Asia Market Update: China Manufacturing PMI contracts for first time since 2016, muted impact seen amid multiple market closures; Trump and Xi speak over the weekend on trade
General Trend:
- Market closures for today’s session include China, Japan and South Korea; Hong Kong and Australia have shortened sessions
- US equity futures gain: Trump said trade deal with China is ‘moving along very well’ without being too specific
- Crude Oil and Copper Futures gain in Asian trading; Natural gas declines
- USD trades mixed across regional currencies
- Financials support markets in Hong Kong and Australia
- Hong Kong Hang Seng ends 2018 with its largest loss since 2011
- Partial US government shutdown continues, to enter 10th day as of Monday
- Some investors pare back Fed rate hike expectations (US financial press)
- Note all markets closed tomorrow for New Year’s Day, coverage to resume January 2nd
Headlines/Economic Data
Japan
- Nikkei 225 closed
- (JP) Japan cosmetic exports set to gain for the 6th consecutive year, driven by tourists continuing to buy products they get on vacation – Nikkei
- (JP) Japan said to consider tax breaks related to cars with automatic breaks – Japanese Press
Korea
- – Kospi closed
- (KR) SOUTH KOREA DEC CPI M/M: -0.3% V 0.1%E; Y/Y: 1.3% V 1.7%E, Core CPI y/y: 1.3% v 1.3% prior
- (KR) South Korea Nov Department Store Sales y/y: -3.9% v +1.2% prior; Discount Store Sales y/y: -2.8% v -14.3% prior
- (KR) South Korean commercial banks expected to record a decline of KRW2.0T in net earnings in 2019 – Yonhap
- (KR) North Korea leader Kim sends letter to South Korea President Moon calling for continued efforts to build peace and prosperity on the Korean Peninsula next yea – Yonhap
- 017670.KR Taxi hailing app, T Map Taxi, reports 13-fold increase in users to 1.21M in Dec from 93K in Oct – Yonhap
- (KR) South Korea Finance Min Hong: Reiterates 2019 economic conditions could be difficult, to focus on revitalizing the economy
- (KR) Bank of Korea (BOK) Gov Lee: See need to maintain accommodative stance in 2019 – New Years message
China/Hong Kong
- Hang Seng opened +0.9%, Shanghai Composite closed
- (CN) CHINA DEC OFFICIAL MANUFACTURING PMI: 49.4 V 50.0E; Non-Manufacturing PMI: 53.8 v 53.2e; Composite PMI: 52.6 v 52.8 prior (1st time below 50 since July 2016, lowest since Feb 2016)
- (US) Pres Trump says China trade deal is “moving along very well”, spoke to Pres Xi this morning; Xi hopes to reach mutually beneficial agreement (Saturday)
- (HK) According to analysts home prices in Hong Kong could fall 10-25% in 2019, with biggest fall expected in H2 – SCMP
- (US) US grants ~1.0K exceptions to tariffs on goods from China, including industrial machinery and electronics parts
- (CN) China Foreign Ministry spokesperson Lu Kang: China stands ready to work with the United States to move forward the China-U.S. ties which are underpinned by coordination, cooperation and stability – Xinhua
- (CN) China legislature approves plans to speed up local government bond issuance before the approval of the annual fiscal budget; for 2019 State Council can assign CNY1.39T in bonds to local govts – China Daily
- (CN) China Supreme Court plans to begin to hear cases related to intellectual property rights from Jan 2019 – financial press
- 272.HK Unit to acquire all remaining interests held by BSREP CXTD Holding (affiliate of Brookfield Asset Management) in China Xintiandi Holding for ~HK$4.1B, China Xintiandi to become wholly-owned unit following the transaction
- (CN) China has restarted approvals of video games with 80 online video games – press
- (CN) China customs bureau to allow imports of U.S. rice, effective Dec 27th – press
- (CN) China PBoC Dir of Monetary Policy Sun Guofeng: China’s position on monetary policy had not changed; PBoC will not flood the market with liquidity – press
- (HK) Overnight HK$ HIBOR reaches 4.6% (highest level since Oct 2007)
Australia/New Zealand
- ASX 200 opened +0.1%
- GXY.AU Received several offers from possible partners on Sal de Vida project, evaluating offers
- WGX.AU Accepts offer to sell non-core Mt. Marion and Buldania lithium royalties to Cobalt 27 for A$250k and 200 metric tonnes of physical cobalt metal
North America
- (US) US Senator Shelby (R) said the talks related to government funding were at an impasse, shutdown could last a ‘long,long time’ – US media
- (US) US Senator Graham (R) said President Trump is ‘receptive’ to idea related to deal for government shutdown, deal could provide work permits for ‘Dreamers’ in exchange for funds related to border barriers – financial press
- (US) Texas judge rules Affordable Care Act (‘Obamacare’) to remain in place during appeal – US Press
- (US) US Fed Fund Futures are pricing in 11% probability of Fed rate cut in 2019 v 2.4% earlier in Dec; Probability of at least 1 Fed rate hike in 2019 has declined to 15% vs 50% previously – US financial press
- (US) Goldman Sachs said to have reduced forecast for US Fed rate hikes, cited growth and financial conditions – US financial press
Europe
- (UK) Trade Secretary Fox says there is a 50/50 chance that the Brexit may be stopped if Parliament votes against the deal proposed by the govt – Sunday Times
- (UK) Fin Min Philip Hammond being accused by Cabinet of failing to provide money needed to prepare UK for no-deal Brexit – Telgraph
- (UK) EU Juncker said not trying to keep the UK in the EU – financial press
- (IT) On Saturday, Italy parliament passed the 2019 budget (as expected), the vote was 327 to 228 – financial press
- DBK.DE Chairman Achleitner said the firm is ‘strong’, has no need for state aid or merger – financial press
Levels as of 11:50ET
- Hang Seng +1.3%; Shanghai Composite closed; Kospi closed; Nikkei225 closed; ASX 200 -0.1%
- Equity Futures: S&P500 +0.7%; Nasdaq100 +0.9%, Dax closed; FTSE100 +0.4%
- EUR 1.1425-1.1450; JPY 110.28-110.47 ; AUD 0.7043-0.7067; NZD 0.6705-0.6721
- Feb Gold -0.2% at $1,280/oz; Feb Crude Oil +1.0% at $45.81/brl; Mar Copper +0.8% at $2.70/lb
