Fonterra reaches partnership in China

Asian Market Update: Fonterra reaches partnership in China; Putin, Poroshenko commit to political process

Economic Data

- (AU) AUSTRALIA Q2 CONSTRUCTION WORK DONE Q/Q: -1.2% V -0.5%E (largest decline in 5 quarters)

- (NZ) NEW ZEALAND JULY FOOD PRICES M/M: -0.7% V +1.4% PRIOR (first decline in 4 months)

- (KR) SOUTH KOREA AUG CONSUMER CONFIDENCE: 107 V 105 PRIOR

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -0.1%, S&P/ASX +0.2%, Kospi +0.4%, Shanghai Composite flat, Hang Seng flat, Sept S&P500 flat at 1,999

Commodities/Fixed Income/Currencies

- Dec gold flat at $1,284, Oct crude oil flat at $93.89/brl, Sept Copper flat at $3.18/lb

- (US) API PETROLEUM INVENTORIES: CRUDE: -1.3M v -1Me, GASOLINE: -3.2M v -1Me, DISTILLATE: +2.4M v -0.5Me

- (JP) BOJ offers to buy ¥400B in 5-10yr JGB, ¥100B in 10-25yr JGB and ¥30B in JGB with maturity over 25-yr

- (AU) Australia MoF (AOFM) sells A$600M in 3.25% 2029 Bonds; avg yield: 3.7184%; bid-to-cover: 3.46x

Market Focal Points/Key Themes

- NZD has clawed back some of the recent losses, rising about 30pips above $0.8360 after dairy cooperative Fonterra launched a partnership with the leading Chinese infant food manufacturer Beingmate. Fonterra also affirmed its FY14/15 payout of NZ$6/kg after the announcement, just as expectations were starting to build that it may have to lower the payout forecast once again. Separately, New Zealand July food prices fell m/m for the first time in 4 months.

- In China, local press speculated the top four banks have accelerated their lending in the past week relative to a rather subdued loans volume in the first half of the month. Recall this follows a very disappointing new yuan loans report for July. Banks were said to be increasingly concerned with rising NPL levels. Among notable earnings, China Telecom posted an over 10% increase in net profit as the growth in 3G subscribers accelerated. Earlier, Haier Electronics reported a 10% topline growth but shares fell 2% due to a 70bp gross margin contraction.

- After initial speculation that bilateral Putin-Poroshenko talks in Minsk could fall apart, the two leaders finally held a brief round of talks. Both spoke in favor of promoting peace in the East. Putin added the recently detained Russian soldiers were actually only patrolling the border, while Poroshenko promised to work on an urgent ceasefire plan.

Equities

US markets:

- TUBE: Reports Q2 $0.01 adj v -$0.15e, R$28.7M v $24.0Me (2 est); +33.4% afterhours

- ARUN: Reports Q4 $0.24 v $0.23e, R$203M v $195Me; cutting workforce by 4% (66 employees) as part of cost optimization plan; +4.2% afterhours

- ADI: Reports Q3 $0.63 v $0.63e, R$722.4M v $716Me; -0.4% afterhours

- TIVO: Reports Q2 $0.08 v $0.07e, R$111M v $106Me; Approves $350M buyback program (22% of market cap); -1.8% afterhours

- SWHC: Reports Q1 $0.26 v $0.25e, R$131.9M v $134Me; cuts FY15 guidance on high inventories; -11.2% afterhours

Notable movers by sector:

- Consumer Discretionary: Guangzhou Automobile Group 2238.HK -3.5% (H1 results)

- Financials: Haitong Securities 6837.HK +0.8% (H1 results); New China Life 1336.HK +1.4% (H1 results); Steadfast Group SDF.AU +11.9% (FY14 results)

- Materials: St Barbara SBM.AU +2.5% (FY14 results)

- Industrials: Hafei Aviation Industry 600038.CN +2.7% (H1 results); United Co. RUSAL 486.HK -1.0% (Q2 results); Worley Parsons WOR.AU +3.4% (FY14 results); Austal ASB.AU +9.1% (FY14 results); Boral BLD.AU +4.5% (FY14 results)