995, but components remained disconcerting. Both exports and imports saw larger than expected declines: Exports fell for the 4th straight month at -6.9% v -3.8%e, while imports were down -18.8% v -15.0%e. Regionally, shipments to US fell -0.9%, EU by -2.9%, and Japan by 7.7%. Economist with ANZ said the trade figures would suggest that domestic demand remains sluggish, but added growth should improve in Q1 of next year. Separately, a govt researcher in China noted that GDP of 6.5% for 2016-2020 is a "bottom line" rather than a target amid reports that the official targets for next 5-year planning period will be released in March. For now, recent signs of stability in financial markets have given China Securities regulator CSRC the confidence to announce resumption of IPOs by the end of 2015. IPOs have been suspended for 4 months, and the resumption is also supporting broader sentiment in the China market, with particular benefits felt in the broker space.
- Australia was a clear laggard in Asia, weighed down by gold and materials stocks negatively impacted by the stronger dollar. Shares of BHP were especially weak, falling over 5%. BHP CEO said its 2016 production targets were under review after last week's Samarco dam incident in Brazil. 3 people have been confirmed killed, over 20 remain missing, and reports suggest the site may be closed for several years with cleanup costs estimated as high as $1B.
- Voting FOMC member Williams spoke over the weekend, stating that the decision not to raise rates in October was already a close call. Williams added that waiting too long on a hike introduces a range of risks, and talked up employment market after the strong NFP, noting US is very close to full employment.
***Equities***
US equities / ADRs:
- PCL: Weyerhaeuser and Plum Creek to merge, creating the world's premier timber, land and forest products company; Weyerhaeuser to repurchase $2.5B (16% of market cap) after transaction
- APA: Said to have rejected unsolicited takeover approach; working on defense with GS - financial press
Notable movers by sector:
- Consumer discretionary: Uni-President China Holdings 220.HK +3.6% (9-month result); Skyworth Digital 751.HK -12.7% (Oct result); Recall Holdings REC.AU -0.7% (guidance)
- Financials: CICC 3908.HK +9.5% (IPO debut); CITIC Securities 6030.HK +2.1%, China Galaxy Securities 6881.HK +2.1% (China to resume IPO); Fosun International 656.HK +1.5% (litigation settlement)
- Industrials: Guangzhou Automobile Group 2238.HK +2.4% (Oct result); Hanjin Shipping Co 117930.KR -4.2% , Hyundai Merchant 011200.KR -8.4% (merger speculation); Isuzu Motors 7202.JP +3.3% (H1 result); Yamaha Motor 7272.JP +3.9% (H1 result); Daiwa House Industry Co. 1925.JP +1.7% (H1 result)
- Technology: Toshiba Corporation 6502.JP -7.0% (H1 result)
- Materials: Newcrest Mining NCM.AU -5.3% (decline in gold prices); Asciano AIO.AU -2.7% (modified offer); Alacer Gold Corp AQG.AU -2.2% (decline in gold prices)
- Energy: Santos STO.AU -1.7% (reaffirms guidance, strategic review); Origin Energy ORG.AU -4.8% (divestment speculation)
- Telecom: NTT 9432.JP +4.6% (H1 result)