Asia Mid-Session Market Update: Australia trade deficit narrows; Twitter suitors reportedly bow out; Fed's Fischer unfazed by risks to financial stability from low rates
***Notes/Observations***
- US stocks closed higher after two days of losses, helped by continued rebound in crude oil prices pushing toward the $50 mark. Energy names outperformed while REITs joined Utilities as most heavily sold - investors are heading for the exits on high-dividend defensive names given the rise in bond yields. More constructive US economic data has kept Fed funds probabilities of a 2016 hike above 60%.
- Twitter reversed its one day of gains, falling over 10% afterhours on Recode reports that Google, Apple, and Disney have no interest in making a bid. CRM has not been ruled out among the primary field of suitors, but would likely need financing. Bidding process expected to conclude on Oct 27.
- Australia Aug trade deficit narrowed to A$2B - smallest in 4 months, though terms of trade have been in the red for 28 straight months. Both exports and imports were flat and shipments to China fell to 4-month lows, but exports of iron ore hit 20-month highs and crude oil a 9-month high. AUD got a brief 10pip bounce on the release before coming under pressure. Volatility in FX majors was generally subdued with Friday's non-farm payrolls on the radar.
- Fed vice chair Fischer urged greater fiscal response to potential economic malaise associated with lower neutral interest rates; Does not believe that persistent low rates are a threat to financial stability and also sees US financial sector resilient to stress.
- In key Asia corporates, Samsung Electronics rallied after receiving a letter from Elliott Affiliates urging restructuring and greater capital return - company is set to report prelim Q3 results tomorrow. Fujitsu and Lenovo rallied on speculation of a tie-up in PC operations.
***Top US session headlines***
- (US) SEPT ADP EMPLOYMENT CHANGE: 154K V 165KE
- (US) SEPT FINAL MARKIT SERVICES PMI: 52.3 V 51.9E (highest since April)
- (US) AUG FACTORY ORDERS: +0.2% V -0.2%E (and inventories rise for two consecutive months)
- (US) DOE CRUDE: -3M V +1.5ME; GASOLINE: -0.2M V +0ME; DISTILLATE: -2.4M V -1ME
- (US) Fed's Lacker (hawk, non-voter): there is a strong case to raise rates more rapidly
***US markets on close: Dow +0.6%, S&P500 +0.4%, Nasdaq +0.5%***
- Best Sector in S&P500: Basic Materials
- Worst Sector in S&P500: Utilities
- Biggest gainers: CHK +6.8%, RIG +5.9%, ENDP +5.1%, SIG +4.6%, FOSL +4.5%
- Biggest losers: CRM -5.8%, AYI -4.7%, AIV -4.0%, EXR -3.3%, AVB -3.2%
***VIX 12.99 (-0.4pts); Treasuries: 2-yr 0.84% (+1bp), 10-yr 1.72% (+3bp), 30-yr 2.44% (+3bp)***
***US movers afterhours***
- ZUMZ +13.3%: Reports Sep SSS +6.3% v -0.4%e; Raises Q3 $0.29-0.30 v $0.24e, R$216-217M v $210Me (prior $0.21-0.26, R$209-213)
- JD +5.5%: Wal-Mart discloses amended passive 10.8% stake (raised from 5.9% in June) - 13G/A filing
- LRCX -1.2%, KLAC -3.7%: Lam terminates proposed combination with KLA-Tencor
- YUM -2.2%: Reports Q3 $1.09 v $1.09e, R$3.32B v $3.52Be; Raises FY16 op profit growth guidance to at least 15% from 14% prior forecast
- RECN -3.1%: Reports Q1 $0.15 v $0.17e, R$143M v $143Me (2 est)
- TWTR -9.2%: Google does not plan to make an offer for Twitter; Apple bid also said to be unlikely - recode
***After extended session***
- TPC: Muddy Waters' Carson Block said to discuss shorting the company - financial press
- COST: Reports Sept SSS (ex-gas) +1% y/y; US SSS (ex-gas) 0% y/y
- TWTR: Follow Up: Disney also not planning to make an offer for Twitter - recode
***Equity Futures (00:00ET): S&P e-mini -0.1%, Dax flat, FTSE100 flat***
***FX / Commodities ranges (00:00ET):***
- EUR 1.12-1.1215; JPY 103.35-103.60; AUD 0.76-0.7620, NZD 0.7150-0.7180
- Gold -0.1% at 1,268/oz; Oil -0.7% at $49.50/brl; Copper flat at $2.17/lb
***Asian Equity Markets (00:00ET)***
- Nikkei +0.6%, Hang Seng +0.4%, ASX +0.5%, Shanghai closed, Kospi 0.3%
***Key economic data:***
- (AU) AUSTRALIA AUG TRADE BALANCE (A$): -2.0B V -2.3BE (28th consecutive deficit; smallest deficit in 4 months)
- (NZ) New Zealand Sept ANZ Truckometer Heavy (heavy traffic) M/M: -1.4% v +6.8% prior
***Speakers / Press / Fixed Income***
China:
- (CN) Fitch: More China cities to take property curb measures
- (CN) Nomura: Unlikely that the latest property curbs in China will cause property bubble to burst - Chinese press
- (CN) HSBC expects PBOC to cut RRR by additional 50bps this year and 200bps in 2017 - financial press
- (CN) China box office revenue during Oct 1st-3rd fell to CNY774M, -10% y/y - China Daily
Japan:
- (JP) Japan Econ Min Ishihara: Time will come when we ask public for a sales-tax hike - TV interview
- JGB: Japan Ministry of Finance (MOF) sells ¥400B in 0.1% CPI-linked 10-yr JGB auction, bid-to-cover ratio 3.21x (3-year high) v 2.85x prior
- (JP) Japan investors sold net ¥636.8B in foreign bonds v bought ¥1.21T in prior week; Foreign investors bought net ¥251.7B in Japan stocks v sold ¥201.5B in Japan stocks in prior week
***Asia movers***
- Consumer discretionary: Modern Land China Co 1107.HK +2.7% (Sept result); Aeon Co 8267.JP -0.4% (H1 result); Hanon Systems 018880.KR -3.6% (strike at Hyundai Motor); ABC-MART 2670.JP -6.8% (H1 result)
- Financials: Times Property Holdings 1233.HK +0.4% (YTD result); Bank of Queensland BOQ.AU -2.5% (FY16 result); Mitsui Fudosan Co 8801.JP +1.2% (result speculation)
- Industrials: Fantasia Holdings Group Co. 1777.HK -0.9% (Sept result); China Cosco Holdings Co 1919.HK +5.6%, China Shipping Development 1138.HK +5.6% (merger speculation)
- Technology: Lenovo Group 992.HK +2.5%, Fujitsu 6702.JP +6.7% (Lenovo may buy PC operations form Fujitsu); Samsung Electronics 005930.KR +3.5% (Elliott proposals); Otsuka Corp 4768.JP +5.0% (Tier 1 firm raised to Buy)
- Materials: St Barbara SBM.AU -4.1% (Q1 result)
- Energy: Inpex Corp 1605.JP +3.7% (oil price rising)
- Healthcare: Askul Corp.2678.JP +3.2% (JPMorgan raised PT); Australian Pharma API.AU +4.8% (raises guidance); Estia Health EHE.AU -5.5% (guidance)