Headlines/Economic Data
General Themes: Asian tech stocks weaker after declines seen in NY session; Taiwan Semi -2%
Markets generally pare opening losses
Japanese and South Korean steelmakers outperform; track earlier gains in US Steel
China Caixin Nov services PMI rises, in line with official data released on Nov 30th
Japan
Nikkei 225 opened -0.5%; closed -0.4%
Tech and Chip-related shares track weakness in US companies: SUMCO -3.5%, Tokyo Electron -2%, Softbank -0.9%; Olympus Corp -1.6% (priced secondary offering)
TOPIX Iron & Steel Index +1.5%; Nippon Steel said to reduce orders accepted for steel pipes by 20-30% as production cannot keep up with the increase in demand from large-scale projects ahead of the 2020 Tokyo Olympics (press)
TOPIX Securities Index +1%
Japan Nov PMI Services: 51.2 v 53.4 prior, PMI Composite: 52.2 v 53.4 prior
(JP) Bank of Japan (BOJ) Gov Kuroda: No discussions about second term as Gov – speaking after lunch with Abe; No comment on whether willing to continue as BOJ Gov (**Note: current 5-year term due to end April 2018)
Bank of Japan (BOJ) Gov Kuroda recent references to the "reversal rate" may signal a shift to a more hawkish policy bias, even though there are no expectations of a near term policy change – FT (**Note: The reversal rate is the level where rate cuts by BOJ could hurt economy)
Japan Fin Min Aso: Wants income tax changes to be revenue neutral and consider ‘work style’ changes
China and Japan officials to hold 8th round of discussions regarding maritime affairs during Dec 5-6th period – financial press
(JP) Japan’s four biggest oil companies are expected to beat FY forecasts – Nikkei
(JP) Bank of Japan (BOJ) Gov Kuroda: BOJ bought ¥105T in JGBs in year through Oct
Japan MoF sells ¥2.3T v ¥2.3T indicated in 0.1% 10-yr JGBS; avg yield 0.059%; bid-to-cover 3.70x
9983.JP Reports Nov Domestic SSS +8.9%; Uniqlo sales +8.9% y/y; +3%
Korea
Kospi opened -0.4%
Samsung Electronics -0.7%
Posco Steel +2%
Korean Won (KRW) +0.3%
(KR) South Korea President Moon: Trade faces difficulties including ‘strong’ Won (KRW); S. Korea should create more jobs through exports
(KR) South Korea Nov Foreign Reserves: $387.3B (record high) v $384.5B prior
(KR) South Korea Oct Current Account Balance: $5.7B v $12.3B prior; Balance of Goods (BOP): $8.6B v $15.0B prior
China/Hong Kong
Markets open lower: Hang Seng -0.8%; Shanghai Composite -0.2%
Hang Seng Information Technology Index -1.2% (Tencent -2%)
China defense names stronger on report that China has encouraged asset injections – press
(CN) China reportedly will keep exempting 10% purchase tax on electric vehicles to 2020 – press
(CN) China Nov Caixin PMI Services: 51.9 v 51.2 prior, PMI Composite: 51.6 v 51.0 prior
(HK) Hong Kong Nov PMI: 50.7 v 50.3 prior
PBoC skips open market operation for 3rd straight session, reiterates liquidity at ‘high level’; net drain CBY170B v CNY90B prior
(CN) PBoC sets yuan reference rate at 6.6113 v 6.6105 prior
(CN) Chinese Think Tank (State Info Center): Recommends China 2018 GDP target be set around 6.5%
(CN) China should cut real interest rate – China Securities Journal
(CN) Former PBoC Adviser Yu Yongding: Investment growth to slowdown in 2018 amid further slowdown in property investment; monetary policy should stay appropriate and ‘not too tight’; Urges China to introduce property tax
(CN) PBOC Financial Research Institute Head Sun Guofeng: New monetary policy framework is taking shape; monetary policy targets should consider financial cycles; Central banks need to influence long-term interest rates.
