First OPEC output cut in 8 years sends energy stocks, commodity FX higher

Asia Notes/Observations

- OPEC officials said to confirm a production cut, limiting output to 32.5-33M bpd range; Setting a committee to decide on level of cut for each member with final decision in November; Saudi Arabia's deteriorating fiscal conditions said to trigger the surprise concession.

- Rally in energy sector sends Australia's S&P/ASX200 to 4-week highs; AUD/USD hits 3-weeks highs above 0.77.

- JPY sold off across the board on risk-appetite as worries over high-yield debt recede.

- Australia job vacancies reach 4-year high as labor market recovery continues.

- China Commerce Ministry notes increasing downward pressure on trade.

 

Top US session headlines

- OPEC reportedly reaches deal in Algiers to limit oil production, execution of deal in Nov - press

- (US) AUG PRELIMINARY DURABLE GOODS ORDERS: 0.0% V -1.5%E; DURABLES EX TRANSPORTATION: -0.4% V -0.5%E

- (EU) ECB's Draghi: what we need now is to allow our measures to develop their full impact - speaks from German Parliament

- BOE's Shafik expects more stimulus at some point

- DB: German government reportedly working on a contingency plan for Deutsche Bank; subsequently walked back by other reports

 

US markets on close: Dow +0.6%, S&P500 +0.5%, Nasdaq +0.2%

- Best Sector in S&P500: Basic Materials (Energy)

- Worst Sector in S&P500: Utilities / Healthcare

- Biggest gainers: MUR +11.3%, NOV +8.5%, CHK +8.4%, DVN +8.3%, MRO +8.0%

- Biggest losers: PAYX -4.6%, NKE -3.8%, LEG -3.6%, MU -3.1%, LB -2.9%

 

VIX 12.39 (-0.7pts); Treasuries: 2-yr 0.77% (+1bp), 10-yr 1.57% (+1bp), 30-yr 2.29% (+1bp)

US movers afterhours

- AEGR +39.8%; Juxtapid (lomitapide) capsules approved in Japan for the treatment of homozygous familial hypercholesterolemia (HoFH)

- PTX +8.5%; Announces distribution of TREXIMET 10/60 mg (sumatriptan 10mg and naproxen sodium 60 mg) dose for use in pediatric patients

- PIR +8.9%; Reports Q2 -$0.05 v -$0.05e, R$405.8M v $409Me

- SCHN +2.2%; Reports prelim Q4 $0.56-0.60* v $0.31 y/y

- PRGS -9.7%; Reports Q3 $0.44 v $0.45e, R$102.4M v $104Me; Narrows lower FY16 $1.57-1.60 v $1.61e, R$412-415M v $413Me (prior $1.57-1.63, R$412-418M)

- ATNM -16.5%; Offering of indeterminate amount of Common Stock

- ITCI -67.9%; Announces top-line results from second Phase 3 trial of ITI-007 in patients with Schizophrenia (Study 302); neither dose separated from placebo on the primary endpoint

 

Equity Futures (00:30ET): S&P e-mini +0.2%, Dax +0.2%, FTSE100 +0.2%

FX/Commodities ranges (00:30ET):

- EUR 1.1215-1.1235; JPY 100.65-101.40; AUD 0.7685-0.7710, NZD 0.7270-0.7300

- Gold +0.4% at 1,328/oz; Oil -0.2% at $49.98/brl; Copper +0.8% at $2.20/lb

- SLV: iShares Silver Trust ETF daily holdings rise to 11,287 tonnes from 11,337 tonnes prior; first decline since Sept 12

 

Asian Equity Markets (00:30ET)

- Nikkei +1.5%, Hang Seng +0.5%, ASX +1.1%, Shanghai +0.6%, Kospi +0.8%

 

Key economic data:

- (JP) JAPAN AUG RETAIL SALES M/M: -1.1% V -0.6%E; RETAIL TRADE Y/Y: -2.1% V -1.7%E

- (AU) AUSTRALIA JUN-AUG SKILLED VACANCIES Q/Q: +4.6% V -2.1% PRIOR; Total vacancies 177.3K (4-year high)

- (KR) SOUTH KOREA AUG DEPARTMENT STORE SALES Y/Y: 4.1% V 7.0% PRIOR; DISCOUNT STORE SALES Y/Y: -1.3% V 2.1% PRIOR

- (KR) South Korea Sept Consumer Confidence: 101.7 v 101.8 prior

 

Speakers/Press/Key Themes

China:

- (CN) Wealthy China investors said to flock to bank issued securities promising yields of as high as 15% - China Daily

- (CN) China Commerce Ministry Official Zhang Ji: Downward pressure on China's trade is increasing due to a variety of destabilizing factors

- (CN) According to a private survey, China economy in Q3 is not as healthy as official data suggests - Chinese press

- (CN) PBoC academic Wang Yong calls for credit policy and tax management for property sector - Chinese press

- (CN) Deutsche Bank maintains FY17 China GDP target at 6.5%, but assumes "significant policy easing including interest rate cut in Q2" - financial press

Japan:

- (JP) Japan PM Abe: Trusts in BOJ Gov Kuroda, Japan is one step away from overcoming deflation

- (JP) Japan Deputy Chief Cabinet Sec Hagiuda: Want to assess the impact of OPEC deal on oil prices

- (JP) Implied average for Japan's overnight index swaps (OIS) over next 12 months has fallen to -0.2%, implying expectations of BOJ having to cut interest rates deeper into the red - Nikkei

- (JP) Japan Council on Economic and Fiscal Policy: Wage hikes should have the key role in Japan achieving 2% inflation target - Nikkei

Australia:

- (AU) Australia PM Turnbull: Energy security needs to be a key priority; Heavy reliance on renewables places strain on grids - financial press

 

Asia movers

Notable movers by sector:

- Consumer discretionary: Quali-Smart Holdings 1348.HK +1.5% (profit warning); Belle International Holdings 1880.HK +0.9% (disposal of shares in Baroque Japan)

- Financials: Programmed Maintenance Services PRG.AU -15.0% (cuts guidance)

- Industrials: Hitachi 6501.JP +2.6%, Mitsubishi Heavy Industries 7011.JP +2.5% (speculation for nuclear fuel business merge)

- Technology: Samsung Electronics 005930.KR +3.0% (partnership with SAP)

- Materials: Tokuyama Corp 4043.JP +15.7% (to sell Tokuyama Malaysia to OCI; Credit Suisse raised to neutral); BHP BHP.AU +4.9%; Marubeni Corp 8002.JP +3.5% (OPEC agrees to cut production)

- Energy: CNOOC 883.HK +5.9%, Inpex Corp 1605.JP +6.6%, Beach Energy BPT.AU +12.5%, Santos STO.AU +7.5%, Origin Energy ORG.AU +8.0%, Woodside Petroleum WPL.AU +7.5% (OPEC agrees to cut production); China Shenhua Energy Co 1088.HK +4.6% (China to add coal production)