Oct 9 Asian Markets Lunchtime Update and European & US outlook
Japan has a typhoon approaching likely to mean a wet and windy weekend. But I hope wherever you are you enjoy your weekend and stay safe from covid.
Summary At 12:30 HK time
Markets opened higher but Japan and Hong Kong sold down; Japan not helped by the weak Average Cash earnings and Household Spending data but both having concerns over US stimulus and the recent increase in covid cases overhanging the market. Expect caution in the PM as we head into the weekend; although HK could see an uptick as Europe reacts to China’s strong re-open.
China re-opened higher and is trading sideways; helped by the good Caixin PMI data; key being that confidence remains high.
Europe will be influenced by the UK data out pre market but expect markets to be cautious especially with covid cases increasing just as we enter the influenza time of year.
US Futures opened but then rallied before easing back but still indicate a +VE open. The stimulus talks likely to be the key driver.
FT has a podcast saying the US is blocking access to a number of its government economic websites for users from Hong Kong as part of Hong Kong being treated as part of mainland China and no longer having special rights. -VE for relations and for Hong Kong status as a financial centre.
JAPAN Market opened higher taking the index to a 7.5mth high but trended lower as pre market data was weak and concerns remain about the timing and size of a new US stimulus package.Nikkei 225 found support around the 23,620 level and traded sideways from them into lunch. Closed at lunch -0.4% @ 23,555
Ave Cash Earnings Aug -1.3% YoY vs -1.3% Jul (F/cast was -0.9%)
Household Spending Aug +1.7% MoM vs -6.5% Jul (F/cast was +3%)
Household Spending Aug -6.9% YoY vs -7.6% Jul (F/cast was -6.5%)
Sept Machine Tool Orders due at 2pm. Aug was -23.3% and the F/cast is -15%.
S KOREA. Market closed for Hangul Day re-opens Monday
TAIWAN Market closed for National Day re-opens Monday
CHINA Markets re-opened strongly playing catch-up after the Golden Week holiday. The CSI 300 Opened at the 4,664 level vs 4,587 previous close, and tracked slightly higher seeing resistance at 4,680 level. CNY and CNH both hitting new highs. The PMI data out after the open was slightly better than forecast (see below for the detail) and the outlook sentiment remained positive.
CSI 300 +107pts +2.3% @ 4,694
Shanghai Composite +61pts +1.9% @ 3,279
Shenzhen Composite +412pts +3.2% @ 13,320
ChiNext Comp +120pts +4% @ 3,072
Sevices PMI Sept 54.8 vs 54 Aug (F/cast was 53)
Composite PMI Sept 54.5 vs 55.1 Aug (F/cast was 54)
Fifth straight month of growth and the steepest since June, as the recovery continues.
New orders expanded faster, mainly led by domestic demand; and employment grew for the second month in a row.
But new export orders remained in contractionary territory for seven of the last eight months. At the same time, backlogs of work have risen in three of the past four months.
Prices, input cost inflation dipped to a three-month low, while prices charged rose for the second straight month, but at a softer rate.
Confidence remained strongly positive.
The latest reading extended the current period of rising business activity to five months, with a softer rise in manufacturing production which more than offset a faster expansion of services activity.
The gauges for new orders, purchases, and inventories all remained strong. Meantime, employment continued to improve, with its index staying in expansionary territory for the second straight month.
Prices, input cost inflation eased to a three-month low, while prices charged rose slightly.
Sentiment remained positive.
"In the near term, there will still be uncertainties from COVID-19 overseas and the US election, and the development of “dual circulation” in the domestic and international markets will continue to face challenges," said Wang Zhe, senior economist at Caixin
HONG KONG Pre market opened @ 24,343 +150pts vs +120pts ADR’s with E commerce names strong and Chinese Insurance names +VE too as Ping An announced its Lufax had filed for a US listing. But the market them sold down to 24,115 below yesterday’s close on concerns over when the US would announce a stimulus package and the increase in local covid 19 cases and concerns of tightening of social distancing rules. It then bounced and trade sideway’s around yesterday’s closing level into lunch @ +0.1% 24,216
EUROPE A large amount of UK data out pre market (Balance of Trade, GDP 3 mth Ave, GDP, Goods Trade Balance, Construction Output, Industrial & Manufacturing Production, (later NIESR Monthly GDP Tracker) and French Industrial Production which will have an influence on the trading direction. There are also concerns about the rise in covid cases which combined with Influenza could be very dangerous and investors are still watching the US for news on stimulus.
US Futures opened flat and then rose to Dow +135pts +0.5%, S&P +0.5% and NDX +0.3% before easing back hopes of a stimulus agreement. I think most people know a package will come; it's about the size and timing and more importantly how much downside the economy/recovery has suffered before it is implemented; especially with regard to new layoffs and business closures.
Data due today Wholesale Inventories, WASDE report, Baker Hughes Total Oil Rig Count.