ECB speculation ahead of Oct meeting

Asia Mid-Session Update: Samsung issues Q3 guidance, Singapore Q3 GDP above ests, China Sept trade below; US Retail Sales, CPI, more bank earnings ahead; ECB speculation ahead of Oct meeting

Asia Summary

-Asian equity markets opened mixed and the Nikkei 225 has outperformed. Nikkei 225 Oct options are said to have settled at ~20,957.

-Nikkei heavy component, Fast Retailing has gained over 3% following it reporting record earnings. Kobe Steel has declined by over 10% amid reports that its data falsification issue has spread to steel wire products.

-Samsung Electronics guided its Q3 operating profits slightly ahead of estimates, while revenues for the quarter are seen in line. It was also reported that the company’s CEO/Co-vice Chairman Kwon would step down in order to give the company a new start and younger management. Amid the company’s earnings report and announced management transition, shares are slightly lower following the over 4% gains seen earlier in the week ahead of guidance.

-On the macro front, China’s Sept trade balance was below expectations as exports were below forecasts, while imports were higher than expected. The PBoC skipped today’s open market operation (OMO) and instead confirmed a 1-year medium-term lending facility (MLF).

-Singapore was the first major Asian economy to release Q3 GDP data, which showed the economy is performing better than expected. Also, the country’s central bank, the Monetary Authority of Singapore (MAS), offered a slightly cautious view on the 2018 growth outlook and tweaked its policy language.

-The Reserve Bank of Australia (RBA) issued its Oct Financial Stability Review in which it announced it was planning ‘top-down’ stress tests for domestic banks. Currently, Australia’s Prudential Regulation Authority (APRA) conducts ‘bottom-up’ assessments of the banking sector.

-In South Korea, the Finance Ministry said the country had extended its currency swap agreement with China for 3-years.

-New Zealand’s First Party Leader Peters said his party’s board was expected to meet on Monday regarding the government coalition talks. Peters had previously said that he planned to make his decision regarding a coalition partner this week.

-Ahead of the ECB’s Oct 26th policy meeting, there has been press speculation that the central bank is said to consider cutting its QE program to €30B/month from Jan and extending it until at least Sept 2018. The current level of monthly asset purchases is €60B.

-In the US, traders are focused on the later today releases of Sept CPI and Retail Sales data. HP Inc. guided the mid-point of its initial FY18 earnings view above market expectations. Later today, US financial names, including Bank of America, PNC and Wells Fargo are due to report quarterly earnings. On Thursday, Citi and JPMorgan traded lower after their respective Q3 earnings reports.

Key economic data

-(CN) CHINA SEPT TRADE BALANCE: $28.5B V $38.0BE

-(CN) CHINA SEPT TRADE BALANCE (CNY) 193.0B V 266.1BE

-(SG) SINGAPORE Q3 ADVANCE GDP Q/Q: 6.3% V 3.7%E; Y/Y: 4.6% V 3.8%E

-(SG) SINGAPORE CENTRAL BANK (MAS) SEMI-ANNUAL POLICY DECISION: KEEPS ZERO APPRECIATION PATH FOR SGD, maintains width and center of currency band

Speakers and Press

China

-(CN) China Customs Official Hu comments on Sept Trade Figures: High base effects led to slowdown y/y in trade growth in Q3; Positive conditions remain for foreign trade in Q4 supported by global recovery and solid domestic recovery; However, uncertainties in global economy still linger in Q4 and higher base last year to impact Q4 trade growth; Also, says fierce global competition to cloud Q4 trade.

-(CN) China Sept Retail Auto Sales 2.23M units, +1.2% y/y

Other

-(AU) RBA OCT FINANCIAL STABILITY REVIEW: NO DIRECT COMMENTS ON MONETARY POLICY: DEVELOPING TOP-DOWN STRESS TEST FOR DOMESTIC BANKS

-ASEAN Central Banks renew currency swap arrangement for 2-years

-(EU) ECB said to consider cutting QE to €30B/month from Jan and extending it until at least Sept 2018 - financial press

-(GR) There is renewed speculation that Greece may issue bonds in the first 3-months of 2018; said to seek to raise at least $3.5B – US financial press

-(KR) South Korea Finance Ministry: Agrees to extend currency swap agreement with China for 3-years

-(NZ) NZ First Party Leader Peters: NZ First board to meet on Monday

-(US) Fed’s Bostic (non-voter): Reiterates not sure if Fed will raise rates in Dec

-(US) President Trump said to plan to end subsidy payments to insurers related to sale of Obamacare insurance coverage – US press

Asian Equity Indices/Futures (00:30ET)

- Nikkei +1.2%, Hang Seng flat, Shanghai Composite +0.2%, ASX200 +0.4%, Kospi flat

- Equity Futures: S&P500 flat; Nasdaq +0.1% , Dax +0.1% , FTSE100 +0.2%%

FX ranges/Commodities/Fixed Income (00:30ET)

- EUR 1.1825-1.1852; JPY 112.02-112.32; AUD 0.7817-0.7842; NZD 0.7078-0.7146

- Aug Gold +0.1% at 1,298/oz; Aug Crude Oil +0.7% at $50.94/brl; Sept Copper -0.1% at $3.119/lb

- GLD SPDR Gold Trust ETF daily holdings flat at 858.5 metric tons

-(CN) PBOC SETS YUAN REFERENCE RATE AT 6.5866 V 6.5808 PRIOR

-(CN) PBOC offers CNY498B 1-year Medium-term Lending Facility (MLF) OPERATION AT 3.2% V 3.2% PRIOR

-(CN) PBoC OMO: Does not conduct OMO v CNY20B injected with 7-day reverse repos prior

US markets on close: Dow -0.1%, S&P500 -0.2%, Nasdaq -0.2%, Russell -0.1%

- Best Sector in S&P500: Real Estate +0.7%

- Worst Sector in S&P500: Financials -0.8%

- At the close: VIX 9.91 (+0.06pts); Treasuries: 2-yr 1.517% (-1bp), 10-yr 2.323% (-3bps), 30-yr 2.852% (-3bps)

US Market Summary

-Stocks ended lower, with the S&P confined to a tight range until a moderate drop at the end of the session. Treasury yields have fallen slightly despite a hotter than expected core PPI reading ahead of tomorrow's CPI data. WTI crude futures declined but traded off the morning lows after the EIA report showed a decline in U.S crude stockpiles, while natural gas prices surged on anticipation of colder weather and in-line expectations from the EIA report. JPM weighed on the Dow post earnings along with Exxon and Chevron. Copper continued to press higher, back towards the Sep multiyear high.

US Afterhours Movers

- EXFO Reports Q4 $0.02 v $0.06e, Rev $63.0M v $60.9Me (2 est); +7.4% afterhours

- TSE Raises Q3 adj EBITDA $162-168M (prior $110-120M); +2.4% afterhours

- NEO Reports prelim Q3 Rev $63.1M v $65.7Me, test volumes +16% y/y; Reports prelim Q3 Clinical genetic test volume 162.5K, +16% y/y; -1.4% afterhours

- ECYT Registers $150M mixed securities shelf - filing (73% of market cap); -3.3% afterhours

- TNDM Announces proposed underwritten public offering of common stock, Series A Warrants and Series B Warrants; -14.5% afterhours

- AAOI Cuts Q3 $1.04-1.09 v $1.31e, R$88-89M v $112Me (prior $1.30-1.43, Rev $107-115M); -22% afterhours