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Market Update – Asian Session: Australia Bond Yields Lower As Retail Sales Unexpectedly Decline

Asia Summary

Equities markets in China and South Korea have continued their holidays. Hong Kong markets are also closed today in observance of a national holiday. In New Zealand, the NZX-50 index has traded at a fresh record high.

Large Japanese retailer Aeon has opened higher on its better than expected H1 operating profit.

In Australia, retail sales unexpectedly declined in August, and this has put downward pressure on the Aussie and bond yields, despite better than expected monthly trade surplus figures. With the downward revision in retail sales, the data has now declined for 2 straight months.

Meanwhile, former RBA official Edwards said the central bank could hike rates even if inflation remains below its 2-3% target, as he said very low rates during times when growth is firm invites trouble. The RBA last raised rates in Nov of 2010.

Key economic data

(AU) AUSTRALIA AUG RETAIL SALES M/M: -0.6% V +0.3%E

(AU) AUSTRALIA AUG TRADE BALANCE (A$) 989M V 850ME

(JP) Foreigners Buy net of ¥953.3B in Japan stocks (highest weekly purchase since 2015) v ¥923.9B in net sales prior week

(PH) Philippines Sept CPI M/M: 0.5% v 0.2%e; Y/Y: 3.4% v 3.1%e (highest since April); Core Y/Y: 3.3% v 3.1%e (highest since Sept 2014)

(NZ) New Zealand FY17 Budget Surplus NZ$4.07B v NZ$1.83B y/y (NZ$363M above forecast); Core Crown Tax Revenue NZ$75.6B, +NZ$5.2B y/y

Speakers and Press

(AU) Former RBA Official John Edwards: RBA could raise rates even if inflation remains below 2-3% target; very low rates during times when growth is firm invites trouble.

(JP) Japan PM Abe said to pledge to ‘speed up’ Abenomics – Japanese Press

Asian Equity Indices/Futures (00:30ET)

Nikkei +0.1%, Hang Seng closed, Shanghai Composite closed, ASX200 +0.2%, Kospi closed

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

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

EUR 1.1751-1.1763; JPY 112.70-112.91; AUD 0.7824-0.7865; NZD 0.7147-0.7168

Aug Gold flat at 1,277/oz; Aug Crude Oil flat at $49.98/brl; Sept Copper +0.3% at $2.964/lb

GLD SPDR Gold Trust ETF daily holdings flat at 854.3 metric tons

Equities notable movers

Australia

Topbetta Holdings, TBH.AU Q1 Rev up over 170% y/y; +4.1%

Japan

Aeon, 8267.JP H1 Operating profit above expectations; +1.7%

US markets on close: Dow +0.1%, S&P500 +0.1%, Nasdaq flat, Russell -0.3%

Best Sector in S&P500: Utilities +1%

Worst Sector in S&P500: Financials -0.5%

At the close: VIX 9.63 (+0.10 pts); Treasuries: 2-yr 1.475% (flat), 10-yr 2.330% (flat), 30-yr 2.874% (+1bp)

US Market Summary

US stocks ended mostly higher after the strongest ISM services reading in more than a decade, though the Russell 2000 broke an 8-day streak of gains. US Sec of State Tillerson, responding to an NBC News report that he had called Pres Trump a ‘moron’ and sought to resign his post, held a press conference to pledge his continued commitment to the Trump administration. The Spanish IBEX finished down 3% as Catalonia headlines continue to weigh on risk sentiment. US Treasury prices declined following the strong US data, pushing up yields. Healthcare names outperformed, with Mylan a leader for the day, while IT, energy and financial names were the laggards.

US Afterhours Movers

ACAD Initiates Phase III Study of Pimavanserin in Dementia-Related Psychosis; +5.3% afterhours

ZUMZ Reports Sept SSS +9.3% y/y; Raises Q3 $0.45-0.48 v $0.47e, Rev $241-243M v $237Me (prior $0.43-0.48, Rev $236-241M), SSS +6-7% y/y; +4.5% afterhours

SEAS Reportedly has hired advisors to consider a sale; +3.5% afterhours

GNW North Carolina regulator approves proposed Oceanwide acquisition of Genworth’s NC-domiciled insurance companies; +2.9% afterhours

CAFD Reports Q3 $0.27 v $0.65e, Rev $27.7M v $25.8Me; Guides Q4 Rev $12-15M v $14.8Me, adj EBITDA $22-25M; -1.5% afterhours

IMGN Files to offer 13M shares via Jefferies, Leerink and RBC (12% of shares outstanding); -8.1% afterhours

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