Asia Mid-Session Market Update: World Bank raises East Asia GDP forecast as composite PMIs from Singapore and Hong Kong show improvement; Twitter bids expected this week
***Asia Notes/Observations***
- World Bank East Asia report sees China growth slowing gradually to 6.3% in 2018; Regional growth target for 2016 raised to 6.4% from 6.3% prior forecast before slowing to 6.0% in 2018.
- Hong Kong composite PMI at 18-month high, Singapore PMI at 19-month high; In Hong Kong, "companies saw only modest falls in key variables such as new work, output and employment. September meanwhile saw an encouraging upturn in purchasing activity and a further rise in inventories"; Singapore "output and new orders components expanded at sharper rates, while new work from abroad rose for the first time since February, but companies were cautious with regard to employment and inventories, with staff numbers rising only slightly."
- Micron beats on earnings but shares fall over 5% afterhours on soft margins and an 8% y/y cut to CAPEX in FY17
- Oil rallies 1% in electronic trade after API inventories showed the largest draw since Sept 7th.
- Twitter up 4% in extended session on press reports it is prepared to take bids this week; Salesforce reportedly joining the other candidates (GOOG, MSFT, DIS)
- Latest NHC update has hurricane Matthew bending into Florida coast Thursday night and then veering off to the Atlantic on Sunday.
- US Vice Presidential debate more contentious than anticipated; USD/MXN less volatile than in presidential debate, trading in 19.27-30 range.
- Precious metals bounce off the lows after plunging in US session.
***Top US session headlines***
- IMF UPDATES WORLD ECONOMIC OUTLOOK (WEO): Maintains 2016 global growth forecast at 3.1%; Maintains 2017 global growth forecast at 3.4%
- Brexit concerns weigh on Pound (31-year low) but FTSE rises to 17-month highs; Prime Min May: regarding fall in sterling, UK economic fundamentals are strong; currencies go up and down
- (US) National Hurricane Center (NHC): Category 4 Hurricane Matthew moving toward Atlantic Coast
- (US) Sept ISM New York: 49.6 v 47.5 prior
- (US) Oct IBD/TIPP Economic Optimism: 49.6 v 47.2e
- (US) National Retail Federation forecasts US holiday sales +3.6% y/y v +3% in 2015 (10-year avg is +2.5%)
- (US) Fed's Lacker (hawk, non-voter): Fed policy should be at least 1.5% by now - comments from West Virginia
- The US curve steepened while the spread to the German Bund yield widened to the largest level since Nov 2015.
***US markets on close: Dow -0.5%, S&P500 -0.5%, Nasdaq -0.2%***
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Utilities
- Biggest gainers: HIG +3.0%, CRM +3.0%, SIG +2.8%, NTRS +2.5%, ALK +2.4%
- Biggest losers: NEM -10.1%, DO -4.6%, DPS -4.3%, AEAS -4.2%, DLTR -3.9%
***VIX 13.63 (+0.1pts); Treasuries: 2-yr 0.83% (+3bp), 10-yr 1.68% (+6bp), 30-yr 2.41% (+7bp)***
***US movers afterhours***
- ACIA +7.8%: Raises Q3 $0.83-0.90 v $0.74e; Rev $130-133M v $129Me (prior $0.72-0.81; Rev $127-131M); Offering 4.5M (3.3M for shareholders)
