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Market Update – Asian Session: North And South Korea Hold First Talks Since 2015

Headlines/Economic Data

General Trend: Asian equities are generally higher as US indices ended mostly positive

Nikkei and USD/JPY pare gains amid BoJ reduction of purchases of longer dated JGBs in daily operation

Analysts ponder if BoJ move at daily operation has broader implications for monetary policy

Japan Nov inflation adjusted real wages see first rise in 11-months (*Note: Wages are seen as key to BoJ policy to help maintain the ‘virtuous’ cycle. On

Jan 5th, Japan PM Abe reiterated his call for companies to raise wages by 3% to put the economy on a ‘virtuous’ cycle)

Japan Finance Min Aso said equities are rising at fast pace on global economic recovery

Samsung Electronics declines as Q4 guidance below consensus

In talks, North Korea and South Korea said to reach agreement on Winter Olympics, but other areas less clear

Japan

Nikkei 225 opened +1% (closed during prior session): close +0.6%

TOPIX Real Estate Index +2.2%, Securities +0.8%

Sony +2.6% (released 2017 holiday sales for PS4)

Fast Retailing +1.4% (Dec SSS +18.1% y/y)

USD/JPY down over 0.4%, BOJ bond buying adjustment triggering the yen and hitting stops

(JP) JAPAN NOV LABOR CASH EARNINGS Y/Y: 0.9% V 0.6%E; REAL CASH EARNINGS Y/Y: +0.1% V -0.1%E (1st rise in 11-months)

(JP) Japan Fin Min Aso: Equities are rising at a fast pace

(JP) BOJ announcement related to daily bond buying operation: reduces planned daily purchases of 10-25 year and over 25-year JGBs each by ¥10B

(JP) Analysts look at tonight’s announcement by the BOJ reducing bond buying and how it could be the first indication that tightening is on the way, despite its commitment to ultra easy monetary policy

6758.JP Reports 2017 holiday period PS4 sales of 5.9M units v 6.2M units in 2016

Korea

Kospi opened -0.1%

Samsung -2.8%: Reported prelim Q4 below expectations, 005930.KR Reports prelim Q4 (KRW) Op profit 15.1T v 15.9Te; Rev 66.0T v 66.8Te; opened slightly lower

Steelmakers track gains seen in the US: Hyundai Steel +1.7%, Posco +1.7%

LG Innotek: +10.5%: Apple said to be funding LG Innotek’s 3D camera factory – Korean press

LG Electronics +2.3% (reported prelim Q4 results; declined over 5% on prior session)

Samsung C&T +3.5% (announced management changes)

(KR) South Korea trade officials see 4% growth in exports in 2018 – Korean press

(KR) North and South Korea hold first talks since 2015: North Korea expressed will to jointly enter winter Olympics

China/Hong Kong

Hang Seng opened +0.1%, Shanghai Composite -0.1%

Hang Seng Info Tech Index +0.9%, Services Index +1.1% (strength in gaming names)

Hang Seng Materials Index -1.8%: Aluminum Corp of China -4.5% (broker commentary)

(CN) China Ministry of Industry: To allow 1 tonne of new steel capacity to be built for each 1.25 tonnes closed in key regions – press

(CN) Commerzbank economist Zhou Hao: Possibility very low for China lending rate hike

(CN) China said to have stopped approving some kinds of consumer loan ABS, including micro loans – press

USD/CNY (CN) Yuan is likely to keep strengthening, China may accelerate yuan exchange rate reform – China Securities Journal

USD/CNY China’s stable FX reserves will support yuan value in 2018 – Chinese press

(CN) China PBoC: Skips OMO for 12th straight session; Net drains CNY130B v CNY40B prior; Current bank liquidity is moderate (prior banking liquidity at relatively high level)

(CN) China PBoC sets yuan reference rate at 6.4968 v 6.4832 prior

(CN) China Dec Retail Auto Sales y/y: 0.6% v 3.2% prior; 2017 24.2M units, 1.5% y/y (record sales for 27th consecutive year) – PCA

Looking Ahead: China Dec CPI and PPI due for release on Wednesday

Australia/New Zealand

ASX 200 opens +0.1%; closed %

ASX 200 Resources Index +0.7%, Financials +0.2%; Consumer Discretionary -0.5%

(AU) AUSTRALIA NOV BUILDING APPROVALS M/M: 11.7% V -1.3%E; Y/Y: 17.1% V 4.6%E

(AU) Australia Dec ANZ Job Advertisements M/M: -2.3% v 1.1% prior

Looking Ahead: Australia Dec NAB Business Confidence due for release on Wednesday

Other Asia

(ID) Indonesia Fin Min Indrawati: 2017 GDP growth to fall short of target; ready to use all instruments to maintain growth momentum

(TW) Taiwan 2018 machinery exports seen up over 10% – Taiwanese Press

North America

US equity markets ended mostly higher: Dow -0.1%, S&P500 +0.2%, Nasdaq +0.3%, Russell 2000 +0.1%

S&P500 Sectors: Utilities +0.9%, Real Estate +0.7%; Health Care -0.4%, Financials -0.1%

(US) Fed’s Bostic (2018 voter, dove): Fed may not need 3 or 4 rate hikes a year; policy is approaching a more neutral stance that could be close to 2%; Personal base case is for 2 or 3 rate hikes this year; Wants to see inflation higher to justify 3-4 rate hikes

(US) Fed’s Williams (moderate, 2018 voter): central banks have less room to cut rates in the next crisis

(US) Fed’s Rosengren (moderate, non-voter): Optimal rate of inflation may move around just as the natural rate of unemployment does

(US) White House reportedly near to a decision on Fed vice chair nomination – press

(US) Special Counsel Mueller reportedly likely to interview Pres Trump as part of Russia investigation in next few weeks – Wash Post

Looking Ahead: US Weekly API Crude Oil Inventories due for release

Europe

(UK) Brexit Min Davis: sees EU’s no-deal Brexit planning as ‘damaging’ to the process – FT

(UK) DEC BRC SALES LFL Y/Y: 0.6% V 0.3%E

(IE) Ireland Dec Consumer Confidence Index: 103.2 v 103.6 prior

Looking Ahead: Germany Nov Trade Balance and Industrial production due to be released

Levels as of 01:00ET

Nikkei225 %, Hang Seng +0.3%; Shanghai Composite +0.0%; ASX200 +0.1%, Kospi -0.3%

Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.1%

EUR 1.1975-1.1958; JPY 113.18-112.50; AUD 0.7865-0.7839;NZD 0.7197-0.7167

Feb Gold -0.0% at $1,320/oz; Feb Crude Oil +0.8% at $62.22/brl; Mar Copper +0.0% at $3.23/lb

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