>>> Asian Update

Asian Mid-session Update: Soft Australia CPI raises expectations for more RBA easing


***Economic Data***
- (AU) AUSTRALIA Q3 CONSUMER PRICES (CPI) Q/Q: 0.5% V 0.7%E; Y/Y: 1.5% V 1.7%E; TRIMMED MEAN Q/Q: 0.3% (1-year low) V 0.5%E ; Y/Y: 2.1% (3-year low) V 2.4%E
- (JP) JAPAN SEPT RETAIL SALES M/M: 0.7% V 1.1%E; Y/Y: -0.2% (first decline in 6 months) V +0.4%E; LARGE RETAILERS' SALES: 1.7% V 1.1%E
- (CN) China Oct Westpac Consumer Confidence index: 109.7 v 118.2 prior
- (KR) South Korea Sept Department Store Sales y/y: +2.8% v -6.5% prior; Discount store sales y/y: +7.0% v -7.6% prior

***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 +0.6%, S&P/ASX -0.1%, Kospi -0.4%, Shanghai Composite -0.2%, Hang Seng -0.5%, Dec S&P500 +0.1% at 2,062

***Commodities/Fixed Income***
- Dec gold +0.2% at $1,167/oz, Dec crude oil +0.1% at $43.25/brl, Dec copper -0.3% at $2.35/lb
- (US) API Petroleum Inventories: Crude: +4.1M v +3.5Me; 3rd straight build
- UNG: CME raises margin requirements on Natural Gas
- (CN) China MOF sells 3-yr bonds, avg yield 2.65%
- (JP) BOJ offers to buy ¥240B in 10-25yr JGBs, ¥140B in JGBs with maturity over 25-yr, and ¥120B in floating rate JGBs

***Market Focal Points/FX***
- Asian equity markets are down slightly, tracking a modestly cautious US session, as investors look ahead to any new hints of rate liftoff from the FOMC decision on Wednesday. No policy changes are expected, though the Fed could attempt to clarify how close it is to tightening after a surprise hold last month.

- Policy implications for the BOJ and the RBA from economic data have been tilted in favor of further easing, with worse than expected retail sales from Japan and softer Q3 CPI from Australia. USD/JPY hit its best levels above 120.50 on the release, while AUD/USD was down over 60pips below $0.7120. Ahead of the retail sales data in Japan, a Nikkei report speculated the BOJ will already have to increase its annual purchases of JGBs to ¥119T within the next year because JGB holdings expected to mature within a year were about ¥39T at the end of September. A separate Japanese press report forecasted the BOJ likely to push back the date of achieving its 2% CPI target beyond the H1 of 2016 currently expected. In Australia, the softer than expected CPI has lifted the probability of next week's easing well above 50%. In other USD majors, NZD/USD tracked the decline in AUD with a 40pip slide below 0.6730, and EUR/USD was down about 20pips after cautious comments from ECB's Coueure who confirmed the central bank is having discussions about asset buying expansion and whether it can do more on CPI.

- Over in China, a researcher with the State Council called on PBoC to continue cutting RRR until PPI measure turns positive. Note that wholesale inflation has been negative for 43 straight months. UBS also cut its 2016 GDP target for China to 6.2% from 6.5%, while banking regulator CBRC official said the financial industry is healthy despite the rising non-performing loans.

***Equities***
US equities / ADRs:
- NOC: Wins USAF long range strike bomber contract to build 100 bombers at estimated cost of about $80B; Beats out Boeing-Lockheed Martin; +6.4% afterhours
- NCR: Reports Q3 $0.78 v $0.70e, R$1.61B v $1.65Be; +1.9% afterhours
- CNI: Reports Q3 C$1.26 v C$1.04 y/y, Rev C$3.22B v C$3.12B y/y; +1.1% afterhours
- AAPL: Reports Q4 $1.96 v $1.88e, R$51.5B v $50.8Be; +0.6% afterhours
- APC: Reports Q3 -$0.72 v -$0.72e, R$1.69B v $2.27Be; -0.5% afterhours
- ESRX: Reports Q3 $1.45 v $1.44e, R$25.2B v $26.3Be; -1.3% afterhours
- KKR: Reports Q3 adj -$0.37 v -$0.33e, R$188.6M v $253Me; adopts a $500M unit repurchase program (6.3% of market cap); -6.0% afterhours
- GILD: Reports Q3 $3.22 v $2.90e, R$8.30B v $8.08Be; -1.5% afterhours
- RAD: Confirms to be acquired by Walgreens Boots Alliance for $17.2B or $9.00/shr in all-cash deal; -7.2% afterhours
- TWTR: Reports Q3 $0.10 v $0.05e, R$569M v $561Me; -12.7% afterhours
- AKAM: Reports Q3 $0.62 v $0.58e, R$551M v $551Me; -12.9% afterhours

