Australia GDP slows but tops consensus

Asian Market Update: Australia GDP slows but tops consensus; China services PMI recovers from record lows

Economic Data

- (CN) CHINA AUG HSBC SERVICES PMI: 54.1 V 50.0 PRIOR (17-month high)

- (CN) CHINA AUG NON-MANUFACTURING PMI: 54.4 V 54.2 PRIOR (first increase in 3 months)

- (AU) AUSTRALIA Q2 GDP Q/Q: 0.5% V 0.4%E; Y/Y: 3.1% V 3.0%E

- (AU) AUSTRALIA AUG AIG PERFORMANCE OF SERVICES INDEX: 49.4 V 49.3 PRIOR (6th consecutive contraction)

- (HK) HONG KONG AUG HSBC PMI: 49.6 V 50.4 PRIOR (first contraction in 3 months)

- (NZ) NEW ZEALAND Q2 VALUE OF ALL BUILDINGS: 1.0% V 0.0%E

- (UK) UK AUG BRC SHOP PRICE INDEX Y/Y: -1.6% V -2.0%E

Index Snapshot (as of 03:30 GMT)

- Nikkei225 +0.8%, S&P/ASX +0.1%, Kospi -0.1%, Shanghai Composite +0.8%, Hang Seng +1.0%, Sept S&P500 +0.1% at 2,002

Commodities/Fixed Income/Currencies

- Dec gold +0.2% at $1,268, Oct crude oil +0.4% at $93.27/brl

- GLD: SPDR Gold Trust ETF daily holdings falls 1.8 tonnes to 793.2 tonnes; Lowest level since June 30

- SLV: iShares Silver Trust ETF daily holdings rise to 10,371 tonnes from 10,311 tonnes prior; Highest since May 5th

- (JP) BOJ offers to buy ¥300B in 1-3yr JGB, ¥200B in 3-5 yr JGB and ¥400B in 5-10yr JGB

- (CN) China sells 7-yr govt bonds at avg yield of 4.16% - financial press

- (AU) Australia MoF (AOFM) sells A$600M in 4.25% bonds due 2026; Avg yield: 3.5548%; Bid-to-cover: 3.33x

- USD/CNY: (CN) PBoC sets yuan mid point at 6.1697 v 6.1684 prior setting (weakest yuan setting since June 4th)

Market Focal Points/Key Themes

- AUD/USD briefly topped the $0.93 handle after a slightly stronger than expected Australia Q2 GDP but quickly reversed those initial gains. Australia Q2 sequential GDP was up 0.5%, slowing from 1.1% growth in Q1, as terms of trade components fell sharply to -4.1%. Manufacturing and Consctruction were the bright spots, while the mining sector predictably posed the strongest headwind, falling 1.4% and detracting 0.2 percentage points from growth in GDP. Later in the day, RBA Gov Stevens testimony rehashed some of the commentary from the central bank statement overnight - pledging to run accommodative policy, reiterating AUD remains overvalued, and warning the labor market is still soft.

- Next set of PMI prints out of the far east has also been mixed. China's HSBC services PMI rebounded from record-low 50.0 all the way to a 17-month high, and the official PMI reversed two consecutive months of declines. Out of HSBC, chief economist warned the "economy still faces downside risks to growth in the second half of the year from the property sector slowdown. We think policy makers should use further easing measures to help support the recovery." In Hong Kong, HSBC PMI surprisingly contracted for the first time in 3 months, and resident expert said "outlook remains uncertain, with new orders contracting for the fourth consecutive month and new business from Mainland China falling again."

- In Japan, LDP Sec Gen reiterated PM Aso may look to raise sales tax to 10% in principle, despite more cautiously oriented urging by his economic advisor. JPY remains under pressure, with USD/JPY topping 105.20

Equities

Market Snapshot (as of 03:30 GMT):

US markets:

- CNQR: Reportedly considering sale of the company and has reached out to potential buyers - financial press; +15.9%

- BPL: To Acquire 80% Interest in Corpus Christi Terminal Complex and Associated Eagle Ford Assets in South Texas for $860M; -1.4% afterhours

- HELE: Lowers FY15 $3.70-3.80 (prior $4.30-4.40); Including Healthy Directions FY15 EPS would be $3.90-4.04; Guides FY15 R$1.275-1.30B; cites weaker retail environment and slower store traffic; -10.4% afterhours

Notable movers by sector:

- Consumer Discretionary: Fast Retailing 9983.JP +2.9% (Uniqlo Aug SSS)

- Energy: Xinjiang Goldwind 2208.HK +6.6% (private placement)

- Industrials: Jiangling Motor 000550.CN -0.9% (Aug sales result); Fanuc 6954.JP +2.3% (plans to build domestic facility)

- Healthcare: Australian Pharma API.AU +10.3% (FY14 guidance)

- Telecom: China Mobile 941.HK +2.6% (iPhone 6 pre-sale)