RBA retains neutral stance despite deteriorating trade conditions as AUD rallies

Economic Data

- (HK) HONG KONG SEPT PMI: 45.7 V 44.4 PRIOR (7th straight month of contraction)

- (AU) RBA LEAVES CASH RATE TARGET UNCHANGED AT 2.00%; AS EXPECTED

- (AU) AUSTRALIA AUG TRADE BALANCE (A$): -3.10B V -2.40BE (16th straight month of deficit, biggest deficit in 4 months)

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 110.0 v 110.6 prior

- (NZ) NEW ZEALAND Q3 NZIER BUSINESS OPINION SURVEY: -14 V +5 PRIOR; 4 1/2 year low

- (JP) JAPAN AUG LOANS & DISCOUNTS CORP Y/Y: 3.1% V 3.3% PRIOR

- (PH) PHILIPPINES SEPT CPI M/M: -0.2% V 0.0%E; Y/Y: 0.4% V 0.6%E

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +1.5%, S&P/ASX +0.9%, Kospi +0.4%, Shanghai Composite closed, Hang Seng +0.2%, Dec S&P500 -0.3% at 1,969

Commodities/Fixed Income

- Dec gold -0.2% at $1,136/oz, Nov crude oil flat at $46.26/brl, Dec copper -0.4% at $2.34/lb

- (SY) US reportedly seeing Russia make preparations for a ground campaign in Syria - press

- GLD: SPDR Gold Trust ETF daily holdings fall 0.2 tonnes to 689.0 tonnes

- (KR) South Korea sells 30-yr govt bonds, avg yield 2.280%

Market Focal Points/FX

- Repricing of the Fed rate liftoff after disappointing NFPs on Friday and more weakness in US services ISM on Monday continued to translate into risk-on flows in the US and into Asian trading session. Safe-haven JPY was notably lower helping Nikkei225 outperform, with USD/JPY pair testing above 120.50. Also in FX, AUD/USD was also particularly strong after another neutral RBA policy decision put in question the market expectations for further easing down the road, rising over 50pips above $0.7130.

- Despite the slowing growth in China, falling commodity prices, and continued deterioration in Australia's terms of trade, the RBA policy statement was predominantly a reiteration of last month's. Going into the decision, Australia's trade balance showed flat exports and a 3-month low in China shipments, but RBA was not moved. If anything, the minor language changes only revealed that RBA "does not see the functioning of financial markets impacted by equity volatility" and also that regulatory measures are helping to contain risks that may arise from the housing market. Westpac calls for RBA to stand pat through 2016, while economist with St George remarked the next policy move is now likely to be a tightening.

- Ahead of tomorrow's BOJ decision, traders will look for signs of Japan central bank potentially paving the way to announcing more easing to accompany updated projections for growth and inflation at the next October 30th decision. One press report citing a survey saw some 40% of analysts polled anticipate BOJ adding to their stimulus vs about 5% in the prior month. However, the news on Japan's economy has not been all bad - Japan Center for Economic Research (JCER) has reported that Aug GDP has risen for the 3rd straight month - so the BOJ may in fact also preserve its neutral position.

- China's Shanghai Composite market remained closed for holiday, but the Hang Seng has eked out slight gains. Hong Kong Sept PMI remained in contraction for the 7th straight month, though not as soft as the 3-year low reported last month. Markit economist noted the global economic slowdown continued to weigh on the performance of Hong Kong's private sector, adding that particularly concerning was the " steepest fall in new business from Mainland China since the global financial crisis, partly driven by the recent devaluation of the yuan." Markit expects Hong Kong PMI weakness to extend into Q4 unless new orders improve.

Equities

US equities/ADRs:

- DD: Cuts FY15 EPS to $2.75 v 3.22e (prior $3.10); accelerates cost saving actions; Ellen Kullman to retire as chair and CEO ; +5.9% afterhours

- LGF: Said to be in advanced merger talks with Starz - LA Times; +5.4% afterhours

- RGLS: To present additional preclinical data supporting RG-012 as a microRNA Therapeutic in development for Alport Syndrome; +4.7% afterhours

- ARNA: CEO Jack Lief retires at request of the Board; evaluating programs and operations; +4.7% afterhours

- PPP: Reports Q2 $0.01 v -$0.02e, R$67.4M v $79.7M y/y; +2.8% afterhours

- PBR: Lowers 2015 investment plan to $25B from $28B prior announced, lowers 2016 to $19B from $27B prior announced; reaffirms production targets for 2015-19; -0.2% afterhours

- TCS: Reports Q2 $0.06 (GAAP) v $0.06e, R$195.5M v $196Me; -11.9% afterhours

- HAE: Guides Q2 $0.40 v $0.39e, R$220M v $233Me; FY16 lower $1.65-1.75 v $2.02e, R$910-920M v $946Me ($1.98-2.08 prior); -12.2% afterhours

- ILMN: Reports prelim Q3 R$550M v $569Me; Guides Q4 R$570M v $608Me; -15.1% afterhours

- PMCS: Skyworks to acquire PMC-Sierra for $10.50/shr or about $2B in cash

Notable movers by sector:

- Consumer discretionary: Treasury Wine Estates TWE.AU +0.7% (update on supply chain optimization); Mobile Embrace MBE.AU -13.3% (to defend claim); Kewpie Corp 2809.JP +6.3% (9-mo result)

- Industrials: MacMahon MAH.AU +11.9% (share buyback plan); Hyundai Motor 005380.KR -4.9% (TPP deal); Mitsui Osk Lines 9104.JP +1.7% (TPP deal)

- Technology: UXC Ltd UXC.AU -6.2% (acquisition speculation); Veda Group VED.AU +1.9% (update on Equifax's acquisition); HTC Corp 2498.TW -2.4% (Q3 result)

- Materials: Citic Resources 1205.HK +13.3% (update on Lofin field); Glencore Xstrata 805.HK +3.0% (CEO's comment); Adelaide Brighton ABC.AU -1.8% (FY15 guidance); Beadell Resources BDR.AU +1.3% (Q3 result); OZ Minerals OZL.AU +2.6% (update on Carrapatenna)

- Energy: Origin Energy ORG.AU -11.0% (speculation on asset sales)

- Healthcare: Avita Medical AVH.AU +10.0% (FDA's approval)