Notable movers by sector:
- Consumer discretionary: China Eastern Airlines 600115.CN +1.4% (9-month result); Tsingtao Brewery Co 168.HK -4.9% (9-month result); Dick Smith Holdings DSH.AU -29.9% (Q1 result, cuts guidance); SK Networks 001740.KR +2.8% (Q3 result)
- Financials: China Vanke Co 2202.HK +0.2% (9-month result); China CITIC Bank 998.HK -1.2% (9-month result); National Australia Bank NAB.AU -1.8% (FY15 result, demerger unit); Mitsui & Co L8031.JP +1.0% (asset sale to Dow Chemical)
- Industrials: China Communications Construction 601800.CN -1.7% (new shares); Mitsubishi Motors 7211.JP +7.3% (H1 result); Fanuc Ltd 6954.JP +5.1% (H1 result); Isuzu Motors Ltd 7202.JP -2.0% (H1 result speculation); Mazda Motor Corp 7261.JP+2.9% (raises H1 guidance)
- Technology: ZTE Corp 000063.CN +2.3% (9-month result); Canon Inc 7751.JP -3.4% (9-month result); Tokyo Electron Ltd 8035.JP +7.5% (H1 result); Veda Group Ltd VED.AU +0.4% (guidance)
- Materials: Maanshan Iron & Steel 323.HK -1.7% (9-month result); Jiangxi Copper Company 358.HK -3.0% (9-month result)
- Energy: China Coal Energy 1898.HK -2.2% (9-month result); Sinovel Wind Group Co Ltd 601558.CN -2.7% (9-month result)
- Healthcare: Sinopharm Group Co 1099.HK +1.6% (9-month result); China Resources Double Crane Pharmaceutical Co 600062.CN +4.8% (approval for acquisition)
- Telecom: Softbank Corp 9984.JP +3.0% (Third Point said to have sold shares)
- Utilities: Huadian Power International Corp 1071.HK +1.5% (9-month result)

>>> US After Hours Summary: VCRA +25.3%, CLD +18.1%, PEGA +9.4%,

After Hours Summary: VCRA +25.3%, CLD +18.1%, PEGA +9.4%, AAPL +0.2%, AKAM -14%, TWTR -13.3%, KKR -6.3% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: VCRA +25.3%, CLD +18.1%, CBI +10.4%, PEGA +9.4%, INFN +9.1%, CSS +6%, BBSI +5.2%, AAC +5%, TRU +4.2%, RGC +3.1%, EXAC +2.9%, BXMT +2.8%, RSYS +2.2%, ZLTQ +2%, NCR +1.9%, ETH +1.5%, NMIH +1.3%, TSS +1.3%, CNI +1.1%, WNC +1.1%, FISV +0.9%, MSL +0.9%, IPHI +0.8%, STAG +0.6%, FEIC +0.4%, BGS +0.4%, KTCC +0.4%, TER +0.4%, AAPL +0.2%

Companies trading higher in after hours in reaction to news: CBI +9.1% (to sell all outstanding equity interests in its nuclear construction business to Westinghouse Electric Company LLC for $229 mln; co will incur $1.0-1.2 bln charge; provided mixed Q3 guidance), NOC +5.8% (co confirmed it was selected by the U.S. Air Force as partner on long-range strike bomber), CORE +2.9% (signed a five year supply agreement to service ~900 7-Eleven stores in three western regions), ABCB +2.8% (to replace MKTX in the S&P SmallCap 600), ARNA +2.3% (received additional patentaa covering BELVIQ by US Patent and Trademark Office to provide additional support for exclusivity in the US until 2032; announced plans to reduce its US workforce by ~80 employees or 35%), GHL +1.8% (CEO disclosed purchase of 202.5K shares, worth total of $5.04 mln)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: AKAM -14%, TWTR -13.3%, BGFV -8.2%, KKR -6.3%, BKFS -3.8%, BBOX -3.2%, SKYW -2.8%, RUBI -2.5%, GILD -2%, ESRX -1.7%, LMAT -1%, NUVA -0.7%, NBR -0.7%, FSP -0.7%, TRMK -0.7%, BOOM -0.7%, BDGE -0.6%, JBT -0.6%, PSB -0.5%, APC -0.5%, VRSK -0.4%, IPCM -0.4%, AFL -0.3%, VICR -0.1%

