China Aug manufacturing PMI slows

Asian Market Update: China Aug manufacturing PMI slows; Putin calls for "statehood" in east Ukraine

Economic Data

- (CN) CHINA AUG MANUFACTURING PMI : 51.1 V 51.2E; First sequential decline in 6 months

- (CN) CHINA AUG FINAL HSBC MANUFACTURING PMI: 50.2 V 50.3E (3-month low)

- (JP) JAPAN AUG FINAL MARKIT/JMMA MANUFACTURING PMI: 52.2 V 52.4 PRELIM; Confirms 3rd month of expansion

- (JP) JAPAN Q2 CAPITAL SPENDING Y/Y: 3.0% (first sequential decline in 6 quarters) V 4.2%E; CAPITAL SPENDING EX-SOFTWARE Y/Y: 1.9% V 1.0%E

- (AU) AUSTRALIA Q2 COMPANY OPERATING PROFIT Q/Q: -6.9% V -2.0%E; INVENTORIES Q/Q: 0.8% V 0.3%E

- (AU) AUSTRALIA AUG AIG PERFORMANCE OF MANUFACTURING INDEX: 47.3 (4-month low) V 50.7 PRIOR

- (AU) AUSTRALIA AUG RPDATA/RISMARK HOUSE PRICE INDEX: 1.1% V 1.6% PRIOR

- (AU) AUSTRALIA AUG TD SECURITIES INFLATION M/M: 0.0% V 0.2% PRIOR; Y/Y: 2.5% V 2.6% PRIOR

- (NZ) NEW ZEALAND Q2 TERMS OF TRADE INDEX Q/Q: +0.3% V -3.5%E

- (KR) SOUTH KOREA AUG HSBC MANUFACTURING PMI: 50.3 V 49.3 PRIOR

- (KR) SOUTH KOREA AUG TRADE BALANCE: $3.4B V $2.9BE

- (TW) TAIWAN AUG HSBC MANUFACTURING PMI: 56.1 V 55.8 PRIOR (highest since Apr 2011)

- (ID) INDONESIA AUG HSBC MANUFACTURING PMI: 49.5 V 52.7 PRIOR (lowest reading since Aug 2013)

Index Snapshot (as of 03:30 GMT)

- Nikkei225 +0.3%, S&P/ASX +0.2%, Kospi flat, Shanghai Composite +0.5%, Hang Seng +0.2%, Sept S&P500 -0.1% at 2,000

Commodities/Fixed Income/Currencies

- Dec gold flat at $1,287, Oct crude oil -0.2% at $95.77/brl

- (KR) South Korea sells KRW1.77T in 3-yr Bonds; avg yield: 2.52%; bid-to-cover: 3.96x; Also sells 30-yr bonds at 3.280%

- USD/CNY: (CN) PBoC sets yuan mid-point at 6.1680 v 6.1647 prior setting (weakest Yuan setting since Aug 6th)

- (JP) BOJ offers to buy ¥110B in JGB with maturity lower than 1-yr, ¥100B in 10-25yr JGB and ¥30B in JGB with maturity over 25-yr

Market Focal Points/Key Themes

- China August official PMI came in at 51.1, slightly below the estimate of 51.2, even as the Production & Operating component rose to 57.9 from 55.3. This marks the first sequential decline in 6 months, bolstering the case for a more aggressive PBoC policy easing before the end of 2014. HSBC/Markit saw China Aug final manufacturing PMI at 50.2, revised slightly lower from preliminary reading of 50.3. Chief economist at HSBC said domestic demand looked more subdued, although external demand showed improvement. Shanghai Composite index was generally higher following an overall decline last week, with investors cheering reports that China cut the margin requirement for CSI 300 Index futures, releasing some liquidity to the market.

- Japan's August final Markit/JMMA Manufacturing PMI confirmed its third month of expansion with a reading of 52.2. The figure was below the preliminary reading of 52.4, but was much higher than last month's reading of 50.5. The Output component was also higher at 52.9, the highest reading since March 2014. Overall the new business and output growth were rose sharply, with job creation was maintained.

- The Ukraine conflict appears to have taken another turn for the worse, as Russia Pres Putin called on the govt of Ukraine to immediately begin negotiations on issues of "statehood" for the southeast region. EU leaders held talks about the escalating tensions, deferring more sanctions but warning new measures could be imposed within a week. EU's Ashton urged Russia to stop hostility and the flow of arms and personnel into the conflict zone, just as Ukraine Defense Min announced there's a growing presence of Russian troops within the rebel stronghold city of Donetsk.

- German Fin Min Schaeuble expressed more criticism of recent push by govt officials from other euro zone countries to ease fiscal constraints, stating "countries that pursued austerity policies in return for sovereign bailouts are doing much better than all the others in Europe." Anti-euro sentiment in Germany appears to be on the rise, as euro-sceptic AfD party won enough votes in Saxony to enter state assembly for the first time.

Equities

US markets:

- TMUS: Renewed speculation that Iliad is in talks with buyout firms on a bid for T-Mobile - financial press

- APH: To Acquire Casco Automotive Group for $450M

- EDE: Files for an increase in Missouri Electric Rates

- OWW: Reaches agreement with American Airlines to continue fare listings on Orbitz site

- AAPL: Said to be considering a partnership with Visa, Mastercard and American Express in its iPhone wallet technology - financial press

- NCLH: Said to be approaching a $3B deal to acquire Prestige Cruises Intl - financial press

Notable movers by sector:

- Consumer Discretionary: China Huiyuan Juice Group 1886.HK -8.1% (H1 results)

- Materials: BC Iron BCI.AU -2.7% (FY15 guidance)

- Industrials: Samsung Engineering 028050.KR +7.8%, Samsung Heavy Industries 010140.KR +5.7% (speculation on merger); China Harmony Auto Holding 3836.HK +2.2% (H1 results); China CSSC Holdings 600150.CN +2.1% (H1 results); BYD Corp 1211.HK +2.4% (Chairman comments)