China HSBC Manufacturing PMI remains in expansion

Economic Data

- (CN) CHINA HSBC SEPT PRELIMINARY MANUFACTURING PMI: 50.5 V 50.0E

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 112.9 v 111.3 prior

- (SL) SRI LANKA LEAVES REVERSE REPO RATE UNCHANGED AT 8.00% (EXPECTED); LEAVES REPURCHASE RATE UNCHANGED AT 6.50% (EXPECTED)

Index Snapshot (as of 02:30 GMT)

- Nikkei225 closed, S&P/ASX +0.1%, Kospi -0.4%, Shanghai Composite +0.2%, Hang Seng -0.1%, Sept S&P500 flat at 1,986

Commodities/Fixed Income/Currencies

- Dec gold flat at $1,218, Nov crude oil +0.8% at $91.36/brl, Dec copper +0.7% at $3.06/lb

- GLD: SPDR Gold Trust ETF daily holdings fall 1.7 tonnes to 774.7 tonnes; Lowest level since Dec 2008

- (CN) PBoC to drain CNY18B in 14-day repos (17th consecutive drain); Offer yield at 3.5%, unchanged from prior

- (AU) Australia MoF (AOFM) sells A$150M in 2.50% indexed bonds due 2030; Avg yield: 1.4683%; Bid-to-cover: 4.28x

Market Focal Points/Key Themes

- China HSBC flash manufacturing PMI - the first gauge of activity in September - avoided falling into contraction, reversing bearish sentiment on display in the US markets. Among notable components, New Orders and Export Orders increased at a faster rate, but Employment decrease accelerated. HSBC China economist noted "activity in the manufacturing sector showed signs of stabilization, (but) property downturn remains the biggest downside risk to growth", adding HSBC still expects more monetary easing from the PBoC in order to steady the recovery. Shanghai Composite turned higher after the PMI print, entering afternoon break +0.7% at session highs.

- Also of note in China, financials rallied after a local press report that banks are considering an adjustment to mortgage policy. Specifically, regulators would adjust the definition of "first home", potentially attracting more bidders looking to take advantage of the incentives. China also released its Q3 Beige Book that stated the economy remains stuck in low gear, with retail and residential real estate sectors struggling. Beige Book also warned the govt is unlikely to introduce large-scale stimulus.

- In the US, one of the FOMC's most dovish voices Kocherlakota said the Fed should adopt a more specific "inflation-targeting" price objective, reiterating policymakers should be very careful in removing stimulus. Kocherlakota also noted it was better to err on the side of higher inflation to secure recovery in employment. Treasury Sec Lew announced the govt will take more concrete steps against inversion tax-avoidance deals by companies. Treasury will publish new guidelines to deter overseas mergers driven by tax strategy and try to block inverted companies' tax-free access to foreign subsidiary earnings.

Equities

US markets:

- SLXP: Allergan said to be in advanced discussions to acquire Salix after revising offer, valued over $10B - financial press; +10.6% afterhours

- OMI: To Acquire ArcRoyal, a Privately Held Kitting Company Based in Ireland; Terms not disclosed; +2.3% afterhours

- HLF: Fox's Gasparino: Carl Icahn has not sold any of his HLF holdings; +1.3% afterhours

- MHFI: To Sell McGraw Hill Construction to Symphony Technology Group for $320M in cash; +0.2% afterhours

- AAPL: Follow up: Denies earlier press report on plans to close Beats Music unit - Recode; -0.4% afterhours

- ASNA: Reports Q4 $0.10 v $0.18e, R$1.18B v $1.22Be; -11.7% afterhours

Notable movers by sector:

- Consumer Discretionary: Kathmandu Holdings KMD.AU -3.8% (FY14 results)

- Financials: Sunac China 1918.HK +4.8%, China Vanke 2202.HK +2.9%, KWG Property 1813.HK +4.2% (China may adjust home mortgage policy)

- Materials: Atlas Iron AGO.AU -3.4%, BC Iron BCI.AU -1.0%(iron ore miners continues to decline in momentum); Fortescue FMG.AU +3.2% (cost reduction plans); Cockatoo Coal Limited COK.AU +8.3% (project expansion approved)

- Energy: Origin Energy ORG.AU +1.1% (successful spud)

- Utilities: Transurban TCL.AU -1.1% (warning from S&P)

- Telecom: TPG Telecom TPM.AU +3.5% (FY14 results)