Asian Mid-session Update: Investors seek out traditional safe havens after ISIS strikes on Paris; Japan returns to recession
***Economic Data***
- (JP) JAPAN Q3 PRELIMINARY GDP Q/Q: -0.2% V -0.1%E; ANNUALIZED GDP: -0.8% V -0.2%E; Confirms Japan is in technical recession
- (NZ) NEW ZEALAND Q3 RETAIL SALES EX-INFLATION Q/Q: 1.6% V 1.4%E
- (NZ) NEW ZEALAND OCT PERFORMANCE SERVICES INDEX: 56.2 V 59.0 PRIOR
- (AU) AUSTRALIA OCT NEW MOTOR VEHICLE SALES M/M: -3.6% V +5.5% PRIOR; Y/Y: 4.2% V 7.7% PRIOR
- (UK) UK NOV RIGHTMOVE HOUSE PRICES M/M: -1.3% (1st decline in 3 months; biggest decline in 11 months) V +0.6% PRIOR; Y/Y 6.2% V 5.6% PRIOR
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 -1.0%, S&P/ASX -0.8%, Kospi -1.1%, Shanghai Composite -0.5%, Hang Seng -1.6%, Dec S&P500 -0.5% at 2,008
***Commodities/Fixed Income***
- Dec gold +1.0% at $1,091/oz, Dec crude oil +0.8% at $41.05/brl, Dec copper -0.3% at $2.16/lb
- USD/CNY: (CN) PBoC sets yuan mid point at 6.3750 v 6.3655 prior; 10th consecutive weaker Yuan setting and weakest setting since Sept 25th
- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr and ¥20B in inflation-indexed JGBs
- (AU) Australia MoF (AOFM) sells A$300M in 2.75% 2035 Bonds; avg yield: 3.4754%; bid-to-cover: 5.11x
- (KR) South Korea sells KRW1.24T in 10-yr govt bonds, avg yield 2.29%
***Market Focal Points/FX***
- Coordinated ISIS terror attacks on the streets of Paris on Friday night have shaken sentiment that was already on the ropes after last week's equity losses. S&P500 futures opened down 0.6% below 2,000 mark, Treasuries were bid, Gold was up $8 above 1,990, and JPY was higher across the board - EUR/JPY fell as much as 140pips to 130.60 - a 6-month low. The latest number from officials in France estimate 132 killed and over 300 wounded, while the French air force has already begun its retaliation campaign with a bombing raid on an ISIS militant base in Syria.
- The extreme losses in Yen pairs were somewhat short-lived, as Japan Q3 GDP slipped the country back into recession with a 2nd consecutive negative print. Preliminary q/q GDP of -0.2% was worse than expected, and it was the corporate capex component that did the most damage, falling -1.3% against expected -0.5%. Soft Yen trend boosted Exports to +2.6% v -4.3% prior, while consumption held up at 0.5% v 0.4%e. The 2nd Japan recession in as many years will surely boost expectations of further monetary easing from the BOJ and perhaps another supplemental fiscal budget.
- Chinese Yuan was surprisingly under pressure despite IMF head Lagarde signing off on the currency to join the SDR basket late on Friday. USD/CNH offshore Yuan rate was up 0.2% as high as 6.42 - a 2-month high. Researcher with Morgan Stanley reflected that the path to greater convertibility will not necessarily result in one-way strength for RMB but rather more volatility. The next step will be for the IMF executive board to consider the issue on Nov 30th. Also of note in China, brokerage firms were down after securities officials doubled margin deposit requirements to 100% effective on Nov 23rd for new trading contracts.
- Among the dollar majors, NZD held up fairly well above 0.6520. Early session strength was attributed to slightly higher than expected New Zealand retail sales and also a raise in earnings expectations by dairy co-operative Fonterra. RBNZ will put out its forecasts for growth and inflation tomorrow, while the RBA will release its minutes from the latest policy meeting.
- The terror threat will play into the debate over the need for further monetary policy action, primarily by the ECB but also possibly a continuation of a wait-and-see approach at the Fed. Fed funds futures probability for a December hike was at 70% on Friday, but will likely tick lower on Monday. FT interview with Fed's Rosengren - a voter on the FOMC next year - suggested that at least in his case, there were no reservations. In fact, Rosengren expressed some concern over commercial lending, and hinted that rates may need to rise at a faster pace than anticipated.
***Equities***
US equities / ADRs:
- GE: Said to be in talks with Sumitomo Mitsui Financial Group's leasing arm and Shinsei Bank about selling its nearly $5B Japan commercial lending business - financial press
- NSC: Canadian Pacific has proposed a merger or other type of partnership to Norfolk Southern, but it has been received coolly - financial press
Notable movers by sector:
- Consumer discretionary: Biostime International Holdings 1112.HK -14.2% (9-month result, guidance); China Southern Airlines 1055.HK -3.5%, Air China 753.HK -3.7% (Paris attack)
Tabcorp TAH.AU -0.2% (possible merger talks); Treasury Wine Estates TWE.AU -0.8% (entitlement offer); Fonterra FCG.NZ +2.6% (increases forecast earning range)
- Financials: CITIC Securities 600030.CN -3.3%, Haitong Securities 600837.CN -3.0% (China to double margin deposit requirement); Samsung Life Insurance Co.032830.KR -2.8% (Q3 result)
Mitsubishi UFJ Financial Group 8306.JP -0.9% (H1 result); Sumitomo Mitsui Financial Group 8316.JP -2.0 % (H1 result); T&D Holdings 8795.JP -2.1% (H1 result)
- Industrials: Sinotrans Air Transportation Development Co 600270.CN +3.1% (attribution to merger approval); XRF Scientific XRF.AU +5.3% (acquisition); Elders ELD.AU -5.6% (FY15 result)
- Technology: Quanta Computer 2382.TW -0.6% (Oct result); Mesoblast MSB.AU -37.8% (offering)
- Materials: Aluminum Corporation of China 601600.CN -0.8% (dispose asset); Hanwha Chemical 009830.KR +11.2% (Q3 result); Newcrest Mining NCM.AU +4.6% (reaffirms guidance)
- Energy: Showa Shell 5002.JP +1.7% (9-month result); Central Petroleum CTP.AU +2.3% (share repurchase); Oil Search OSH.AU +1.2% (Woodside Petroleum may restart bid)
- Healthcare: Zhejiang Conba Pharmaceutical Co 600572.CN +10.0% (private placement)