Asian Mid-session Update: Japan terms of trade remains in deficit, threatens recession; BHP up on quarterly output report
***Economic Data***
- (JP) JAPAN SEPT TRADE BALANCE TOTAL: -¥114.5B V +¥87BE PRIOR; ADJUSTED: -¥355.7B V -¥63BE; 6th consecutive trade deficit
- (AU) AUSTRALIA SEPT WESTPAC LEADING INDEX M/M: +0.1% V -0.3% PRIOR
- (AU) AUSTRALIA SEPT SKILLED VACANCIES M/M: 1.8% V 1.5% PRIOR
- (AU) Australia Aug Conference Board Leading index m/m: -0.4% v +0.3% prior; largest decline in 11 months
- (NZ) NEW ZEALAND SEPT RETAIL CREDIT CARD SPENDING M/M: -1.9% V +1.1% PRIOR; Y/Y 7.3% V 10.5% PRIOR
- (NZ) New Zealand Sept Net Migration: 5.6K v 5.5K prior; Record high
***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +0.8%, S&P/ASX -0.5%, Kospi +0.2%, Shanghai Composite -0.6%, Hang Seng closed, Dec S&P500 +0.1% at 2,022
***Commodities/Fixed Income***
- Dec gold flat at $1,177/oz, Dec crude oil -0.7% at $45.95/brl, Dec copper -0.8% at $2.34/lb
- (US) API Petroleum Inventories: Crude: +7.1M v +3.5Me; 2nd straight build
- (NZ) Fonterra Global Dairy Trade auction: Dairy Trade price index: -3.1% v +9.9% prior auction; first decline in 5 auctions
- (CN) China MoF sells 7-yr bonds at 3.05% v 3.05%e
- (JP) BOJ offers to buy ¥400B in 5-10yr JGBs, ¥240B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr
- (AU) Australia MoF (AOFM) sells A$900M in 4.25% 2026 Bonds; avg yield: 2.7271%; bid-to-cover: 2.14x
***Market Focal Points/FX***
- Asian indices are mixed as investors assess the likelihood of further policy easing in Asia after the latest China GDP and today's Japan trade data. Shanghai Composite was down slightly in the opening hours but has since come off the lows to trade up 0.4% entering midday break. Nikkei225 is up over 1.1% returning from break, bumping up against its 1-month high above 18,400. Volatility in FX majors was more contained - USD/JPY was the most active with a 25pip rise above 119.90, as softer than expected Japan trade balance boosted expectations for more BOJ easing. AUD/USD rose some 10pips above 0.7270, while NZD/USD consolidated post dairy auction decline in a 20pip range below 0.6760.
- Expectations called for Japan to return to trade surplus, but instead the print came in as a 6th straight deficit. Exports component was especially soft, rising just 0.6% v 3.8%e, while imports fell for the 9th straight month at -11.1% v -12.0%e. Exports to Asia ex-China fell for the first time in 7 months at -0.9%, and those to China fell for 2nd month by -3.5%. Shipments to Europe and US held up, rising 10.4% and 5.1% respectively. With 6 months of trade deficit in Japan's export sensitive economy in the books, analysts are calling for heightened possibility of a recession. Recall Q2 final GDP released in early Sept was already a negative at -0.3%.
- Australia Westpac leading index improved slightly, but resident economist said growth is looking "a little vulnerable based on this current run of below trend growth rates for the Leading Index". Westpac added 2016 GDP growth would be closer to 2.75% than 3%. BHP was up just over 1% as iron ore output in Q1 rose despite the slowdown in China demand. Mining giant also affirmed its FY16 production forecasts for copper, oil, energy coal, and iron ore, while also cutting its CAPEX for Petroleum business by 6% to $2.9B.
***Equities***
US equities / ADRs:
- ISRG: Reports Q3 $4.40 v $4.26e, R$590M v $584Me; +7.8% afterhours
- EPAX: Announces Dissolution Date and Initial Liquidating Distribution; +5.4% afterhours
- CREE: Reports Q1 $0.21 v $0.20e, R$425.5M v $419Me; +2.0% afterhours
- DFS: Reports Q3 $1.38 v $1.34e, R$2.19B v $1.84Be; +1.4% afterhours
- TEX: Reports Q3 $0.58 v $0.62e, R$1.64B v $1.56Be; +1.1% afterhours
- ACE: Reports Q3 $1.62 (incl items) v $2.38e, net premiums written $4.2B v $4.23B; -0.3% afterhours
- YHOO: Reports Q3 $0.15 v $0.15e, R$1.00B v $1.02Be; Guides Q4 Rev $920-960M (ex-TAC) v $1.07Be; -1.3% afterhours
- VMW: Reports Q3 $1.02 v $1.00e, R$1.67B v $1.67Be; -3.4% afterhours
- IRBT: Reports Q3 $0.42 v $0.30e, R$143.6M v $146Me; -5.1% afterhours
- CMG: Reports Q3 $4.59 v $4.64e, R$1.22B v $1.21Be; -7.7% afterhours
Notable movers by sector:
- Consumer discretionary: Camel Group Co 601311.CN -0.6% ?9-month result?; Crown Ltd CWN.AU +3.2% (quarterly result); Freedom Foods Group FNP.AU -0.4% (equity raising and acquisition)
- Consumer staples: Australian Agricultural Company AAC.AU +3.2% (H1 guidance); A2 Corp. ATM.NZ -5.1% (Freedom Foods sell stakes)
- Financials: Insurance Australia IAG.AU -0.7% (reaffirms guidance); Medibank MPL.AU -1.2% (affirms guidance)
- Industrials: Amcor Ltd AMC.AU +0.3% (share buyback)
- Technology: HTC 2498.TW -5.6% (releases new phone model); Leshi Internet Info & Tech Co Beijing 300104.CN -3.3% (investment in Yongche.com); LG Electronics Inc 066570.KR +11.0% (partnership with GM)
- Materials: BHP Billiton BHP.AU +0.6% (Q1 result); Zijin Mining 601899.CN +4.0% (9-month result); Nippon Steel & Sumitomo Metal Corp 5401.JP +3.1% (earnings speculation)
- Energy: Idemitsu Kosan Co 5019.JP -1.5% (Cuts H1 guidance); Origin Energ ORG.AU +0.8% (exec comment); Cooper Energy COE.AU -1.0% (Q1 result)
- Utilities: Huaneng Power International, Inc 600011.CN +0.1% (Q3 result); GD Power Development Co 600795.CN +2.1% (Q3 result); China Electric Power Construction 601669.CN +6.5% (9-month result); Yaskawa Electric 6506.JP +8.9% (H1 result)