Oct 23 FT The debate, Bounceback in Europe on China, BoJ warns, TikTok battles, lunchtime updates

27 Oct

Oct 23 FT The debate, Bounceback in Europe on China, BoJ warns, TikTok battles, lunchtime updates

MARKETs at 12:30pm HK time
Markets in Asia mixed but all trading around flat ahead of the weekend. The last Presidential debate had no knock out moments; so the election will continue to be close. Some weakness in Semiconductor names after the Intel numbers.
E-commerce names slightly weaker in HK as Ant to kick off IPO next week with Nov 6 said to be listing target date.
Hong Kong will be closed on Monday so we may see some weakness going into the weekend

JAPAN opened higher but sold down to Thursdays closing level on poor Inflation data and tested the support a couple of time before working higher into lunch After lunch opened higher but eased back Currently +0.3% @ 23,554. Tech mixed after the poor Intel numbers. Tokyo Electron -2.3%, Advantest -0.7%
Pre Market
Inflation Rate Sept 0.0% YoY vs +0.2% Aug (F/cast was +0.1%)
Inflation Rate Sept -0.1% MoM vs -0.1% Aug (F/cast was +0.2%)
Inflation Rate Ex Food & Energy Sept 0.0% YoY vs -0.1% Aug (F/cast was +0.0%)
Core Inflation Rate Sept -0.3% YoY vs -0.4% Aug (F/cast was -0.3%)
Market House
PMI Flash data
Services Oct 46.6 vs 46.9 Sept (F/cast was 47.6)
Manufacturing Oct 48 vs 47.7 Sept (F/cast was 48.5)
Composite Oct 46.7 vs 46.6 Sept (F/cast was 47.8)
S KOREA Markets opened higher but sold down before rallying back and trading sideways
Kospi opened at 2,365, sold down to 2,345 and currently +0.4% @ 2,365
Kosdaq opened at 818, sold down to 805 and then rallied back to 813, (yesterday’s closing level) Currently flat @ 813
SY Hynix +1.4% having opened lower, Samsung +0.3%
TAIWAN opened higher at 12,945, tested higher but then sold down to 12,880 levell before rebounding to 12,910 level and trading sideways currently -0.05% @ 12,908
CHINA opened slightly lower at 4,776 but rallied to 4,796 has traded seen choppy sideways in that range. Currently +0.2% @ 4,787
Huawei's revenue +9.9% YoY to RMB671.3 billion for the first nine months of 2020, slower than the 13% growth for the first half of 2020. Hurt by U.S. export curbs, together with weakened smartphone and telecom gear sales under COVID-19 outbreak.
Shanghai Comp +0.1% @ 3,317
Shenzhen Comp -0.4% @ 13,350
ChiNext Index -0.5% @ 2,661
HONG KONG Market will be closed on Monday (Double Ninth Day)
Market opened @ 24,773 -13pts vs +118pts @ 24,773. Tested down to 24,700 before working higher through the morning to 12,970 level and eased back into lunch +0.6% @ 24,939
E-commerce names weak but wider market +VE. Ant expected to unroll IPO next week with Nov 6 as a listing date.
EUROPE I would expect a flat/lower open following Asia, with covid, earnings and the US stimulus plan in focus
Data due
EUROZONE Services, Manufacturing and Composite PMI (Flash).
GERMANY Services, Manufacturing and Composite PMI (Flash).
FRANCE Services, Manufacturing and Composite PMI (Flash).
UK Retail Sales, Services, Manufacturing and Composite PMI (Flash).
US Futures Opened Dow +44pts but eased back to +22pts, and are currently -23pts  S&P and NDX slight +VE.
Presidential debate didn’t have any knock out blows
Data due Services, Manufacturing and Composite PMI (Flash), Baker Hughes Total Oil Rig Count

The last Presidential Debate started out as a more orderly affair as Trump was less able to speak over his opponent or the adjudicator but he still avoided questions and tried to continue his personal attacks on Biden and his family. In many cases that did not came out well, especially as Biden has released his tax returns and Trump has not. Trump also claimed to have pre-paid taxes and is unfairly treated by the IRS.
Biden did say he would make sure China played by the rules when it came to climate control and attacked Trump on his tariffs. It is likely that Biden would use international co-operation to challenge China on trade and the South China Sea.
For most of Trump’s outbursts Biden was allowed to respond and did so with, I thought, more gravitas than the Trump outbursts. Trump continued to try and override the adjudicator which again did not look good. In a lot of cases Trump failed to answer the specific question; especially the last question which was supposed to be how you inaugural speech you would address those that had not voted for you. Trump answered it by say what would happen if people voted for Biden. Biden actually answered the question!
Who won? difficult to say. No knockout blows. Trump’s style still brash and Biden the politician. The election will still be a close run event. The BBC reckon the mute button won!
For a summary

FT Print Edition
Europe’s manufacturers stage bounceback.
Ahead of the PMI data due out later today. Rising demand from China helps production processes drive continent’s recovery. The article notes that Germany and Italy have already seen good rebounds in manufacturing but whilst there are concerns about the rise in covid cases many are considering expanding production. Manufacturers are being helped by the back log in orders caused but the lockdowns. One of the big beneficiaries is the Auto sector but other manufacturers are also seeing a rebound too but it remains patchy and the risk of more lock downs as covid cases rise is a concern.
I think the risk of significant lock downs is diminishing as industries introduce new practices for safe working and with the prospect of a vaccine being available soon. Although the situation in France is worrisome. See France widens night-time curfew to two-thirds of population

BoJ warns of rising defaults if virus downturn is lengthy. Looks at the threat to the financial system if the recovery from covid is prolonged by which is means into 2021 and 2022. Key being the risks of corporate defaults and the impact onto the banking system. So far there has been limited impact because a lot of companies have strong balance sheets and the government support for hotels and restaurants. It sees the risk areas as those where the banks has large exposure pre covid; like loans to midsize firms, real estate and financing for merger and acquisition deals.

TikTok battles to stay apolitical ahead of US poll. ByteDance-owned video platform faces content moderation challenge. It has banned political content but actually preventing it is more difficult. It comes as the platform also faces scrutiny over its security and links to Beijing.
The key thing being that its algorithm that is so good at suggesting similar video clips would do the same with political content. Whilst it has done much to curb and take down content it is still facing issues.

Asia’s luxury lovers lift Hermès and Kering Looks at how they have seen record breaking sales; with increased sales in Asia and the US to off-set weak European sales as consumers are unable to travel due to covid. It also, I think reinforces, other reports that the spending in China is split between the luxury sector which continues to do well but spending at lover levels is focused on essentials as the ordinary public in China remain concerned about the recovery and job security.

Jobless applications fall close to lowest level since March. Good numbers beat forecasts. It notes the federal Pandemic Unemployment Assistance programme, which offers benefits to the self-employed and others who would not qualify for regular benefits, registered 345,440 new claims on an unadjusted basis, up from 337,228.
So whilst the headlines numbers look good the reality is that getting employment back to pre pandemic levels is going to take a long time.

For Interest
Asset managers plan $300bn drive to boost private lending
. Investors switch focus to credit deals after flood of US stimulus saturates other funding options. An interesting article that looks at how investors are looking for alternative and less crowded trade.

Modern Monetary Theory’s path ends with a reckoning. Looks at how taxes, inflation and covid impact Modern Monetary Theory.

* The email will not be published on the website.