General Trend:
- Nikkei 225 outperforms as yen weakened; Gainers in Japan include banks, along with Marine/Transportation and Electric Appliances companies; Nikkei weighted Fast retailing rises over 4%
- Hang Seng rises over 2% amid gains in financials, gaming companies and energy firms
- Shanghai Composite rises over 1% in early trading, outperforming sectors include Consumer Discretionary and Financials
- Global government bond yields trade generally higher on rise in risk appetite amid the news related to the US/China and UK
- Asian currencies track strength in the Chinese yuan (CNY), USD/CNH holds below the 7.00 level
- AUD/JPY rises over 0.4% on US/China news, Aussie 10-year yield rises over 13bps; Probability of Feb RBA rate cut moves below 50%
- BoJ Q4 Tankan large manufacturing indices missed ests; large automakers sentiment index turned negative (first time since 2016)
- Summary of Thursday’s (Dec 12th) trade-related headlines for US and China
- (CN) US OFFICIALS ARE SAID TO HAVE OFFERED TO CUT EXISTING TARIFF RATES BY 50% ON $360B IN IMPORTS FROM CHINA; ALSO OFFERING TO CANCEL NEW TARIFFS SCHEDULED FOR DEC 15TH – PRESS [10:01]; US asks that China make firm commitments to increase purchases of US products
- (CN) Reportedly US has reached an agreement in principle with China on ‘Phase 1’ trade deal; waiting for a Pres Trump to sign off on the deal – press [14:31]
- (US) Pres Trump reportedly has signed off on US-China agreement, which includes delaying new round of tariffs – press [16:27]
- (CN) Follow Up: China has agreed to make $50B in agricultural purchases from the US in 2020, confirms US and China have agreed to some tariff reductions and a delay on tariffs set to go into effect on Dec 15th – US Financial Press [18:06]
- Fox Business News reported that a public announcement is expected [related to the trade deal] at the White House on Friday (Dec 13th)
Headlines/Economic Data
Australia/New Zealand
- ASX 200 opened +0.4%
- (AU) Feb Reserve Bank of Australia (RBA) rate cut bets decline amid reported agreement in principle between the US and China on trade: Markets now see a 45% probability of Feb rate cut vs. 55% on Thursday – US financial press
- (AU) Australia Port Hedland Nov Iron Ore Exports: 43.3Mt v 42.0Mt m/m
- (AU) IMF: Sees Australia 2020 GDP growth at 2.2% (vs 2.6% in Feb); renewed overheating in housing market is a risk; QE not necessary under current scenario – Article IV Mission Statement
- (NZ) New Zealand Nov Business Manufacturing PMI: 51.4 v 52.6 prior
- (NZ) New Zealand Nov REINZ House Sales y/y: -1.9% v -4.0% prior
China/Hong Kong
- Shanghai Composite opened +0.8%, Hang Seng +1.9%
- (CN) China govt said to have concluded its key economic planning meeting; to achieve its economic target in 2020; To maintain its prudent monetary policy in 2020, policy to be flexible, appropriate
- (CN) China Foreign Min Wang: US-China ties are most important topic for 2019; US defamed China on several occasions; US’ incorrect understanding of China is the root cause – Symposium in Beijing
- (CN) China PBoC Open Market Operation (OMO): Skips for 18th consecutive session; Net drains CNY0B v CNY0B prior
- (CN) China PBOC sets Yuan Reference Rate: 7.0156 v 7.0253 prior (strongest CNY fix since Nov 20th)
- (CN) China Nov Foreign Direct Investment (FDI) Y/Y: 1.5% v 7.4% prior
Japan
- Nikkei 225 opened +1.7%
- (JP) Nikkei 225 Futures and Options may settle at ~23,896 – financial press
- (JP) JAPAN Q4 TANKAN LARGE MANUFACTURING INDEX: 0 V 3E (over 6-year low); OUTLOOK SURVEY: 0 V 3E; LARGE ALL INDUSTRY CAPEX: 6.8% V 6.0%E; Many large manufacturers cited negative impact from US/China trade tension, overseas slowdown and sales tax hike.
- (JP) Japan Oct Final Industrial Production M/M: -4.5% v -4.2% prelim; Y/Y: -7.7% v -7.4% prelim
- (JP) Japan Government said to be planning to issue ¥2.23T in deficit-covering to fill tax revenue gap [additional deficit-covering bond issuance of ¥2.0T was speculated on Dec 11th]
- (JP) Japan extra budget draft includes ¥4.4T in bonds including ¥2.19T in construction bonds and ¥2.23T in debt-covering bonds – US Financial Press
- (JP) Japan government said to be finalizing a plan to assume for FY20 budget a long-term rate of 1.1% (record low for 4th consecutive year)
- (JP) Japan Econ Min Kajiyama: Hopes export issues with South Korea can be resolved by talks; policy talks to restart after 3.5 years
- (JP) Bank of Japan (BOJ) announcement related to daily bond buying operation: Unchanged
South Korea
- Kospi opened +1.3%
- (KR) South Korea Nov Export Price Index M/M: -1.8% v -1.9% prior; Y/Y: -6.2% v -7.3% prior
Other Asia
- (PH) Philippines Central Bank (BSP) Gov Diokno: May have more time to pause; considering 50bps cut in Key Rate in 2020; has more time on reduction in reserve requirement; Could see rate cut as early as Feb
North America
- (US) New York Fed to increase overnight repo offering to at least $150B on Dec 31st and Jan 2nd
Europe
- (UK) GENERAL ELECTION EXIT POLL: TORIES 368 SEATS, LABOUR 191 SEATS, LIB DEMS 13 SEATS, SNP 55 SEATS; CONSERVATIVES TO WIN OUTRIGHT MAJORITY, POLL SHOWS; Would mean 86 seat majority for Tories (would be largest Tory majority since PM Thatcher in 1987)
- (UK) Election Follow Up: Latest BBC poll projects Conservatives with 357 seats and Labour with 201; Sky News Exit poll has Conservatives with 358-368 seats vs 192-202 seats for Labour
- (EU) EU governments reach consensus on climate policy – EU Council
Levels as of 00:20 ET
- Nikkei 225, +2.6%, ASX 200 +0.5%, Hang Seng +2.1%; Shanghai Composite +1.2%; Kospi +1.4%
- Equity Futures: S&P500 +0.4%; Nasdaq100 +0.5%, Dax +0.7%; FTSE100 +0.1%
- EUR 1.1200-1.1120 ; JPY 109.62-109.00 ; AUD 0.6939-0.6903 ;NZD 0.6636-0.6593; GBP 1.3515-1.3149
- Gold -0.1% at $1,471/oz; Crude Oil +0.5% at $59.50/brl; Copper +0.3% at $2.818/lb
