China manufacturing PMIs conflicting, S. Korea exports continue to decline

Asia Market Update: Markets mixed as they absorb the prospects of China, US trade war impact on global growth as tariffs go into effect on both sides; China manufacturing PMIs conflicting, S. Korea exports continue to decline

 

General Trend:

- S&P futures open down 1% as US tariffs on China and China’s retaliatory tariffs on US go into effect

- In general markets open mostly lower, Shanghai Composite then reversed losses and gained more than 1%, JPY found strength again the majors, with biggest move against the EUR

- China PMIs came in conflicting, China Caixin PMI manufacturing came in at 50.4 the first expansion after two consecutive months of contraction, new export orders contract at fastest pace since Nov 2018

- While, China official manufacturing PMI was 49.5, the 4th consecutive contraction, Non-manufacturing the composite remained in expansion, China official commented overall market demand faces pressure, although production continued to expand

- Friday Indonesia signed into law a ban on nickel exports, which sent LME futures higher and nickel producers gained near double digits

- Violence in Hong Kong between protesters and police escalated this weekend, Xinhua Op Ed noted 3 bottom lines that cannot be crossed; China will hold a press conference tomorrow on Hong Kong

- Japan PM Abe notes he will announce cabinet reshuffle next week

- Reminder: Markets in US and Canada closed for holiday Monday, September 2nd

- Looking ahead: RBA to hold policy meeting in tomorrow’s session

 

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opened flat

- (NZ) NEW ZEALAND Q2 TERMS OF TRADE INDEX Q/Q: 1.6% V 1.0%E

- (AU) Australia Aug AIG Performance of Manufacturing Index: 53.1 v 51.3 prior

- (AU) Australia Aug Final CBA PMI Manufacturing: 50.9 v 51.3 prelim

- BXB.AU Announces $1.65B, 240M (15% of shares outstanding) share buyback after AGM and A$0.19/shr special dividend

- TLS.AU Adjusts guidance after NBN plan: FY20 (A$) Raises underlying EBITDA 7.4-7.9B (prior 7.3-7.8B); Cuts Rev 25.3-27.3B (prior 25.7-27.7B)

- (AU) Australia Aug CoreLogic House Price Index m/m: 1.0% v 0.1% prior

- (AU) Australia sells A$400M v A$400M indicated in Nov 2029 bonds, avg yield 0.8961% v 0.8841% prior, bid to cover 4.32x v 3.95 prior

- (AU) Australia Aug Melbourne Institute Inflation m/m: 0.0% v 0.3% prior; y/y: 1.7% v 1.8% prior

- (AU) AUSTRALIA Q2 CORP OP PROFIT Q/Q: 4.5% V 2.0%E; INVENTORIES Q/Q: -0.9% V +0.3%E

- (AU) Australia PM Morrison responds to question is Australia is heading to recession: Expect Q2 results to be soft

- (NZ) New Zealand Treasury Monthly Economic Indicators Report: Business pessimism raises downside risk to GDP forecast, signs that business confidence may have stabilized

Japan

- Nikkei 225 opened -0.4%

- (JP) Bank of Japan (BOJ) operation related to daily bond buying operation: Cuts 10-25 year JGB buying

- (JP) Japan Cabinet Sec Suga: Japan is closely watching US-China trade developments

- (JP) Japan PM Abe: Planning to reshuffle cabinet next week, prospects for global economy is increasingly uncertain; consumption to be supposed by ample measures

- (JP) JAPAN Q2 CAPITAL SPENDING (CAPEX)Y/Y: 1.9% V 1.7%E; CAPITAL SPENDING EX-SOFTWARE:
-1.7% V 2.4%E

- (JP) Japan Aug Final PMI Manufacturing: 49.3 v 49.5 prelim; Output 48.9 v 48.1 prior (highest reading since Jan 2019)

- 6502.JP Completed withdrawal from US LNG business on Aug 30th; to book ¥90B charge in FY20 related to exit

- (JP) Re-appoints Hiroaki Nakanishi to Bank of Japan (BOJ), effective Sept 1

Korea

- Kospi opened -0.3%

- (KR) South Korea Aug Trade Balance $1.7B v $2.2Be; Exports Y/Y: -4.2% v -12.5%e (9th consecutive decline); Semiconductor exports Y/Y: -30.7% v -28.1% prior

