ECB stress test results largely benign

Asian Market Update: ECB stress test results largely benign; Rousseff edges Neves to return for 2nd term

Economic Data

- (JP) JAPAN SEPT PPI SERVICES Y/Y: 3.5% V 3.5%E

- (KR) SOUTH KOREA SEPT DISCOUNT STORE SALES Y/Y: -10.1% V +3.2% PRIOR; DEPARTMENT STORE SALES Y/Y: -6.3% V +10.5% PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +0.4%, S&P/ASX +0.6%, Kospi +0.4%, Shanghai Composite -0.6%, Hang Seng -0.9%, Dec S&P500 flat at 1,959

Commodities/Fixed Income

- Dec gold flat at $1,230/oz, Dec crude oil flat at $81.00/brl, Dec Copper -0.4% at $3.03/lb

- (KR) South Korea sells KRW700B 20-yr govt Bonds; avg yield of 2.890%; Bid-to-cover: 4.157x

- (JP) BOJ offers to buy ¥110B in 10-25yr JGB, ¥35B in JGB with maturity over 25-yr as well as ¥140B in floating rate JGB

Market Focal Points/Key Themes/FX

- ECB failed 25 out of 140 banks in published results of its stress tests, however 12 of those bank have already covered their shortfalls with a €15B recapitalization. Results of German banks were particularly impressive, as none needed to raise new capital. Italian banks were deemed as most vulnerable with 9 bank failures, while Greece and Cyprus had 3 each.

- Brazil Pres Rousseff emerged victorious in the 2nd round of elections, narrowly beating out the pro-business candidate Neves by a 3pct margin despite the left-wing Silva throwing her support behind the challenger. Brazil stocks and currency are anticipated to plummet given the thin margin of victory, even though Rousseff promised more political dialogue and greater focus on combating inflation during her 2nd term.

- China mainland markets are underperforming mainly after reported delay of Hong Kong-Shanghai stock-trading connect link. No rescheduled date has been provided, though there has been some press speculation that the Occupy Central movement is partially responsible. Separately in China, the largest property developer Vanke is down 3% after reporting underwhelming Q3 that saw a near 100bps margin contraction. Chinese press also cited State Information Center chief economist Fan Jianping forecasting 2015 GDP to be 7% without additional policy stimulus.

- Japan PM Abe cabinet rating was down 9pts and 5pts in two separate surveys, predominantly as a result of a spillover from resignation of two female cabinet members last week. A Nikkei report also speculated automakers could miss their domestic sales targets as a result of larger impact of consumption tax hike this year.

- Ukraine Parliamentary snap elections saw the pro-Europe parties of Pres Poroshenko and PM Yatsenyuk come out as the top two with 23% and 21%, and they are expected to form ruling govt coalition. More radical Self-Help Party, Radical Party, Freedom Party and Fatherland parties also entered parliament, as voters shunned the few candidates associated with former PM Yanukovych.

Equities

US markets:

- NVS: Announces divestiture of influenza vaccines business to CSL for $275M

- WMB: Williams, Williams Partners L.P. and Access Midstream Partners, L.P. announce merger agreement; total deal valued at $50B

Notable movers by sector:

- Financials: Guoyuan Securities 000728.CN -2.0%, Sinolink Securities 600109.CN -4.2%, Haitong International 665.HK -5.2%, Hong Kong Exchange [388.HK] -3.7% (Hong Kong-Shanghai interconnect trading delays); China Vanke [2202.HK] -3.0% (Q3 results)

- Industrials: Samsung Heavy Industries 010140.KR +4.8%, Samsung Engineering 028050.KR +3.5% (shareholders approve merger plan); Tokyu Construction 1720.JP +9.6% (raises H2, FY14/15 guidance)

- Energy: Petroleum Exploration 1662.JP +2.0% (raises H1 guidance)

- Consumer discretionary: Morinaga Milk Industry 2264.JP -5.0% (lowers FY14/15 guidance); Nomura Research Institute 4307.JP +2.7% (H1 results; raises FY14/15 guidance)

- Financials: Iyo Bank 8385.JP +3.3% (raises H2, FY14/15 guidance)

- Technology: Sharp Corp 6753.JP -3.0% (press report on H1 results)

- Utilities: TEPCO 9501.JP +9.2% (press report on FY14/15 results)

- Materials: Mount Gibson Iron MGX.AU -4.7% (halts production)

- Telecom: AAM.AU +13.2% (Receives proposal from Vocus)