Companies trading lower in after hours in reaction to news: MCUR -54.2% (announced pivotal Phase 3 study of CureXcell in the treatment of diabetic foot ulcers did not meet its primary endpoint or secondary endpoints), RAD -7.7% (to be acquired by Walgreens Boots Alliance (WBA) for $9/share in cash, or ~$17.2 bln; shares were up 42% on the day in speculation of the deal), LMT -1.8% (lower following loss of Long Range Strike-Bomber contract to Northrop Grumman; BA also lower by 1.3%)

>>> Gilead Sciences notes from conference call: 190k US, 80k European patients h

Gilead Sciences notes from conference call: 190k US, 80k European patients have begun hepatitis C treatment since the beginning of this year 

* Co repurchased $3.1 bln of stock (27.6 mln shares) at an average price of $110.63 during Q3; $11.1 bln of the January 2015 share repurchase program ($15 bln) remaining as of September 30, 2015
* Co continues to be pleased with the number of patients it is reaching with Sovaldi and Harvoni; total revs $4.8 bln, -2% from prior quarter, +70% from prior year
* In US:
- Co saw a gradual decrease in retail market, but less so in non-retail sector due to uptick from the VA
- 190k patients on treatment on a Gilead product since beginning of the year
- Payer restrictions still remain to varying degress; co expects restrictions could lessen over time as patient volumes become more predictable and payers recognize benefits of early treatment in less sick patients
- Number of warehouse patients has diminished; current uptake rates will be more reflective of rates going forward
* In Europe - strong demand for Harvoni, particularly in newly launched markets like Spain and Italy; 80k patients began treatment since the beginning of this year; Harvoni now recommended treatment in UK; co expects revs to be constrained by country-specific budgets rather than the number of patients;
* In Japan - co very pleased with launch; guidelines updated to make Harvoni/Sovaldi the first choice treatment
* Management still believes only a fraction of diagnosed patients have been treated so far, even in early launch markets

WSJ : Apple Earnings Lifted by iPhone Sales in China

Apple Earnings Lifted by iPhone Sales in China

Apple CEO Tim Cook says he expects iPhone sales to grow again in the current quarter

Apple Inc. said its quarterly profit rose 31%, sparked by strong demand for iPhones in China.

Booming iPhone sales have propelled the company to a string of strong results while withstanding a slowdown in the global smartphone market. Apple followed up its first large-screen iPhones with a pair of new releases in late September, but the company faces questions about whether it can maintain its sales momentum of the past year.

Apple Chief Executive Tim Cook said he expects iPhone sales to grow again in the current quarter. Some analysts have questioned whether Apple’s iPhone sales may dip in the current quarter compared with last year, when Apple sold a record 74.46 million iPhones.

“We’re pretty confident that we can grow this quarter despite having the mother of all comps,” Mr. Cook said in an interview with The Wall Street Journal.

Shares of Apple, up 9% over the past year, rose 3.1% to $118.10 in after-hours trading.

In its fiscal fourth quarter ended Sept. 26, the company said it sold 48.04 million iPhones, surpassing sales of 39.27 million units a year earlier. However, it fell short of analysts’ estimates of 48.72 million units in the quarter. The September quarter included only two business days where Apple offered its most recent models, iPhone 6S and 6S Plus.

Apple said fourth-quarter net income totaled $11.12 billion, up from $8.47 billion in the year-ago period. Earnings per share rose more sharply, to $1.96 from $1.42, because of Apple’s aggressive share-repurchase program.

Revenue rose 22% to $51.50 billion from $42.12 billion in the same period a year earlier.

Analysts polled by Thomson Reuters estimated that Apple would post earnings of $1.88 a share on revenue of $51.1 billion.

Apple also reported gross margin, the percentage of revenue that remains after manufacturing costs, of 39.9%, above its estimated range of 38.5% to 39.5%. Gross margin is a closely watched measure of profitability.

For the current quarter ending December, Apple said it expects a gross margin of between 39% and 40%. It sees revenue of $75.5 billion to $77.5 billion. Analysts had been projecting revenue of $77.14 billion with a gross margin of 39.8%.

More than any other product, the iPhone is the linchpin to Apple’s earnings. It accounted for nearly 63% of revenue in the quarter, and a greater portion of Apple’s profits.

Any slowdown to iPhone demand is a major concern for investors. Apple released the new iPhones accompanied by a marketing campaign—“The only thing that’s changed is everything”—aimed at critics who said the phones don’t deliver as many noticeable changes as predecessors.

Mr. Cook said there are still many iPhone consumers who haven't upgraded to the larger-screen iPhone. He says about two-thirds of iPhone’s customer base before the first batch of larger iPhones were introduced in 2014 haven't upgraded to newer models.

