>>> Asian Update

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)

>>> US After Hours Summary: ISRG +7.6%, ZIXI +4.7%, CREE +0.4%,

After Hours Summary: ISRG +7.6%, ZIXI +4.7%, CREE +0.4%, CMG -7.2%, VMW -4.7%, YHOO -1.6% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings: ISRG +7.6%, ZIXI +4.7%, MANH +2.9%, DFS +1.2%, CREE +0.4%, CB +0.1%

Companies trading higher in after hours in reaction to news: EPAX +5.4% (announced intent to file for dissolution; approved an initial liquidating distribution of $2.85/share), KERX +4.4% (The Baupost Group disclosed 34.61% active stake in 13D filing; private placement was previously announced on October 15), BWINA +3.4% (appointed Steven A. Shapiro as Executive Chairman of the Board), IM +0.5% (agreed to acquire Brazil-based Grupo ACAO; expects $300 mln in annual value-add solutions revs, and be modestly accretive to 2016 FY non-GAAP EPS)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings: CMG -7.2%, WSCI -6%, IRBT -5.3%, TEX -4.9%, VMW -4.7%, CLS -4.3%, IBKR -1.7%, YHOO -1.6%, RUSHA -0.8%, FTI -0.5%, ACE -0.3%, SHLM -0.2%

Companies trading lower in after hours in reaction to news: BDR -8.2% (says it continued to experience lower than anticipated sales during Q3, liquidity position has not improved), GBSN -1.6% (received a notice from Nasdaq for non-compliance with the exchange's minimum market cap and $1 minimum price bid standards), BHP -1.3% (provided operational review for quarter ended Sept 30, 2015: Petroleum production declined 4% from prior year to 65 MMboe)

>>> US Close Dow-0.08% S&P-0.13% Nasdaq-0.50% Russell-0.08%

Closing Market Summary: Stocks Unable to Overcome Weakness in Health Care and Technology

The stock market finished Tuesday on a quiet note after spending the session inside a narrow trading range. The S&P 500 shed 0.1% while the Nasdaq Composite (-0.5%) underperformed throughout the day.

Just like yesterday, today's affair was very quiet with the S&P 500 spending the majority of the session near its flat line. The benchmark index opened with a modest loss and rallied into the green during morning action, but could not climb above its 100-day moving average (2,039), which served as resistance. The index followed that short-lived rally with a return into the red, where it settled for the day.

Six sectors ended the day with gains, but top-weighted technology (-0.3%) and health care (-1.5%) struggled, which kept the market under pressure. Notably, the technology sector could not overcome the relative weakness in the shares of IBM (IBM 140.68, -8.54) after Big Blue reported below-consensus revenue and lowered its guidance, which overshadowed a bottom-line beat.

Staying in the tech sector, chipmakers also struggled with the PHLX Semiconductor Index shedding 0.2%. Micron (MU 17.09, -2.07) was the weakest performer, sliding 10.8%, after Intel (INTC 33.44, -0.15) announced plans to increase its investment in non-volatile memory technology.

Meanwhile, the health care sector (-1.5%) spent the day behind the remaining groups due to daylong weakness in biotechnology. The iShares Nasdaq Biotechnology ETF (IBB 305.96, -9.98) retreated into the afternoon to settle lower by 3.1%, which contributed to the weakness in the Nasdaq Composite.

On the upside, the telecom services sector (+0.8%) held the lead throughout the session thanks to a 1.2% spike in Verizon (VZ 45.24, +0.54) after the company beat earnings expectations and reaffirmed its full-year revenue growth outlook.

Similar to telecom services, financials (+0.5%) and industrials (+0.6%) ended the day with solid gains. Travelers (TRV 108.95, +2.63) spiked 2.5%, contributing to the relative strength in financials, while United Technologies (UTX 95.70, +3.65) surged 4.0%, underpinning the industrial space. Transport stocks also rallied alongside the sector with the Dow Jones Transportation Average climbing 0.6%.

Treasuries notched their lows during morning action and they remained near those levels until the close with the 10-yr yield rising five basis points to 2.07%.

Just like yesterday, investor participation was a bit below average as fewer than 800 million shares changed hands at the NYSE floor.

Economic data was limited to Housing Starts, which increased 6.5% in September to 1.207 million from an upwardly revised 1.132 million (from 1.126 million) in August while the  consensus expected an increase to 1.150 million. That was the second time in 2015 that total new housing starts topped 1.200 million (1.211 million in June) and the first time that the level has been exceeded on two occasions in one year since 2007. New single-family home construction remained robust in September with starts increasing 0.3% to 740,000 from 738,000

Tomorrow's economic data will be limited to the weekly MBA Mortgage Index, which will be released at 7:00 ET.

  • Nasdaq Composite +3.1% YTD
  • S&P 500 -1.4% YTD
  • Dow Jones Industrial Average -3.4% YTD
  • Russell 2000 -3.5% YTD