Australia RBA, Treasury differ on property market risks

Economic Data

- (CN) CHINA AUG ACTUAL FOREIGN DIRECT INVESTMENT (FDI) Y/Y: -14.0% (to $7.2B) V -17.0% PRIOR

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 111.3 v 113.3 prior (5-week low)

Index Snapshot (as of 02:30 GMT)

- Nikkei225 -0.3%, S&P/ASX -0.1%, Kospi +0.4%, Shanghai Composite -0.4%, Hang Seng morning session closed, Dec S&P500 flat at 1,976

Commodities/Fixed Income/Currencies

- Dec gold +0.2% at $1,237, Oct crude oil -0.1% at $92.80/brl, Dec copper -1.0% at $3.07/lb

- (CN) China banks Aug net forex purchase for clients: CNY20.4B v CNY62.1B m/m - SAFE

- (CN) PBoC to drain CNY15B in 14-day repos (15th consecutive drain)

Market Focal Points/Key Themes

- AUD/USD briefly spiked up nearly 20pips above $0.9050 on the release of RBA policy meeting minutes that showed renewed concern over the risks of rising housing prices. Specifically, RBA said macroeconomic stability would be in danger and that speculative demand increases the probability of a freefall, concluding the rising housing prices warrant close observation. Remarks from RBA Dep Gov Kent also expressed concern with rapidly rising home prices, however Treasurer Hockey said he does not see substantial risk in the sector and that Australia should produce more housing given the demand. Hockey also remarked growth would recover in 2015, given some encouraging recent trends in employment. Separately, ANZ Roy Morgan consumer confidence index slowed, but local economists forecasted improvement later this year, "supported by solid fundamentals such as low interest rates, rising house prices and a gradually strengthening labour market."

- Fallout from disappointing industrial output in China continued in today's session. RBS lowered China GDP target to 7.2% from 7.6%, and China Trade Ministry warned about uncertainties related to sustaining strong exports growth seen in the past two months of trade data. Former PBoC adviser Fan Gang was more upbeat, noting China annual GDP growth would only slow to an annual pace of 7.0-7.5% in 2016-2020, and that current conditions do not require stimulus policies. Shanghai Composite is among the laggards, further weighed down by continued decline in China foreign direct investment.

- In Japan, Fin Min Aso reiterated his view that local economy is recovering moderately, however Econ Min Amari said adverse weather in July-Aug may have harmed consumption. Recall PM Abe is counting on Q3 recovery in consumer spending and investment from sharp contraction in Q2 in order to justify another increase in Japan's sales tax come 2015. Econ Min Amari is calling on the govt to present policies to ensure consumer sentiment does not weaken further. Also of note in Japan, a 5.6 magnitude earthquake hit just 2km WNW of Iwai, shaking buildings in Tokyo and leading to suspension of train service. No reports on injuries or tsunami warnings have been issued.

Equities

US markets:

- COP: To sell its 24% stake in Clair oilfield (North Sea) for up to $2-3B - FT; +0.1% afterhours

- NFLX: CEO: Netflix to be profitable in Europe in 5-10 years - financial press; -1.8% afterhours

- BABA: To raise IPO price range to $66-68/shr (v $60-66 initial range); to maintain number of shares sold - financial press

Notable movers by sector:

- Consumer Discretionary: Qantas QAN.AU +2.2% (to operate additional flights)

- Materials: Paladin Energy Limited PDN.AU -4.6% (lowers production guidance); Fortescue FMG.AU +2.5% (commodity prices higher)

- Industrials: Shanghai Jinqiao Export Processing Zone Development 600639.CN +4.1%, Shanghai Waigaoqiao Free Trade Zone Development 600648.CN +2.3% (Premier Li on China to be more and more open)

- Utilities: Softbank 9984.JP +3.8% (holdings in Alibaba)