At the same time, Apple said it is winning over customers from rivals. Mr. Cook said 30% of consumers who bought an iPhone replaced a smartphone running Google Inc.’s Android operating system during the quarter. He said this is the highest rate of Android “switchers” that Apple has ever measured.

The iPhone continues to do well in China, where it has become a premium brand akin to Prada bags or Rolex watches. As more Chinese consumers enter the middle class with greater disposable income, they are embracing the iPhone.

What’s more, the iPhone’s hefty price tag—once considered a liability—now works in Apple’s favor, allowing it to stand out from a fast-growing pack of low-cost smartphones and reinforcing the view that its products are of a higher quality.

Sales to Greater China, which includes Hong Kong and Taiwan, rose 99% to $12.5 billion. But sales declined slightly from the prior quarter, during a period in which the rest of the Chinese smartphone market slowed more noticeably.

Apple didn't disclose sales for Apple Watch, its first all-new hardware product since 2010. Watch sales were included with the iPod, Apple TV and Beats accessories in the “other products” category. Sales of that segment rose 61% to $3.04 billion.

Sales of Apple’s previous breakthrough hardware product, the iPad, continued to slump. Apple’s tablet sales fell for a seventh straight quarter, down 20% in unit terms. The iPad and tablet computers, in general, are facing an existential problem—not as essential as the smartphone but not as functional as a notebook computer.

Apple aims to solve a few issues hampering iPad demand with a new larger-size iPad coming out next month. Many early iPad buyers don’t see a compelling reason to upgrade to recent models, but Apple sees a new wave of demand from consumers seeking a larger-screen tablet computer for the workplace.

>>> KKR misses by $0.07, misses on revs; announces $500 mln buyback; sets quarte

KKR misses by $0.07, misses on revs; announces $500 mln buyback; sets quarterly distribution at $0.16/unit  

* Reports Q3 (Sep) ENI of ($0.37) per share, $0.07 worse than the Capital IQ Consensus of ($0.30) -- note economic net income is based on quarterly marks are not the most important metric; revenues fell 45.3% year/year to $188.6 mln vs the $257.49 mln Capital IQ Consensus.
* Total distributable earnings was $349.1 million and $1,357.1 million for the quarter and nine months ended September 30, 2015, respectively, down from $504.8 million and $1,652.6 million in the comparable periods of 2014.
* Book value was $10.2 billion on a total reportable segment basis as of Sept 30, 2015 or $12.01 per adjusted unit.
* Assets under management ("AUM") and fee paying assets under management totaled $98.7 billion and $82.9 billion, respectively, as of September 30, 2015.
* Distribution $0.35.
* KKR adopts a $500 million unit repurchase program
* KKR to change distribution policy to fixed $0.16 per common unit per quarter beginning with the fourth quarter of 2015.

>>> Notable after hours earnings movers: INFN +5.5%, PEGA +5%, TRU +4.2%, AAPL +

Notable after hours earnings movers: INFN +5.5%, PEGA +5%, TRU +4.2%, AAPL +2.1%, TWTR -10.8%, NBR -4.2%, ULTI -2.3%

Companies trading higher after hours following earnings/guidance:
INFN +5.5%, PEGA +5%, TRU +4.2%, NCR +3.4%, VDSI +1.8%, RGC +3.1%, BXMT +2.8%, IPHI +2.7%, ZLTQ +2.4%, AAPL +2.1%, CNI +1.1%

Companies trading lower after hours following earnings/guidance:
TWTR -10.8%, NBR -4.2%, ULTI -2.3%, SLCA -1%, GILD -0.9%, BOOM -0.7%, RUBI -0.5%, SKYW -0.3%

>>> Apple beats by $0.09, beats on revs; guides Q1 in-line

Apple beats by $0.09, beats on revs; guides Q1 in-line 

* Reports Q4 (Sep) earnings of $1.96 per share, $0.09 better than the Capital IQ Consensus of $1.87; revenues rose 22.3% year/year to $51.5 bln vs the $50.96 bln Capital IQ Consensus and $49-51 bln guidance; gross margin of 39.9% vs 39.2% ests (guidance 38.5-39.5%)
- iPhones 48.1 mln vs 48.8 mln ests & 39.3 mln last year
- iPads 9.9 mln vs 10.1 mln ests & 12.3 mln last year
- Macs 5.7 mln vs 5.6 mln ests & 5.5 mln last year
* Co issues in-line guidance for Q1, sees Q1 revs of $75.5-77.5 bln vs. $76.95 bln Capital IQ Consensus; gross margin 39-40% vs. 39.9% estimates;