China adjusting taxes to boost domestic consumption

Asia Market Update: US said to be looking at changing currency manipulator classification, to leverage China in trade dispute; UK PM May settles 95% of Brexit withdrawal deals; China adjusting taxes to boost domestic consumption

General Trend:

- Regional equities weaker outside of China and Hong Kong

- China Shanghai Composite tests 2-yr high rising more than 4%

- UK PM May signals that 95% of Brexit negations are settled

- IEA Chief not worried about Saudi Arabia cutting oil exports on death of journalist pressure

- BOK Gov Lee signals at a future rate hike

- China President Xi reiterated his unwavering commitment to the private sector

- China publishes draft tax cut plan to boost domestic consumption

- China new home prices slowing m/m and a bit hotter y/y; Bank of East Asia cuts mortgage rates in Hong Kong

- Japan telecom names lower on Japan govt call to lower plan fees

- GE and Siemens secure deals in Iraq paving way to larger contracts in the future

- Next North Korea/US summit likely to be in January 2019

- AUD fell to 0.7088 before erasing nearly all losses

Headlines/Economic Data

Japan

- Nikkei 225 opened -0.7%

- 3333.JP May report FY Net more than ¥200B for the first time - Nikkei

- (JP) Bank of Japan (BOJ): Company Loan Index 2 v 2 prior; Govt Loan Demand -2 v -2 prior; Household Loan Demand: 0 v -2 prior

- (JP) Japan Chief Cabinet Sec Suga: Reiterates calls to lower mobile phone fees as soon as possible

- (JP) Bank of Japan (BOJ) Financial System Report: Domestic financial system maintaining stability; No sign of overheating from financial activities

Korea

- Kospi opened -0.6%

- (KR) North Korea and US planning a second summit for January - Korean press

- (KR) US and South Korea call off joint military drills, South Korea to conduct alone in December - Korean press

- (KR) South Korea Oct 1-20 Trade Balance +$1.64B, Exports y/y: +26.0% v 21.6% prior; Imports y/y: +31.4% v 14.0% prior

- (KR) South Korea Treasury sells KRW600B in 20-yr bonds; avg yield 2.285%

- (KR) Bank of Korea (BOK) Gov Lee: Message on need for accommodation adjustment sent to markets; see potential GDP of 2.8-2.9% - parliament

China/Hong Kong

- Hang Seng opened +0.3%, Shanghai Composite +0.6%

- (CN) China releases draft of tax cuts including reduction to cost of housing, education and healthcare in order to boost domestic consumption, to take effect Jan 1, 2019 - SCMP

- (CN) China State Council commission on financial development and stability: To balance need for stable growth and preventing risks; reiterates to implement prudent and neutral monetary policy - meeting on fending off financial risks

- (CN) China Sept New Home Prices M/M: 1.0% v 1.5% prior; Y/Y: 9% v 8% prior; M/M home prices rise in 64 of 70 cities v 67 prior; Y/Y home prices rise in 67 of 70 cities v 68 prior

- (CN) China brokerages are considering relief funds with local SOEs - CSJ

- (US) White House Econ Adviser Kudlow: China is doing nothing to defuse trade tensions – FT

- (CN) US President Trump said to have no plans to ease tariffs on China, wants China leaders to suffer from tariffs and thinks that will give him more leverage - US press

- (CN) China PBOC Adviser Ma Jun: Expect policy measures to support the market; see China tax and fee cuts next year to be 1% of GDP or more

- (CN) US Treasury Sec Mnuchin said to be open to changing how US names currency manipulators, which could open the window to official name China as one, which could then become leverage for trade dispute talks - US financial press

- (CN) China PBoC Open Market Operation (OMO): To inject CNY120B in 7-day reverse repos v CNY30B prior: Net: CNY120B injection v CNY30B prior

- (CN) China PBOC sets Yuan Reference Rate: 6.9236 v 6.9387 prior

Australia/New Zealand

- ASX 200 opened -0.2%

- VAH.AU Reports prelim Q1 Rev +9.7% y/y v at least +7% guided

- (AU) Australia Independent Kerryn Phelps was on track for victory in the Wentworth by-election to replace former member and prime minister Malcolm Turnbull, a Phelps victory would take away 1 seat from the Govt taking away its majority – AFR

- (AU) CBA and IHS Markit to start new flash PMI index for Australia

- (AU) Australia sells A$500M v A$500M indicated in 2022 bonds; avg yield 2.1921%; bid to cover 6.45x

- WOR.AU Confirms deal with Jacobs Engineering for ECR assets, to add ~20% EPS accretion on an FY18 pro-forma basis, announces A$2.9B entitlement offering priced at A$15.56/shr

- CCV.AU Settles class action for A$10.6M in relation to cash advance lending in Queensland [+9%]

- FLT.AU Guides H1 underlying PBT A$140-150M; FY19 underlying PBT A$390-420M; Seeing overseas profit close to 50% of total earnings [+9.5%]

- (AU) RBA Assist Gov Debelle: RBA has an open mind on what constitutes full employment

North America

- FCAU Expected to announce the sale of its car part manufacturer, Magneti, to KKR in an expected €6B deal - FT

- GE Signed principles of co-operation with Iraq to add 14 GW of power generation capacity, with an immediate order for 1.5GW to come into service summer 2019

- JEC Sells Energy, Chemicals and Resources Business to WorleyParsons for $3.3B ($2.6B cash $700M in shares); FY18 results looking materially inline with prior guidance

- IEA chief Birol: Not worried about Saudi Arabia cutting oil exports in response to international pressure on journalist's death

- (SA) Saudi Oil Min Al-Falih: New OPEC+oil agreement might be signed on Dec 7th - financial press

Europe

- SIE.DE Signed agreement to supply Iraq with 11GW of power generation over 4-yrs

- (UK) PM May: 95% of Brexit withdrawal deal is "now settled"; dispute resolution arrangements agreed with EU

- (DE) Germany Sept Tax Rev +5.8% y/y; YTD +6.3% y/y; Trade uncertainty to continue crimping exports

- (IT) Moodys cuts Italy sovereign rating one notch to Baa3 from Baa2 (now lowest level of investment grade); Outlook Stable (Oct 20th)

Levels as of 01:15ET

- Hang Seng +2.5%; Shanghai Composite +4.8%; Kospi +0.1%; Nikkei225 +0.4%; ASX 200 -0.6%

- Equity Futures: S&P500 +0.1%; Nasdaq100 +0.3%, Dax +0.2%; FTSE100 +0.3%

- EUR 1.1518-1.1498; JPY 112.65-112.35 ; AUD 0.7126-0.7088;NZD 0.6618-0.6581

- Dec Gold +0.1% at $1,230/oz; Dec Crude Oil +0.4% at $69.53/brl; Dec Copper +0.7% at $2.80/lb