- (KR) North Korea First Vice Foreign Minister Choe Son Hui: Expectation that dialogue with the US will resume is "gradually disappearing" after US Sec of State Pompeo described the N. Korea's behavior as "rogue"

China/Hong Kong

- Hang Seng opened -0.4%; Shanghai Composite opened flat

- (CN) CHINA AUG MANUFACTURING PMI: 49.5 V 49.6E (4th consecutive contraction); Comments: Overall market demand faces pressure, although production continued to expand

- (CN) CHINA AUG CAIXIN PMI MANUFACTURING: 50.4 V 49.8E (first expansion after 2 consecutive contractions)

- (CN) China Customs Tariff Commission of the State Council clarifies tariff increase on US goods; next round goes into effect today on $75B in goods in 2 batches, second on Dec 15th – Xinhua

- (CN) New 15% US tariffs on $112B of China goods, went into effect today

- (HK) Macau Aug Gaming Rev (MOP) 24.3B v 24.5B prior; Y/Y: -8.6% v -3.5% prior

- (CN) US and China officials held 'working level' call on Thursday evening; sources say that on the call China claims it has made progress toward restricting outbound fentanyl shipments – CNBC

- (US) Pres Trump: new China tariffs are still set to take effect this weekend; Sept meeting with Chinese trade delegation is "still on" (in Sept in Washington DC)

- (HK) Xinhua Op ed warns that the end is coming for those attempting to disrupt Hong Kong and antagonize China, detailed 3 bottom lines that must not be crossed

- (CN) China PBOC sets Yuan Reference Rate: 7.0883 v 7.0879 prior

- (CN) China PBoC Open Market Operation (OMO): Skips for 3rd consecutive session; Net CNY0B v drain CNY80B prior

- (CN) China to hold press conference regarding Hong Kong situation on 11:15 AM Tuesday local time (23:15 ET) - US Financial Press

- (CN) China National Development and Reform Commission (NDRC) official Lu Weisheng: Planning measures to fix auto industry, including increasing oversight and lowering capacity – press citing talk at auto conference

Other Asia

- (IN) India planning to merge 10 state banks in 4 stronger entities with wide domestic and global reach – press

- (TH) Thailand Aug CPI M/M: -0.2% v -0.1%e; Y/Y: 0.5% v 0.7%e (7-month low and below target range)

North America

- (US) Pres Trump, asked if he would like to see negative interest rates in the US, says "no"

- (US) National Hurricane Center (NHC) Hurricane Dorian made landfall in Bahamas as Category 5 hurricane, parts of Florida continue to evacuate, expected to head up east coast impacting Georgia, South and North Carolina later this week

Europe

- (DE) Germany Regional Election Results: Merkel's CDU party and coalition partner Social Democrats retains control in Saxony and Brandenburg but lost seats to the the far right, which made significant gains in both

- AT1.DE TLG Immobilien acquires 9.99% stake from largest shareholder Avisco Group for €1.02B, companies evaluating possible merger

- (UK) Labour Party Brexit spokesperson: Lawmakers opposed to no deal Brexit will try to pass a law this week that will block PM Johnson from allowing it to happen Oct 31

- (AT) Austria National Bank Gov Holzmann (newly appointed ECB member): Worried about adding additional stimulus to the EU, lowering the deposit rate - local media

- (IT) Italy PM Conte expects to finalize talks over new Govt by Wednesday - speaking to press Sunday

- (EU) London Mayor Sadiq Khan: Europe is starting to resemble the situation ahead of World War II, leaders are using divisive language to win popularity and spreading hatred against minorities - speaking in Poland event marking the 80th anniversary of the start of WWII

- (IE) Ireland Aug Manufacturing PMI: 48.6 v 48.7 prior (2nd consecutive month of contraction, lowest reading since Apr 2013)

 

Levels as of 01:20ET

- Hang Seng -0.6%; Shanghai Composite +1.1%; Kospi +0.1%; Nikkei225 -0.4%; ASX 200 -0.4%

- Equity Futures: S&P500 -0.4%; Nasdaq100 -0.7%, Dax -0.3%; FTSE100 -0.2%

- EUR 1.0984-1.0997; JPY 105.92-106.28; AUD 0.6717-0.6735; NZD 0.6289-0.6312

- Commodity Futures: Gold +0.3% at $1,533/oz; Crude Oil +0.0% at $55.12/brl; Copper 0% at $2.55/lb