Asian equity markets trade generally lower

Asia Market Update: PM May calls draft deal with EU a non-starter; PBOC Gov Gang affirms plenty of options for monetary adjustments

General Trend:

- Asian equity markets trade generally lower

- Korean automakers decline, Kia drops over 6%

- Japanese equities weighed down by declines in Softbank, automakers and financial sector

- Financials and resources firms underperform in Australia

- US defense contractors L-3 Technology and Harris Corp confirm merger of equals

- China PBoC 100bps RRR cut that was announced on Oct 7th, took effect today

- PBoC said to not roll over maturing MLF loans today

- China fixed the yuan (CNY) at weakest level since Jan 2017

- British Pound (GBP) underperforms in Asia amid focus on Brexit talks

- PM May said to call draft Brexit deal a "non-starter" in its current form; EU leaders may not call special summit in Nov as a result of lack of progress - FT

- Oil prices rise over 1%

- Trump said will severely punish Saudi Arabia if it is determined that journalist Khashoggi was killed in the Saudi consulate in Turkey (CBS interview)

- JPM and Ford executives will not attend Saudi investor conference amid journalist disappearance

- Multiple central bankers spoke over the weekend including PBoC Gov Yi Gang, BoJ Gov Kuroda, various ECB speakers (Draghi, Weidmann, Villeroy)

- US companies expected to report earnings include Bank of America and Charles Schwab.

- Rio Tinto is expected to release quarterly production update on Tuesday’s session

- China Sept CPI data due on Tuesday

- The US Treasury's Semi-Annual Currency Report is expected to be released during the week beginning October 15th.

 

Headlines/Economic Data

Japan

- Nikkei 225 opened -0.9%

- (JP) Japan PM Abe to raise sales tax as planned in Oct 2019 - press

- 7201.JP Said to be seeking to post wage talks at UK plant to 2019 - Japanese Press

- (JP) BOJ Gov Kuroda: BoJ will use interest rates to signal exit from easy policy

- (JP) Japan PM Abe: want to pass extra budget as soon as possible

-(JP) Japan Chief Cabinet Sec Suga: Extra budget to be approved at cabinet meeting today

-(JP) Japan Economy Min Motegi: no intent to discuss foreign exchange in US trade talk; does have intention of discussing measures to prevent competitive currency devaluations - Japan press

Korea

- Kospi opened -0.3%

- (KR) South Korea Gov planning to cut maximum legal lending rate to 20% from 24% - Korean press

- (KR) South Korea Fin Min Kim: South Korea should not be regarded as a currency manipulator as it strives to enhance transparency in its currency market

- (KR) North Korea leader Kim said to have 'refused' to give nuclear list to the US - South Korean press

- (KR) Bank of Korea sells KRW190B in 6-month Monetary Stabilization Bonds; avg yield 1.80%

-(KR) South Korea sells KRW500B in 10-yr bonds; avg yield 2.39% v 2.265% prior; bid to cover 2.73x

- (KR) South Korea Sept fund flow data: Foreign investment in local equities +KRW0.6T v +1.1T m/m; in local bonds -1.9T v +2.4T m/m

China/Hong Kong

- Hang Seng opened -0.5%, Shanghai Composite 0.0%

- (CN) China PBoC Gov Yi Gang: the central bank is considering range of risks in currency policy, including worst case scenario; plenty of room for monetary adjustments amid trade row; monetary policy to remain neutral with more focus on guiding expectations - US financial press

- (CN) Government of China Shenzhen City to provide support to listed companies, plans to use tens of billions of yuan to provide liquidity support to companies - Shanghai Securities News

- (HK) UK and Hong Kong regulators have lined up 2.5K funds for cross border selling – SCMP

- (CN) China PBoC Open Market Operation (OMO): Skips OMO v skipped prior: Net: nil v nil prior; PBOC will not roll over maturing MLF loans today

- (CN) China PBoC set yuan reference rate: 6.9154 v 6.9120 prior (weakest setting since Jan 2017)

-(CN) Major realtor said to warn that 'winter' is coming for China property market - financial press