(CN) China Vice Fin Min Zhu Guangyao: Sees worldwide economy recovery momentum in 2017; Attention needed to impact of Fed balance sheet reduction; Whether the ECB is to quit QE is yet to see
(CN) China should ‘brace’ for fallout from US tax cuts as they could challenge domestic manufacturing sector; China should take steps to cut enterprise costs – China Press
(CN) China Premier Li: China and Canada agree to uphold trade liberalization; to continue talk on bilateral free trade agreement (FTA)
Australia/New Zealand
ASX 200 opened -0.1%; Closed:
ASX 200 Financials Index -0.3%; Utilities Index +0.9%
Rio Tinto [RIO.AU] -1.6% (gained 1.2% during prior session)
Qantas [QAN.AU] -1.6%
AWE Ltd [AWE.AU] -11% (China Energy Reserve withdrew takeover offer yesterday)
Aussie rises amid better than expected Oct retail sales; Q3 data (Current Account, Net Exports of GDP) below ests
(AU) AUSTRALIA OCT RETAIL SALES M/M: 0.5% V 0.3%E
(AU) AUSTRALIA Q3 BOP CURRENT ACCOUNT (A$): -9.1B V –9.6B PRIOR; NET EXPORTS OF GDP: 0.00 V 0.30 PRIOR
Aussie adds to gains following RBA statement
(AU) RESERVE BANK OF AUSTRALIA (RBA) LEAVES CASH RATE TARGET UNCHANGED AT 1.50%; AS EXPECTED (16TH CONSECUTIVE HOLD IN CURRENT EASING CYCLE); The Australian dollar remains within the range that it has been in over the past two years; One continuing source of uncertainty is the outlook for household consumption
Kiwi rises following comments from RBNZ Gov Spencer
(NZ) RBNZ Gov: Persistently low inflation has prompted central bank to think about whether it needs to ‘tweak’ its approach to monetary policy; Should be cautious about making any recommendations for change in current framework
(NZ) NEW ZEALAND Q3 VOLUME OF ALL BUILDINGS Q/Q: 2.7% V 2.0%E
(NZ) New Zealand Government 4-Month budget balance (NZ$): -308M v -217Me
(NZ) New Zealand Nov ANZ Commodity Price: -0.9% v -0.3% prior
AWE.AU China Energy Reserve formally withdrew offer -15%
Looking Ahead: Australia Q3 GDP due to be released on Wednesday
North America
US equity markets pared gains and closed mixed amid passage of Senate tax bill: Nasdaq -1.1%, S&P 500 -0.1%, Dow Jones +0.2%, Russell 2000 -0.3%
S&P 500 Technology Sector -1.6%, Healthcare -1.2%
MasterCard raised quarterly dividend by 14% and announced new $4.0B buyback plan
M&A: 21st Century Fox: Reportedly favors Disney as prospective acquirer for its studio and media assets – press
Packaging company Bemis Co said to hire adviser to examine options – US Press
Tax Reform: (US) House votes for motion to go to conference with Senate on tax bill (as expected)
Government Funding: (US) US Republicans: Will pursue stop-gap government spending measure through Dec 30th – US financial press (**Note: According to prior speculation, a potential govt shutdown is looming on Dec 8th unless Congress can pass a new spending bill. Republicans are preparing a two week stop gap spending bill)
(US) Democratic Leaders Pelosi and Schumer to meet with Pres Trump and GOP leadership on Thurs – press
Looking Ahead: US Nov ISM Non-Manufacturing data to be released on Tuesday
Europe
(UK) EU’s Juncker: it was not possible to make a complete Brexit deal today (comments from Monday); will need further talks to reach a complete deal; did make considerable progress – comments in Brussels; Will continue discussions with the UK this week; there are only two or three points still open; Has confidence we can make sufficient progress by time of leaders’ summit (Dec 14-15)
(UK) Prime Min May: we had a constructive meeting with the EU; have been negotiating hard and want to move forward together; We need more consultations on some issues; positive that the two sides will conclude this positively
(UK) Nov BRC Sales LFL Y/Y: +0.6% v -1.0% prior
(EU) Eurogroup President-designate Centeno: deeper discussions are needed on a euro zone fiscal union; there is a long way to go
(EU) Portugal Fin Min Mario Centeno wins Eurogroup chairmanship race; term starts in Jan – press
(GR) ESM’s Regling: it’s a bit premature to be precise about the size of the Greece tranche; It’s more likely that there’s one more review left in the Greek program
Levels as of 01:00ET
Nikkei225 -0.2%, Hang Seng -0.5%; Shanghai Composite -0.2%; ASX200 -0.2%, Kospi +0.2%
Equity Futures: S&P500 +0.2%; Nasdaq100 +0.1%, Dax +0.3%; FTSE100 +0.4%
EUR 1.1877-1.1862; JPY 112.63-112.38; AUD 0.7654-0.7596;NZD 0.6908-0.6852
Feb Gold +0.1% at $1,278/oz; Jan Crude Oil +0.1% at $57.51/brl; Mar Copper +0.1% at $3.09/lb
