Equities trade mixed into month and quarter-end – Nikkei drops after Friday’s plunge in the FUTs

Asia market update: Equities trade mixed into month and quarter-end; Nikkei drops after Friday’s plunge in the FUTs; China stimulus-driven rally continues ahead of holiday; Terrible Caixin China PMIs seen; BOJ Summary of Opinions and Tankan survey due on Tues.

General trend

- Shanghai Composite rises >5% (13-month high).

- China Cabinet Meeting; China should focus on solving outstanding economic problems, strive to complete annual economic and social development goals; Must consider and study new additional measures in a timely manner as the economic situation changes [Sept 29th].

- China PBOC: All commercial banks must start lowering interest rates, in batches, on all existing mortgages by Oct 31st to no less than 30 bps below the PBOC's LPR rate - PBOC statement from third-quarter meeting [Reminder: Sept 24th: China PBOC: Existing mortgage rates to be cut to be similar to new homes; Banks will need some time to prepare for reduction in mortgage rates; It is expected that the interest rate of existing mortgages will be cut by about 0.5%; Will guide commercial banks to improve pricing mechanism for mortgage loans; Will no longer distinguish between down payment for first and second homes, rate to be unified at 15%].

- Follow Up: Guangzhou [China] removed all of its home purchase restrictions – press [**Reminder Sept 27th: (CN) Shanghai and Shenzhen said to lift key remaining home purchasing curbs to boost market; To scrap limits on number of homes Chinese people can buy and also remove curbs on non-local residents; Beijing mulls similar lifting of restrictions, except for key districts – press; Both cities are expected to announce the changes in the coming weeks].

- Chinese chipmakers rally [Sept 27th: China urges local companies to stay away from Nvidia's AI chips; Ramping up pressure to use domestic champions like Huawei and Cambricon].

- Commodity-sensitive indices outperform in Australia amid CN stimulus.

- CNH declines amid Caixin PMI.

- Will China’s stimulus measures support property developers’ debt restructuring agreements?; Logan Property [3380.HK]: Has engaged White & Case as its principal legal advisor in respect of the Offshore Restructuring.

- China holiday in focus; Mainland China market is closed for holiday Oct 1-7th [Tues-Mon]; Hong Kong is closed Oct 1st [Tues].

- USD/JPY erased gain.

- JGB FUTS remain lower [Reminder Sept 27th: ) Japan ruling liberal democratic party (LDP) leadership election results: former defense Min Ishiba wins knockout round by 215-194 TO become new JAPAN PM [**Note: Ishiba was seen as more yen-positive as he earlier said BOJ was on the right policy track to gradually align with global interest rates"].

-BOJ to announce Oct bond buying schedule.

Headlines/economic data

Australia/New Zealand

-Australia Aug Private Sector Credit M/M: 0.5% v 0.5%e; Y/Y: 5.7% v 5.7% prior.

- ASX 200 opens +0.3% at 8,246.

-Iron ore FUTs rise >6%.

- Australia reports final FY24 budget surplus of A$15.8B – Press.

-ANZ [ANZ.AU]: CEO: Alcohol ban would be difficult to implement.

-New Zealand Sept ANZ business confidence: 60.9 V 50.6 PRIOR.

-(NZ) LGFA considers bond offer and cancels 2 October 2024 tender

China/Hong Kong

-(HK) Hang Seng opens +2.6% at 21,175.

-Shanghai Composite opens +3.5% at 3,194.

-China Securities Journal front-page commentary: Boosting equities key to economic confidence - update.

-China 10-year government bond yield rises >6bps.

-China PBOC: All commercial banks must start lowering interest rates, in batches, on all existing mortgages by Oct 31st to no less than 30 bps below the PBOC's LPR rate - PBOC statement from third-quarter meeting.

-China SEPT CAIXIN PMI Manufacturing: 49.3 V 50.5E (moves back into contraction after one month expansion, lowest since Jul 2023); PMI Services: 50.3 v 51.6e [lowest since Dec 2022].

-China SEPT Manufacturing PMI (GOVT OFFICIAL): 49.8 V 49.4E (5th month of contraction, highest since Apr); Non-manufacturing PMI: 50.0 v 50.4e [lowest since Dec 2022].

-China PBOC cuts standing lending facility (SLF) rates by 20bps for the overnight, 7-day and 1-month maturities (last time SLF rates were cut by 10bps in July 2024).

- China PBOC Open Market Operation (OMO): Injects CNY212B in 7-day reverse repos; Net injects CNY52B.

- China PBOC sets Yuan reference rate: 7.0074 v 7.0101 prior [strongest Yuan fixing since May 18, 2023].

-China PBOC expected to set yuan mid-point at 7.0098 (prior CNY fix was 7.0101) - financial press poll.

- China MOF Aug stats: Net local government special bond issuance CNY805.1B.

-China State Planner (NDRC): NDRC will provide aid to companies to overcome difficulties.

-China MOFCOM: To further improve policy targetedness and effectiveness.

- China Gaming Regulator (NPPA) approves 109 domestic online games in Sept v 117 m/m - press.

- HKMA said to propose raising the asset threshold for ‘category 1 institutions’ to HK$400B from HK$250B – Local Press.

-CATL [300750.CN]: Notes cause of fire is being probed; the fire occurred in an independent building at the Dongqiao factory area of the co's Ningde base - Exchange statement; Sees 'small' impact on production.