- (CN) China Anhui Province to limit cement production during the winter - Chinese Press

Australia/New Zealand

- ASX 200 opened -0.2%

- (AU) Fitch Q4 Australia Fixed Income Investor Survey: Trade wars and regulation are threats to Australia house prices

- STU.NZ Receives revised offer from Fletcher Building at NZ$1.90/shr (prior NZ$1.70) with dividend up to NZ$0.05/shr

- STU.NZ Fletcher Building withdraws offer, notes lack of support from Steel & Tube's board [-1.3%]

- WES.AU Reports Q1 (A$) Coles Sales 9.84B v 9.37B y/y [-0.5%]

- OEL.AU Gives drilling update for Big Tex; Despite strong hydrocarbon indications on mud logs, insufficient producible reservoir was encountered to justify setting production casing [-25%]

-(AU) Reserve Bank of Australia (RBA) Harper: Near term rate increase would spook consumers; reiterates RBA view that rates are more likely to rise than fall

-CIM.AU Thiess awarded A$1.2B Mt Arthur coal contract from BHP

North America

- HRS Confirms deal with L3 Technologies in a merger of equals; Cash EPS accretive in first full year post close; $500M of annual gross pre-tax cost synergies in year 3; $300M net of savings returned to customers

- HRS Reports Q1 $1.78 v $1.70e, Rev $1.54B v $1.53Be; raises some FY19 guidance

- LLL Reports prelim Q3 $2.85 (adj) v $239e; Rev $2.5B v $2.5B; Raises FY18 guidance

- Sears [SHLD]: Said to be close to an agreement regarding $500-600M in bankruptcy financing from CEO Lampert and certain banks - financial press

-(US) US Treasury Sec Mnuchin: would like to include currency stipulations in future trade agreements with everybody, citing the USMCA as the model going forward - speaking from Indonesia

Europe

- (UK) Former Foreign Min Johnson: We are now entering the moment of crisis in Brexit talks, cannot go on as it is; In the last few days UK negotiators have agreed that we will remain in the customs territory of EU, even stronger commitment than remaining in the customs union - Telegraph

- (UK) Negotiators in Brexit talks working through the weekend, neither side is sure that a deal will be reached by the self-imposed deadline of Monday; still hung on Ireland solution - financial press

- (EU) ECB's Draghi: underlying inflation is hovering around 1%, but confident inflation is moving toward target; inflation is driven mainly by oil prices; Main risk is a sharp repricing of assets or sharp and sudden increase in interest rates; an inflation surprise is another risk but not that likely

- (IT) ECB's Draghi: do not see room for additional expenditures in Italy; All parties need to ease the tone around Italy budgetary discussions; ECB will not intervene to help Italy

- (EU) ECB Villeroy said the central bank would soon decide how to reinvest the proceeds of the bonds that expire in 2019, but should not yet commit beyond that point - financial press

- (UK) PM May said to call draft Brexit deal a "non-starter" in its current form; EU leaders may not call special summit in Nov as a result of lack of progress – FT

- (DE) Germany Bavaria regional prelim election results saw the ruling Christian Social Union, sister party to Chancellor Merkel’s Christian Democrats, had lost its absolute majority, receiving only 37.4% of votes (worst result since 1950) - press

- (PT) Moody's raises Portugal sovereign rating one notch to Baa3 from Ba1; outlook to Stable (from Oct 12th)

- IMF Communique: members pledge to refrain from competitive currency devaluations or targeting FX rates for trade advantage

 

Levels as of 01:30ET

- Hang Seng -1.5%; Shanghai Composite -0.8%; Kospi -0.8%; Nikkei225 -1.8%; ASX 200 -1.0%

- Equity Futures: S&P500 -0.2%; Nasdaq100 -0.4%, Dax -0.6%; FTSE100 -0.2%

- EUR 1.1563-1.1536; JPY 112.26-111.94; AUD 0.7115-0.7099;NZD 0.6508-0.6494

- Dec Gold +0.3% at $1,225/oz; Nov Crude Oil +1.1% at $72.09/brl; Dec Copper -0.0% at $2.81/lb