Asian Mid-session Update: Nikkei falls over 2% in catch-up selling; New Zealand trade deficit widens
***Economic Data***
- (JP) JAPAN SEPT MARKIT FLASH PRELIMINARY MANUFACTURING PMI: 50.9 V 51.2E
- (NZ) NEW ZEALAND AUG TRADE BALANCE (NZD): -1.04B V -850ME; 3rd straight deficit and widest deficit in a year
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -2.3%, S&P/ASX +1.0%, Kospi +0.4%, Shanghai Composite +0.8%, Hang Seng -0.6%, Dec S&P500 -0.3% at 1,921
***Commodities/Fixed Income***
- Dec gold +0.2% at $1,133/oz, Nov crude oil +0.8% at $44.82/brl, Dec copper +0.3% at $2.30/lb
- (JP) BOJ offers to buy ¥400B in 5-10yr JGBs, ¥240B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr
- (CN) PBoC to inject CNY80B in 14-day reverse repos (26th consecutive injection); Injects net CNY40B this week v drained CNY140B prior; Offer yield at 2.70% v 4.10% prior on Feb 26th
***Market Focal Points/FX***
- Asian indices are mixed tracking another down day on Wall St. The selling is led by Nikkei225, where investors caught up with increasingly overwhelming bearish sentiment after 3 days of holidays. US S&P emini futures were also down by about 0.5%, falling below 1,920. FX majors are generally rangebound, though USD/JPY was notably lower by about 50pips below the ¥120 handle. Soft USD has boosted precious metals, with Dec gold up over $5 above $1.135.
- Japan's Sept preliminary manufacturing PMI remained in expansion but was softer than consensus 51.2 and prior 51.7 level. Markit economist said the findings pointed to a general slowdown in the expansion of the Japanese manufacturing sector with moderating new order growth. Respondents generally indicated that much of the decline is due to a fall in sales volumes from China. Survey's employment component levels also declined for the first time since March.
- PBoC open market operation switched to 14-day reverse repo instruments to inject CNY80B in liquidity. For the week, injections were also net positive against prior month's net drain. In notable Chinese press, economists with Bank of China (BOC) estimated Q3 GDP to slow to 6.8% before a bounce of 7% in Q4, resulting in overall 2015 growth of around 7%. Separately, local press speculated the PBoC is considering setting up interest rate corridor, whereby the lower bound of the corridor would represent the rates banks are paid for deposits and the upper bound determines cost of funds that banks borrow from PBoC.
- Down under, BHP was marginally lower by just over 1% after BlackRock trimmed its holdings from the "substantial holder" status of over 5% below that threshold. New Zealand trade balance was in deficit for the 3rd straight month and at its widest in over a year. Both exports and imports were above estimates, with exports to US up over 15% but shipments to Australia down over 2%. NZD/USD had the most volatility after the Fonterra H2 results however, rising over 30pips above 0.6280 once the cooperative raised its FY15/16 payout forecast by 0.75 above NZ$4.60/kg, Economists estimate the higher payout to produce up to NZ$1B in additional revenues for the industry.
***Equities***
US equities / ADRs:
- CNAT: Announces top-line results from multicenter Phase 2 portal hypertension clinical trial in patients with liver cirrhosis; +41.6% afterhours
- SCS: Reports Q2 $0.35 v $0.33e, R$819M v $795Me; +4.9% afterhours
- WMT: Said to be seeking price cuts of 2-6% on China made goods from over 10K suppliers - financial press; +0.1% afterhours
Notable movers by sector:
- Consumer discretionary: Esprit Holdings 330.HK -1.1% (FY15 result); Li & Fung 494.HK +0.6%, WH Group 288.HK +0.7% (Wal-Mart said to seek price cuts); G8 Education GEM.AU -2.9% (Chairperson to step down)l Fonterra FCG.NZ +4.4%(H2 result)
- Consumer staples: Nine Dragons Paper Holdings 2689.HK -0.7% (FY15 result)
- Financials: SOHO China 410.HK +1.0% (To restructure loans); New World China Land 917.HK +1.4% (FY15 result); Fosun International 656.HK -1.3% (acquisition); Nomura Holdings 8604.JP -2.8% (legal settlement)
- Industrials: NWS Holdings 659.HK +0.8% (FY15 result); Shenzhen Auto Electric Power Plant Co 002227.CN +5.6% (China boosts EV charging station construction); Aisin Seiki Co 7259.JP -6.9% (Wal-Mart said to seek price cuts); Honda Motor 7267.JP -3.2%, Toyota Motor 7203.JP -1.4% (investigation related to VW)
- Technology: Tsinghua Unisplendour 000938.CN +0.1% (cooperation with Microsoft); Taiwan Semiconductor Manufacturing 2330.TW +1.2% (raises Q3 outlook)
- Materials: Yunnan Aluminum Co 000807.CN +3.7% (private placement); Brickworks BKW.AU -1.4% (FY15 result)
- Energy: China Coal Energy 1898.HK -1.9% (Chairman resigns); Senex Energy SXY.AU +16.0% (reaffirms outlook)
- Utilities: CGN Meiya Power Holdings Co 1811.HK +1.1% (prelim talk for possible acquisition)