World Bank cuts China GDP targets

Asian Mid-session Update: World Bank cuts China GDP targets, but stocks remain firm on the prospects of lower US rates after a miss in NFPs

Economic Data

- (JP) JAPAN AUG LABOR CASH EARNINGS Y/Y: 0.5% V 0.6%E; REAL EARNINGS (EX-INFLATION) Y/Y: 0.2% V 0.5%E

- (JP) JAPAN SEPT NIKKEI SERVICES PMI: 51.4 V 53.7 PRIOR; COMPOSITE PMI: 51.2 V 52.9 PRIOR

- (AU) AUSTRALIA SEPT ANZ JOB ADVERTISEMENTS M/M: 3.9% V 1.3% PRIOR; 15-month high

- (AU) AUSTRALIA SEPT TD SECURITIES INFLATION M/M: 0.3% V 0.1% PRIOR; Y/Y: 1.9% V 1.7% PRIOR (10-month high)

- (AU) AUSTRALIA SEPT AIG PERF OF SERVICES INDEX: 52.3 V 55.6 PRIOR; 4TH MONTH OF EXPANSION, 3-MONTH LOW

Index Snapshot (as of 02:30 GMT)

- Nikkei225 +1.2%, S&P/ASX +1.8%, Kospi +1.1%, Shanghai Composite closed, Hang Seng +1.9%, Dec S&P500 -0.1% at 1,941

Commodities/Fixed Income

- Dec gold +0.1% at $1,137/oz, Nov crude oil +0.2% at $45.65/brl, Dec copper +0.8% at $2.34/lb

- (SA) Saudi Arabia cut the price of light-crude oil deliveries to Asia by $1.70/brl

- (AU) Australia Aug Port Hedland iron ore exports 39.4Mt v 39.2M m/m; new record high - financial press

- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥400B in 3-5yr JGBs, ¥240B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr

- (KR) South Korea sells KRW800B in 3-yr govt bond, avg yield 1.605%; Sells KRW1.2T in 3-yr govt bonds, avg yield 1.580%

Market Focal Points/FX

- Asian equity markets are sharply higher, tracking the rally in the US on Friday where a disappointing September non-farm payrolls along with a significant downward revision to the prior month raised a question over the durability of recovery in employment and greatly diminished expectations for a Fed liftoff this year. Australia and Hong Kong are particularly strong, while Shanghai Composite remains closed for holiday. Investors are also shrugging a World Bank report that lowered China 2015 GDP target below the official forecast of 7% to to 6.9% from 7.1% and 2016 GDP outlook to 6.7% from 7.0%. Moreover, the likelihood of lower US rates for longer defused a call by a PBoC official for China to continue fine-tuning policy rather than implement more decisive stimulus measures. In FX, USD remained under modest pressure in Asian trade - AUD/USD and NZD/USD were notably firmer by about 40 and 30 pips respectively above $0.7080 and $0.6470.

- Ahead of this week's BOJ decision, a Nikkei report speculated the central bank would lower its economic and inflation forecast at the biannual outlook on Oct 30th and push back expectation for 2% inflation target from the current H1 of FY16. The BOJ may also use this week's meeting to signal it would consider boosting QE at that Oct 30th decision. Incoming economic data continued to justify added easing - wage inflation missed expectations for a modest growth, while Services PMI also showed some pronounced deterioration. Markit economist said the "data pointed to a slowdown in the expansion of the Japanese service sector" though "employment growth resumed in September and at a rate that was the strongest since November last year."

- Going into tomorrow's RBA decision, economic data also reflected prevailing sentiment of policy being appropriately calibrated. TD inflation remains below the RBA's 2-3 target range, but TD Securities report saw y/y level at a 10-month high, as resident economist said "the weaker Australian dollar may be boosting imported prices." Separately, ANZ job ads growth also rose to a 15-month high, and the bank noted "the demand for labor in a range of services industries has strengthened."

- Electronic trade in the energy markets was somewhat more volatile than usual after reports that Saudi Arabia cut the price of light-crude oil deliveries to Asia by $1.70/brl, possibly signalling a price war with other exporters. WTI fell about 1% to $45.20 but then rose back to $46/brl on lower USD along with some geopolitical worries over expanded campaign in Syria by Russian military.

Equities

US equities/ADRs:

- LMT: Reportedly in talks to merge its $4B information technologies business with another govt contractor - press

- GE: Trian reportedly has built a $2.5B (about 1%) stake in GE since May; Marks its largest investment - financial press

- APP: Said to be planning a bankruptcy filing as early as Monday - financial press

- GLEN.UK: Reportedly to consider offers for any potential takeover offer - UK press

Notable movers by sector:

- Consumer discretionary: Toray Industries 3402.JP +1.0% (H1 result speculation); Galaxy Entertainment Group 27.HK +5.6%, Wynn Macau 1128.HK +5.8% (China visitors to Macau rises)

- Financials: Bank of Queensland BOQ.AU +0.4% (update); ANZ Bank ANZ.AU +1.3% (speculation on unit sale)

- Industrials: Great Wall Motor 601633.CN +10.0%,Dongfeng Motor 489.HK +1.0% (positive news for small cars)

- Technology: Asustek Computer 2357.TW -0.7% (to broaden patent engagement with Microsoft)

- Materials: Kingsgate KCN.AU -7.6% (update on Thai IPO); Glencore Xstrata 805.HK +21.5% (payment update, speculation on takeover offer); BHP Billiton BHP.AU +3.7%, Rio Tinto RIO.AU +2.1% (momentum); Newcrest Mining NCM.AU +9.7%, Evolution Mining EVN.AU +9.1% (gold price rises)

- Energy: Woodside Petroleum WPL.AU +3.0% (CEO's comment); Santos STO.AU +4.8% (speculation for asset bid)