China official manufacturing PMI hits a 3-year low

Asian Mid-session Update: China official manufacturing PMI hits a 3-year low; RBA policy statement still neutral with door open to more easing

Economic Data

- (CN) CHINA NOV CAIXIN PMI MANUFACTURING: 48.6 V 48.3E

- (CN) CHINA NOV MANUFACTURING PMI (OFFICIAL): 49.6 v 49.8E (4th straight contraction, 3-year low); NON-MANUFACTURING PMI (SERVICES): 53.6 (4-month high) V 53.1 PRIOR

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

- (AU) AUSTRALIA OCT BUILDING APPROVALS M/M: +3.9% V -2.5%E; Y/Y: 12.3% V 5.7%E

- (AU) AUSTRALIA Q3 CURRENT ACCOUNT BALANCE (A$): -18.1B V -16.5BE; NET EXPORTS OF GDP: 1.5% V 1.2%E

- (AU) AUSTRALIA NOV CORELOGIC RPDATA HOUSE PRICES M/M: -1.5% V +0.2% PRIOR

- (AU) AUSTRALIA NOV AIG MANUFACTURING INDEX: 52.5 V 50.2 PRIOR (5th straight expansion)

- (NZ) NEW ZEALAND NOV QV HOUSE PRICES Y/Y: 15.0% V 14.0% PRIOR

- (NZ) NEW ZEALAND Q3 TERMS OF TRADE INDEX Q/Q: -3.7% V -2.6%E

- (JP) JAPAN Q3 CAPITAL SPENDING Y/Y: 11.2% V 2.2%E; CAPITAL SPENDING EX-SOFTWARE Y/Y: 11.2% V 1.7%E

- (JP) JAPAN NOV FINAL PMI MANUFACTURING: 52.6 V 52.8 PRELIM

- (KR) SOUTH KOREA NOV PMI MANUFACTURING: 49.1 V 49.1 PRIOR; 9th consecutive contraction

- (KR) SOUTH KOREA NOV TRADE BALANCE: $10.36B V $6.96BE; Exports y/y: -4.7% v -9.0%e; Imports y/y: -17.6% v -14.7%e

- (KR) SOUTH KOREA NOV CPI M/M: -0.1% V -0.1%E; Y/Y: 1.0% V 0.9%E; CPI CORE Y/Y: 2.4% V 2.3% PRIOR

- (IN) INDIA NOV PMI MANUFACTURING: 50.3 V 50.7 PRIOR (24th month of expansion but lowest reading since Oct 2013)

- (ID) INDONESIA NOV CPI M/M: 0.2% V 0.2%E; Y/Y: 4.9% V 4.9%E; CPI CORE Y/Y: 4.8% V 4.9%E

- (HK) Macau Nov casino revenue -32.3% y/y v -28.4% prior (18th consecutive decline)

- (CN) China Index Academy: Avg price of new residential properties in 100 major cities in Nov m/m: +0.46% v +0.30% prior, y/y: +2.93% v +2.07% prior

Index Snapshot (as of 04:30 GMT)

- Nikkei225 +1.0%, S&P/ASX +1.8%, Kospi +1.6%, Shanghai Composite -0.5%, Hang Seng +1.7%, Dec S&P500 +0.6% at 2,091

Commodities/Fixed Income

- Feb gold +0.5% at $1,070/oz, Jan crude oil +0.7% at $41.93/brl, Mar copper +1.0% at $2.07/lb

- (CN) PBoC to inject CNY50B in 7-day reverse repos (43rd consecutive injection, highest injection since Oct 15th)

- USD/CNY: (CN) PBoC sets yuan mid point at 6.3973 v 6.3962 prior; weakest Yuan setting since Aug 28th

- JGB: (JP) Japan MoF sells ¥2.17T in 10-yr 0.3% JGBs; Avg yield: 0.320% v 0.318% prior; bid to cover: 3.56x (highest since Sept 2014) v 2.80x prior

- (KR) South Korea sells 30-yr bonds at yield 2.43%

Market Focal Points/FX

- Asian markets are generally higher with the exception of Shanghai Composite which is underperforming due to disappointing official China manufacturing PMI. Meanwhile Australia markets are posting strong gains amid some green shoots in the commodities space tracking lower USD. Gold was up over $10 from the lows, Copper up over 1%, and WTI crude up about 30c testing the $42/brl level. Expectations of a very gradual tightening cycle by the FOMC are pressuring USD across the board - EUR/USD was up over 30pips toward 1.06, USD/JPY down some 60pips below 122.70, and AUD/USD up 70pips from the lows as high as 0.7280.

- RBA kept rates unchanged for the 7th straight meeting and largely reiterated the sentiment from last month's policy statement. RBA still sees prospects for an improvement in economic conditions having firmed, inflation consistent with the target over the next 1-2 years, and AUD currency adjusting to commodity decline. The biggest change in the language was the admission of a large decline in capital spending in the mining sector and also that of moderation in property price gains in Melbourne and Sydney. Markets were preparing for more currency jawboning, since AUD has risen slightly since the last policy decision, and sent AUD up about 15pips on the statement release. Separately, ahead of tomorrow's Q3 GDP, Australia current account deficit was a touch wider than expected while building approvals were much better. Manufacturing PMI in Australia was also in expansion for the 5th straight month.

- China official manufacturing PMI was most notable in the twin-PMI release, remaining in contraction for the 4th straight month and also posting a 3-year low. Further slowdown in Key components of New Export Orders and Input prices revealed continued softness of external demand and also disinflationary pressures. Official services PMI did rise to a 4-month high however, while Manufacturing Caixin bounced slightly to 48.6 from 48.3. Resident economist said PMI for November continued to show signs of recovery, which indicates that pressure on economic growth has eased and fiscal policy has had a strong effect.

- After the official IMF decision to include Yuan in the SDR basket, PBoC Dep Gov Yi said the move marks international recognition while also pledging continued reform toward convertibility. Yi assured that the currency is not poised for a continuous fall, and that China still has medium to high-growth trend. Comments from Bank of Korea highlighted expectations of international demand for CNY denominated assets, even as CNY weakened by 0.3% in offshore market through the 6.44 handle.

Equities

US equities/ADRs:

- BLOX: Reports Q1 $0.13 v $0.06e, R$94.0M v $87.9Me; announces $100M share repurchase (11% of market cap); +17.1% afterhours

- MFRM: Acquires Sleepy's for $780M; +7.4% afterhours

- THO: Reports prelim Q1 $0.97 v $0.84e, R$1.03B v $1.02Be; +4.0% afterhours

- SCVL: Reports Q3 $0.47 v $0.48e, R$270M v $266Me (2 est); +1.4% afterhours

Notable movers by sector:

- Consumer discretionary: Gome Electrical Appliances Holdings 493.HK +2.3% (Q3 result); IPH IPH.AU -0.4% (share issue); Tabcorp TAH.AU +1.3% (investors push for merger talks)

- Consumer staples: China Huishan Dairy Holdings 6863.HK +2.4% (agreement); Lion Corp 4912.JP -4.2% (raises guidance)

- Financials: Devine DVN.AU -3.9% (cuts guidance)

- Industrials: MTR Corporation 66.HK +1.8% (agreement for rail link project); Decmil Group DCG.AU -3.2% (acquisition); Cosel Co 6905.JP +3.2% (cuts guidance)

- Energy: Huaneng Power International 902.HK +4.7% (benefit from power reform)

- Healthcare: Takeda Pharmaceutical Co 4502.JP +1.7% (partnership with Teva)