Asia Mid-Session Market Update: RBA on hold as expected with added concern over slowing housing sector; USD/JPY at 2-week highs above ¥102
***Asia Notes/Observations***
- Reserve Bank of Australia had its first policy decision under Gov Lowe, leaving rates on hold as forecast by unanimous survey of economists; Accompanying statement reiterated some of the prior positions - global economy growing at slower pace, China growth is moderating, labor market has been mixed with continued expansion seen in near term, and inflation remains quite low; RBA did feature some notably new focus on the housing sector, adding that growth in lending for housing has slowed over the past year, turnover has declined, rate of increase is lower than year ago, and growth in rents is the slowest in some decades; There has been speculation that the RBA could eventually pave the way to rate hikes by next year, but concern on housing will likely keep the central bank at bay. Nov meeting will be more telling with updated projections of economic growth and inflation.
- USD/JPY extending gains to 2-week high above 102.30 as better than expected US ISM Manufacturing raises expectations of a Fed hike this year; CME probabilities of at least a 25bp move by 2016-end back above 60%; Nikkei leads regional indices higher on softer JPY
***Top US session headlines***
- (US) Atlanta Fed GDPNow: cuts Q3 GDP forecast to 2.2% from 2.4% on Sep 30th
- (US) SEPT ISM MANUFACTURING: 51.5 V 50.3E; PRICES PAID: 53.0 V 53.5E (higher raw materials prices for the seventh consecutive month)
- (US) Fed's Mester (hawkish dissenter, FOMC voter): the US economy is not overheating; Fed is not behind the curve and policy has to be forward looking
***US markets on close: Dow -0.3%, S&P500 -0.3%, Nasdaq -0.2%***
- Best Sector in S&P500: Basic Materials
- Worst Sector in S&P500: Utilities
- Biggest gainers: CTSH +5.6%, NFLX +4.1%, NWSA +3.2%, AAL +3.0%, LUV +2.2%
- Biggest losers: RIG -7.6%, APD -6.5%, CNC -5.5%, TDC -5.0%, FRT -3.8%
***VIX 13.57 (+0.3pts); Treasuries: 2-yr 0.80% (+3bp), 10-yr 1.62% (+2bp), 30-yr 2.34% (flat)***
***US movers afterhours***
- OLLI +5.4%: to enter S&P SmallCap 600 index; VOXX -2.9%: dropped from S&P SmallCap 600
***Equity Futures (00:00ET): S&P e-mini +0.1%, Dax -0.3%, FTSE100 flat***
***FX / Commodities ranges (00:00ET):***
- EUR 1.1195-1.1215; JPY 101.60-102.40; AUD 0.7660-0.7690, NZD 0.7270-0.7310
- Gold flat at 1,313/oz; Oil -0.5% at $48.57/brl; Copper -0.3% at $2.18/lb
***Asian Equity Markets (00:00ET)***
- Nikkei +0.6%, Hang Seng flat, ASX -0.1%, Shanghai closed, Kospi +0.5%
***Key economic data:***
- (AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET AT 1.50%; AS EXPECTED
- (AU) AUSTRALIA AUG BUILDING APPROVALS M/M: -1.8% V -6.0%E; Y/Y: 10.1% (10-month high) V 5.1%E
- (AU) AUSTRALIA SEPT ANZ JOB ADVERTISEMENTS M/M: -0.3% V +1.8% PRIOR
- (NZ) NEW ZEALAND SEPT QV HOUSE PRICES Y/Y: 14.3% V 14.6% PRIOR
- (NZ) New Zealand Q3 Business Confidence: 26 v 19 prior; highest since Q2 of 2014 - NZIER business survey
- (JP) JAPAN SEPT MONETARY BASE Y/Y: 22.7% v 24.2% PRIOR; MONETARY BASE END OF PERIOD: ¥412.8T v ¥404.5T PRIOR
- (KR) SOUTH KOREA AUG CURRENT ACCOUNT BALANCE: $5.5B V $8.7B PRIOR; GOODS BALANCE: $7.3B V $10.8B PRIOR
***Speakers / Press / Key Themes***
China:
- (CN) PIMCO: Expect China to make more progress on financial market reform amid slowing growth and a depreciating yuan
- (CN) China to crack down on 45 real estate developers and intermediaries for violation - China Daily
Japan:
- (JP) BOJ Q3 TANKAN Inflation Survey: Japan companies see inflation 0.6% y/y 1-year v 0.7% q/q; 1.0% in 3-yrs v 1.1% q/q, and 1.0% in 5-yrs v 1.1% q/q
- (JP) Japan PM Abe: have not given any thought to calling snap elections
- (JP) Japan Fin Min Aso: Will explain Japan's economic policy at G20 - financial press
- (JP) BOJ Gov Kuroda: negative rates have cut bank earnings but are a plus for overall economy; Not seeing immediate damage to banking sector from negative rates; Reiterates view that new poilcy framework is not tapering
- (JP) Japan Center for Economic Research (JCER): AUG GDP estimated at -0.2% m/m, down for 2nd straight month - Nikkei
Australia:
- (AU) Australia Treasurer Morrison: Govt to strengthen regulation on financial benchmarks
- AUD/USD falls about 15pips to 0.7660 after RBA policy statement
***Asia movers***
Notable movers by sector:
- Consumer discretionary: Kewpie Corp 2809.JP -3.0% (9-momtn result); News Corp NWS.AU +3.2% (pending Tronc-Gannett deal); Seven West Media SWM.AU -1.1% (divestment)
- Financials: Evergrande Real Estate Group 3333.HK +8.8% (reorganization); Digital Domain Holdings 547.HK -4.9% (share sale); Tokyu Fudosan Holdings Corp 3289.JP -0.9% (Credit Suisse cuts to neutral); Nomura Real Estate Holdings 3231.JP -3.6% (Credit Suisse cuts to Neutral)
- Industrials: Bradken BKN.AU +31.7% (Hitachi Construction to acquire Bradken for A$3.25/shr or about A$689M); Mitsubishi Motors 7211.JP +0.9% (Sept North America sales); Honda Motor Co 7267.JP +2.0% (Haitong raised to Buy)
- Technology: FIH Mobile 2038.HK -0.8% (profit warning); Tokyo Electron 8035.JP +2.9% (SMBC raises PT)
- Materials: Galaxy Resources GXY.AU +8.4% (update on Mt Cattlin)