Asia Summary
After being closed for holiday last week, the Shanghai Composite resumed trading higher by over 1.5%, amid strength seen in the property and banking sectors. Australia’s ASX 200 index has gained over 0.5%. Equity markets in Japan, South Korea and Taiwan are closed in observance of holidays. South Korean markets are due to resume trading on Tuesday. There was no reported military activity out of North Korea over the weekend.
In Australian M&A, hotel services company Mantra Group received a A$1.2B bid from France’s Accor. Engineering services firm Worleyparsons agreed to a total consideration of £228M to acquire a majority stake in AFW UK Oil & Gas, which is the oil and gas unit of Amec Foster Wheeler. Meanwhile, almond producer, Select Harvest, rejected a A$430.6M bid from Mubadala.
On the macro front, China’s Sept Caixin Services PMI hit a 21-month low, and the initial impact on markets has been muted. Government think tank, China Academy of Social Services (CASS) reiterated that it saw Q4 GDP growth around 6.7%. It also sees 2017 GDP growth at ~6.7%, after suggesting 6.8% in late July. China’s official 2017 GDP growth forecast is around 6.5%.
The PBoC skipped today’s open market operation. There has also been speculation that the PBoC is gauging bank demand for a medium-term lending facility (MLF), as CNY404B related to prior central bank operations is expected to mature this week.
With the US equity markets closed for holiday on Monday, various energy companies, including Shell and Phillips 66, announced plans to start resuming their operations, as Nate was downgraded to a tropical depression earlier on Sunday. According to the US Bureau of Safety and Environment (BSEE) there have been no reports of damage to offshore oil facilities as of Sunday afternoon. Also, the US Coast Guard said it reopened the Port of New Orleans. US government bond markets are open for trading.
The Turkish Lira (TRY) has declined by over 4%, as Turkey’s government suspended non-immigrant visa services for US citizens. The move followed, the US government suspending non-immigrant visa services in Turkey, after the arrest of a US consulate employee in Istanbul, in relation to Muslim leader Fethullah Gulen.
On Sunday in Spain, an estimated 350K people were said to have gathered in Catalonia capital, Barcelona, for protests related to opposition for declaring independence from Spain. Spanish companies Abertis and Colonial are reported to be planning to hold board meetings on Monday to discuss whether to move their headquarters from Catalonia.
Key economic data
(CN) CHINA SEPT CAIXIN SERVICES PMI: 50.6 V 52.7 PRIOR (21-month low); COMPOSITE: 51.4 V 52.4 PRIOR
Speakers and Press
China
(CN) Shanghai Composite +1.6% at 3,403 after being closed last week for holiday
(CN) China PBOC said to poll banks demand for medium-term lending facility (MLF) loans, expected to issue these loans on Friday – financial press
(HK) Macau Oct 8 China Visitor Arrivals +32% y/y; Oct 1-8 China Visitor Arrivals +11% y/y
(CN) China National Day Holiday Tourism Income CNY583.6B, +13.9% y/y; Number of tourists 705M, +11.9% y/y
(CN) China CFLP Sept Logistics Business Volume Index: 54.3 v 53.5 prior
(CN) China said to seek to have 600K new energy vehicles by 2020 – Chinese Press
Other
(AU) Senator Xenophon (independent) says he is still opposed to the bank tax proposed by South Australia – Australia Press
(ES) On Sunday, hundreds of thousands of people were reported to have gathered in Catalonia capital Barcelona for protests related to opposition for declaring independence from Spain – financial press
(TW) Taiwan may extend same-day trading tax cut for 2-years – Taiwanese Press
(US) House Speaker Ryan: Tax reform is on track for implementation by Jan 1st, 2018
(US) In list of new immigration principles, the White House calls on Congress to ensure funding for US/Mexico border wall – US financial press
(US) Fed’s Rosengren (moderate, non-voter): Fed has to respond to very tight labor markets or may damage the economy – comments from Montreal
Asian Equity Indices/Futures (00:30ET)
Nikkei closed, Hang Seng -0.3%, Shanghai Composite +1.2%, ASX200 +0.6%, Kospi closed
Equity Futures: S&P500 +0.1% ; Nasdaq +0.2% , Dax +0.1% , FTSE100 -0.1%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1730-1.1747; JPY 112.33-112.68; AUD 0.7765-0.7782; NZD 0.7059-0.7080
Aug Gold +0.8% at 1,285/oz; Aug Crude Oil +0.4% at $49.48/brl; Sept Copper flat at $3.024/lb
GLD SPDR Gold Trust ETF daily holdings +0.4% to 854 metric tons
(CN) CHINA PBOC SET YUAN REFERENCE RATE AT 6.6493 V 6.6369** PRIOR
(CN) PBOC OMO: TO SKIP OMO; net drain CNY180B
US markets on close: Dow flat, S&P500 -0.1%, Nasdaq +0.1%, Russell -0.3%
Best Sector in S&P500: Technology +0.2%
Worst Sector in S&P500: Consumer Staples -1%
At the close: VIX 9.65 (+0.46 pts); Treasuries: 2-yr 1.508% (+1.5bps), 10-yr 2.361% (+1bp), 30-yr 2.896% (flat)
US Market Summary
Equity markets ran up yet again last week to fresh highs before Friday’s September employment report induced some minimal profit taking. Outside of Friday’s jobs numbers the economic data remained unambiguously strong; headlined by the highest ISM non-manufacturing composite since 2005. The September jobs report did suggest wage inflation may be taking hold as unemployment rates continue to dwindle. The figures came on the heels of a plethora of Fed speak which seemed to indicate Fed officials were gaining confidence in their ability pull the trigger and raise rates in December. Rates moved up and Treasury curves steepened while the US Dollar regained some upside momentum. The Pound came under pressure as Brexit concerns, and in particular, the fate of PM May weighed on traders psyche. Spanish stocks weighed on Europe as uncertainty surrounding Catalonia resulted IBEX weakness and a modest widening of peripheral yield spreads. WTI crude futures stumbled, dipping back below $50 and under the 50-day moving average even as another tropical storm, Nate, approached the Gulf of Mexico. Copper prices broke back above the 50-day moving average to the highest levels in more than a month, helped by a dearth of headlines out of China as markets were closed for Golden Week. In Washington DC, Republicans continued to press the case for tax cuts while speculation swirled surrounding the fate of Sec of State Tillerson. Democrats called for renewed gun regulation in the wake of Las Vegas suffering the worst mass shooting in US history. The VIX drifted lower yet again nearing the 9.00 mark midweek and overall stock volumes remained notably soft. For the week the DJIA gained 1.6%, the S&P500 was up 1.2%, and the Nasdaq added 1.5%.