- TWTR +3.9%: First bids expected to come in this week for the company; Salesforce among potential bidders - financial press
- MU -5.3%: Reports Q4 -$0.05 v -$0.12e, R$3.22B v $3.11Be; Gross margin (gaap) 18% v 27% y/y; Guides Q1 $0.13-0.21 v $0.07e, R$3.55-3.85B v $3.32Be
***Equity Futures (00:00ET): S&P e-mini flat, Dax +0.1%, FTSE100 +0.2%***
***FX / Commodities ranges (00:00ET):***
- EUR 1.12-1.1230; JPY 102.65-102.95; AUD 0.7605-0.7645, NZD 0.7175-0.7200
- Gold +0.5% at 1,277/oz; Oil +0.9% at $49.14/brl; Copper +0.3% at $2.17/lb
- Weekly API Oil Inventories: Crude: -7.6M v -0.8M prior; 3rd straight draw; largest draw since Sept 7th
***Asian Equity Markets (00:00ET)***
- Nikkei +0.6%, Hang Seng +0.4%, ASX -0.6%, Shanghai closed, Kospi flat
***Key economic data:***
- (AU) AUSTRALIA AUG RETAIL SALES M/M: 0.4% V 0.2%E; 5-month high
- (AU) AUSTRALIA SEPT AIG PERF OF SERVICES INDEX: 48.9 V 45.0 PRIOR; 2nd straight month of contraction
- (JP) JAPAN SEPT SERVICES PMI: 48.2 V 49.6 PRIOR; COMPOSITE PMI: 48.9 V 49.8 PRIOR
- (HK) HONG KONG SEPT COMPOSITE PMI: 49.3 V 49.0 PRIOR; highest since Mar 2015; 19th consecutive month of contraction
- (SG) SINGAPORE SEPT PMI COMPOSITE: 52.9 V 52.3 PRIOR; highest since Feb 2015
- (KR) SOUTH KOREA SEPT CPI M/M: 0.6% V 0.2%E; Y/Y: 1.2% V 0.7%E; CPI CORE Y/Y: 1.3% V 1.1%E
- (PH) PHILIPPINES SEPT CPI M/M: 0.2% V 0.0%E; Y/Y: 2.3% V 2.1%E; CPI CORE Y/Y: 2.3% V 2.1%E
- (TW) TAIWAN SEPT CPI Y/Y: 0.3% V 0.4%E; WPI Y/Y: -4.0% V -3.9%E
- (UK) SEPT AUG BRC SHOP PRICE INDEX Y/Y: -1.8% V -2.0% PRIOR (41st month of decline)
***Speakers / Press / Fixed Income***
China:
(CN) Additional major cities in China (Guangzhou, Shenzhen City, Zhenzhou City, Suzhou City) to tighten home purchase rules to cool down market - Chinese press
- World Bank East Asia Pacific Economic Update: Cuts China 2018 GDP forecast to 6.3% from 6.5%
Japan:
- (JP) BOJ Gov Kuroda: Interest rates to rise if price target is met; reiterates will lower rates if needed - speaking in Diet
- (JP) Japan PM Abe: Reiterates not talking of calling an election now (speculated may call snap election early next year in Chinese press)
Australia:
- (AU) Australia sells A$1.0B in 2027 bonds; avg yield 2.183%; bid-to-cover 2.06x
***Asia movers***
Notable movers by sector:
- Consumer discretionary: Fast Retailing Co 9983.JP +1.8% (JPMorgan raised to Overweight); Toray Industries 3402.JP -3.8% (H1 result speculation)
- Financials: Sompo Japan Insurance 8630.JP +2.1% (acquisition speculation); Marui Group Co.8252.JP +4.5% (Mitsubishi raised to Neutral)
- Industrials: Hitachi Ltd 6501.JP +5.1% (plans to sell stakes in Hitachi Kokusai)
- Technology: Nintendo Co.7974.JP +1.3% (Pokemon Go available in more countries)
- Materials: Anhui Conch Cement 914.HK +2.0% (Jefferies raised to Buy); Whitehaven Coal WHC.AU +5.1% (European 2017 coal price rises); Syrah Resources SYR.AU -16.1% (Managing Director resigns); Zijin Mining 2899.HK -2.4%
- Energy: China Oilfield Services 2883.HK +7.1% (Nomura raised to Buy); Beach Energy BPT.AU -2.1% (Goldman cuts to Sell)
- Healthcare: Avita Medical AVH.AU +7.1% (FDA's approval)