Oct 7 Asian Lunchtime Update with Europe & US Expectations
SUMMARY at 12:30HK time
Markets opened on the day lows after Trump said he was calling off stimulus negotiations and would pass a new stimulus package after his was re-elected. But them rallied quickly to yesterday’s closing levels.
Investors now presuming that whilst there will not be an immediately stimulus package there will be one coming. Prompting a 'buy the dip’ reaction in Asia.
The concern should be whether that delay causes what Powell was warning about yesterday he said a lack of support could “lead to a weak recovery, creating unnecessary hardship for households and businesses” and thwart a rebound that thus far has progressed more quickly than expected. “By contrast, the risks of overdoing it seem, for now, to be smaller,”.
In Asia oil prices dropped on the news.
Nikkei opened lower in line with the futures but worked higher in the morning session, rising to 23,400 (just short of Tuesday’s closing level (23,433)), which was tested a couple of times before easing back into lunch. PM opened flat and trading sideways; currently -0.2% @ 23,383
Japan Data out pre market Foreign Exchange Reserves Sept $1389.8b vs 1398.5b Aug
Data due out @ 1pm HK time Prelims
Coincident Index Aug vs 78.3 Jul (F/cast was 79)
Leading Economic Index Aug vs 86.7 Jul (F/cast was 88)
Kospi opened lower following the US markets, initial ticked slightly higher but sold down to the opening level but then worked higher from around 9:40am to 2,374 level. Then traded sideways before retesting yesterday’s closing level but then bounced back. Currently +0.3% @ 2,374
Kosdaq opened lower but quickly gapped back above yesterday’s closing level and worked higher to 869 level. Then sold down to test the support at yesterday’s closing level before working back to 865 level. Currently +0.3% @ 865
S Korean Data out pre market Foreign Exchange Reserves Sept $420.55b vs 418.95b Aug
Opened at the lows but worked back to yesterday’s closing level by 10:15am and then traded sideways around that level for an hour and now working higher. Currently +0.2% @ 12,735
Remains closed. Re-opens on Friday when we get the Caixin PMI data which based on Monday’s releases should be good.
Market opened at 24,000 +19pts vs -24pts ADR’s @ 23,956 with E commerce names and Financials +VE. HSI initially sold down to 23,905 before bouncing back to 24,190 but unable to break higher; retrenched to 24,100 and traded sideways. At lunch +0.5% @ 24,092. Pre market PMI shows signs of improvement but missed forecasts. At lunchtime E-commerce, Chinese Developers and Tech +VE but Chinese Financials weak.
IPO JHBP-B (06998.HK), debut at lunchtime was HK$29.30 vs listing price of $24. Stock spiked initially to 31.90 but has trended lower since to lower than the grey price.
HK Data Pre Market PMI Sept 47.7 vs 44.0 Aug (F/cast was 49)
The highest reading since June, with output dropping the least in 3 months.
New orders contracted at the softest pace since June, partially linked to a continued decline in export sales, including from mainland China.
The decrease in input buying was much slower than in the previous two months and was modest. Employment grew the most in 6-1/2 years, amid a further depletion of backlogs. Supply chains remained under pressure as limited freight capacity reportedly contributed to delivery delays.
On the price front, input prices stabilized, with paid prices for inputs and wage costs broadly unchanged. Output charges fell further, though at the slowest rate since July 2019.
Sentiment remained negative, but the degree of pessimism was the least in over a year.
Expect markets to open flat with caution over Trump’s action on the the next stimulus package.
Data due today
EUROZONE ECB’s Lagard speaks
GERMANY Industrial Production
FRANCE Balance of Trade, Current Account
UK Halifax House Price Index, Labour Productivity,
Futures opened Dow -130pts S&P and NDX -0.5% but eased to Dow -60pts, S&P -0.3% and NDX -0.2% I would expect a lower open still.
FAANG’s may see some pressure today after the House Antitrust Subcommittee determined Facebook wields monopoly powers in social network and has maintained its position by acquiring, copying or killing its competitors. It also addresses antitrust concerns regarding Amazon, Apple, Alphabet, recommends that Congress review a series of potential remedies. This includes “structural separation,” which could require the companies to split parts of their businesses. -VE
Data due today MBA Mortgage Applications & 30yr Mortgage Rate, EIA Oil report, FOMC minutes, Fed Speakers Barkin, Williams twice, Kashkari and Evans.