Asia Summary
Asian equity markets opened mixed, in line with Thursday’s NY trading session. Rio Tinto opened higher by over 1%, after announcing an additional $2.5B stock buyback. Shares of Taiwan’s HTC have risen over 9% following the transaction with Google.
On the geopolitical front, President Trump announced an executive order for additional US sanctions on North Korea, which may include shipping and trade networks. North Korea later responded and said it would consider the ‘highest level of countermeasure.’
Later, a South Korean press report (citing North Korea’s Foreign Minister) suggesting that North Korea could conduct an H-bomb test has since weighed on markets.
Amid the North Korea headline, AUD/JPY has declined over 0.4%. Also, China’s metals, including iron ore, have traded lower by over 2%, following reports that the Shanghai Metals Exchange raised trading fees.
South Korean steelmakers have traded sharply lower (Posco -4.1%) amid press speculation that the US could increase tariffs.
In corporate issuance, China Postal Savings Bank announced plans to issue $7.25B in perpetual preference shares in order to strengthen additional Tier 1 capital. On the sovereign front, S&P downgraded Hong Kong from AAA, while China criticized its own recent downgrade by the ratings agency.
S&P also issued its Banking Industry Country Risk Assessment (BIRCA) on Japan, in which it revised the trend for the country’s economic risk to stable from negative. It also revised the view of the trend for banking industry risk to negative from stable.
Looking ahead, comments are expected out of ECB (Draghi, Coeure, Constancio) and Fed officials (Williams, Kaplan)
In US corporate news, there has been press speculation that Hewlett Packard Enterprise is said to be planning to cut ~5,000 jobs, which equals about 10% of its total workforce.
Speakers and Press
China
(HK) S&P downgrades Hong Kong sovereign rating to AA+ from AAA (follows recent downgrade of China); Outlook revised to Stable from Negative; cites potential for spillover risks.
(CN) China MOF: S&P sovereign rating cut of China is ‘wrong decision’; The ratings agency’s inclusion of local government debt financing vehicles into local government debt does not have legal foundation.
(CN) S&P Tan: Says local government financing vehicles (LGFVs) still a key source of China credit growth.
Other
(KR) North Korea countermeasure may mean H-bomb test in Pacific – South Korean Press; Cites North Korea Foreign Minister.
(KR) North Korea leader Kim Jong Un: President Trump’s UN speech was rude nonsense, he is mentally unstable; Trump should select his words prudently; Says to mull highest level of countermeasure.
(JP) S&P publishes latest Banking Industry Country Risk Assessment (BIRCA) on Japan; revised ‘trend for Japan’s economic risk to stable from negative’; revised view of trend for banking industry risk to negative from stable
(JP) Japan Defense Min: North Korea Foreign Min comments about hydrogen bomb test in Pacific Ocean are ‘absolutely unacceptable’; Says North Korea Foreign Minister remarks are personal, but should take them seriously.
(JP) Japan Chief Cabinet Spokesman Suga: Plans to hold extraordinary Diet session on Sept 28th
(JP) Japan Finance Min Aso: Government has not decided to delay budget balancing; not yet sure if 2020 primary surplus target can be hit
(JP) Japan Economic Revitalization Min Motegi: Maintains primary balance surplus target; will reassess target in next years mid-term review
(JP) Japan PM Abe to speak to press on Monday afternoon – US financial press
(KR) US Dept of Commerce said to have included South Korea on list for sanctions of steel imports – South Korea Press; The report says an announcement could come at the end Sept.
Asian Equity Indices/Futures (00:30ET)
Nikkei -0.3%, Hang Seng -0.9%, Shanghai Composite -0.5%, ASX200 +0.3%, Kospi -0.7%
Equity Futures: S&P500 -0.3% ; Nasdaq -0.5% , Dax -0.2% , FTSE100 -0.2%
FX ranges/Commodities/Fixed Income (00:30ET)
EUR 1.1938-1.1959; JPY 111.66-112.56; AUD 0.7909-0.7934; NZD 0.7282-0.7313
Aug Gold +0.5% at 1,300/oz; Aug Crude Oil +0.1% at $50.62/brl; Sept Copper -0.9% at $2.911/lb
GLD SPDR Gold Trust ETF daily holdings up 6.21 tons to 852.2 tons
(CN) China PBOC sets yuan reference rate at 6.5861 v 6.5867 prior
(CN) PBOC OMO: To inject CNY120B in 7 and 28-day reverse repos v injected CNY60B in 7 and 28-day reverse repo prior; Weekly net injection CNY450B v CNY260B injection prior
(AU) Australia sells A$800M in 2.25% May 2028 bonds, avg yield 2.8368, bid to cover: 3.7X
Equities notable movers
Australia
Seven West Media, SWM.AU Did not reach merger agreement with Prime Media; +1.7%
Tatts Group, TTS.AU Received gambling regulatory approvals for planned merger with Tabcorp ; +2.7%
Hong Kong/China
Logan Property Holdings, 3380.HK Denied that it was planning share placement ; -7%
US markets on close: Dow -0.2%, S&P500 -0.3%, Nasdaq -0.5%, Russell flat
Best Sector in S&P500: Industrials +0.3%
Worst Sector in S&P500: Consumer Staples -1%
At the close: VIX 9.67 (-0.11pts); Treasuries: 2-yr 1.44% (flat), 10-yr 2.278% (flat), 30-yr 2.805% (-2bps)
US Market Summary
US equity markets drifted lower despite some better than expected data in the August Leading Indicators and the September Philly Fed. Heads of state continued consultations in NY and President Trump emerged with an announcement that the US, Japan and South Korea would further tighten sanctions on the regime in Pyongyang. WTI crude managed to rally off of early lows to close up 0.1%, while natural gas tanked 4.3% after the EIA posted a larger than expected build in gas inventories. Bond yields continued to creep higher, with the 10-year stretching above 2.8%.