Japan

-Nikkei 225 opens -1.8% at 39,117.

-Nikkei FUTs in Singapore open points at 37,905, -665 points.

- Japan Incoming PM Ishiba said to consider holding general election on Oct 27th [Note: general election must be called by the end of October 2025] - Japanese press.

- Japan Incoming PM Ishiba: Plan to form Cabinet on Oct 1st; Need to make sure deflation is defeated; Wages must continue to beat inflation [Sept 27th].

-Incoming PM Ishiba: Accomodative monetary policy trend won't change; Won't make any request to BOJ on monetary policy [Sept 27th].

-Japan Chief Cabinet Sec Hayashi: No comment on daily stock price moves.

-Japan AUG PRELIMINARY INDUSTRIAL PRODUCTION M/M: -3.3% V -0.5%E; Y/Y: -4.9% V -1.5%E; METI sees Sept output at +2.0% v -3.3% prior; METI sees Oct output at +6.1% m/m.

-japan AUG RETAIL SALES M/M: 0.8% V 0.5%E; Y/Y: 2.8% V 2.6%E.

- Japan Aug Annualized Housing Starts: 777K v 781Ke; Y/Y: -5.1% v -3.5%e.

-japan sells ¥2.6T VS. ¥2.6T indicated in 2-year JGB bonds; AVG yield: 0.3920% V 0.3850% prior; Bid -top- cover: 3.81X V 5.54X prior; Tail of 1bp v 0bp prior.

-Note: Japan Gotobi day in focus, refers to the 5th day of the month and dates that are multiples of 5; accounts are generally settled on Gotobi days.

-Toyota [7203.JP]: Said to plan Q4 global output of ~2.5M units - Press.

Korea

- Kospi opens +0.6% at 2,665.

- South Korea Aug Industrial Production M/M: 4.1% v 2.8%e; Y/Y: 3.8% v 2.0%e.

-South Korea opposition party to decide on financial income tax on Oct 4th [Fri] – Local press.

- South Korea Fin Min Choi: WGBI [bond index] inclusion would be gradual if it occurs [**Reminder Jun 13th (KR) South Korea Fin Min & Central Bank (BOK): Reiterated aims to be included in WGBI index in Sept].

North America

-(US) Fed's Musalem (non-voter): Fed should lower rates 'gradually'; US economy may react 'very vigorously' to looser monetary policy - FT interview; May cut faster if job market weakens more than forecast [Sept 27th].

-(US) California Governor Newsom vetoed SB 1047, one of several GenAI bills considered this year by the California Legislature; While well-intentioned, SB 1047 does not take into account whether an AI system is deployed in high-risk environments, involves critical decision-making or the use of sensitive data. Instead, the bill applies stringent standards to even the most basic functions — so long as a large system deploys it. I do not believe this is the best approach to protecting the public from real threats posed by the technology.

-CVS [CVS]: Glenview Capital owns ~1% stake in the co. - WSJ.

-Dominion Energy [D]: estimating restoration work will continue through next week in areas hardest hit by the catastrophic impacts of Hurricane Helene. As of 5 p.m. Sunday, approximately 116,000 customers are still without power.

-NIO [NIO]: Has entered into definitive agreements for investment in NIO Holding Co., Ltd., a PRC subsidiary in which it holds 92.1% controlling equity interest (“NIO China”), with Hefei Jianheng New Energy Automobile Investment Fund Partnership (Limited Partnership), Anhui Provincial Emerging Industry Investment Co., Ltd. and CS Capital Co., Ltd. (collectively, the “Strategic Investors”), pursuant to which the Strategic Investors will invest an aggregate of RMB3.3B in cash to subscribe for newly issued shares of NIO China.

-Baxter [BAX]: North Cove facility affected by flooding and currently closed for production as company assesses extent of impact; Anticipates financial results will be negatively impacted; North Cove, NC plant is the largest IV plant in U.S.

-Duke Energy [DUK]: As of 3 p.m. ET today, Duke Energy Florida's crews restored power for 687,000 customers, while 73,000 continue to experience outages as a result of Hurricane Helene.

-Southen Co. [SO]: Georgia Power's restoration efforts following Hurricane Helene continued Sunday, with the company having restored service to approximately 690,000 customers since the start of the storm.

Europe

-(UK) Sept Lloyds Business Barometer: 47 v 50 prior.

-Volkswagen [VOW3.DE]: Cuts FY24 Rev €320B v €322.3B y/y and prior guidance ~+5%; Cuts FY24 oper margin 5.6% (prior: 6.5-7.0%) on oper income ~€18B.

- Iran Supreme Leader Khamenei: Nasrallah's blood will not go unavenged.

Levels as of 01:20 ET

- Nikkei 225, -4.9%, ASX 200 +0.6% , Hang Seng +3.3%; Shanghai Composite +7.1% ; Kospi -1.1%.

- Equity S&P500 Futures: flat; Nasdaq100 -0.2%, Dax -0.1%; FTSE100 +0.3%.

- EUR 1.1173-1.1156 ; JPY 142.95-142.06 ; AUD 0.6939-0.6893 ;NZD 0.6376-0.6334.

- Gold +0.4% at $2,677/oz; Crude Oil +0.5% at $68.54/brl; Copper +1.5% at $4.6602/lb.