Headlines/Economic Data
General Trend: Asian equities trade generally lower
China Premier Li confirms that 2017 GDP growth expected to exceed official target
USD/JPY trades marginally higher as China FX Regulator responded to market speculation about the country’s US Treasury holdings; US Long Bond Futures +0.4%
Australia Nov Retail Sales rise at the fastest pace in over 3 years
Japan
Nikkei 225 opened -0.6%; closed -0.3%
Toyota -1%, Honda -2% (outperformed during prior session)
Fast Retailing -0.5% (expected to report Q1 earnings after close)
(JP) Japan govt projections show primary surplus delayed by 2 years – Nikkei
(JP) Japan Credit Bureau (JCB) developing a technology that connects separate blockchains to share their excess capacity, resolving issuesthat arise from heavy traffic on a single ledger – Nikkei
(JP) Bank of Japan (BOJ) quarterly public opinion of household sentiment: households see inflation at 3% in 1-yr, 2% in 5-yrs
USD/JPY FT looks at recent yen gains, being attributed to market’s growing confidence that G10 central banks will implement synchronous policy tightening
Korea
Kospi opened -0.1%
Steelmakers trade lower: Hyundai Steel -2%, Posco -2.3%
Samsung Electronics -0.7% ( shares remain weaker after release of prelim Q4 results on Tuesday)
(KR) South Korea President Moon’s zeal on North Korea is leaving its allies worried that inter-Korean talks could blow a hole in international sanctions and threaten efforts to denuclearize – Nikkei
(KR) South Korea Justice Ministry to prepare a crypto exchange shutdown bill; South Korea cryptocurrency exchanges raided by police, Bitcoin falls over 9% on the news
(KR) South Korea Finance Min Kim: Reiterates closely monitoring property market; home price ‘spike’ in Gangham driven by speculative demand
China/Hong Kong
Hang Seng opened flat, Shanghai Composite -0.2%
Hang Seng Information Tech Index -1.6%
(CN) China Premier Li: Sees China 2017 GDP at ~6.9% – Xinhua
(CN) China PBoC OMO: Injects CNY60B v CNY120B prior in combined 7, 14-day reverse repos; Net drains CNY30B v CNY0B prior
USD/CNY (CN) China PBoC sets yuan reference rate at 6.5147 v 6.5207 prior
(CN) China Commerce Ministry (MOFCOM): Protectionist sentiment is rising in the US
(CN) CHINA FX REGULATOR SAFE: REPORT THAT CHINA IS CONSIDERING REDUCING OR STOPPING PURCHASES OF US TREASURIES COULD BE BASED ON WRONG INFORMATION – financial press
Looking Ahead: China Dec Banking Data (including money supply, New Yuan loans) may be released during European session; China Dec Trade Balance tentatively scheduled for Friday
Australia/New Zealand
ASX 200 opened flat: closed -0.5%
ASX 200 Utilities Index -0.7%, REIT -0.7%, Energy -0.6%, Financials -0.5%
Australian Dollar and bond yields rise after better than expected retail sales
(AU) AUSTRALIA NOV RETAIL SALES M/M: 1.2% V 0.4%E
Other Asia
(SG) DBS CEO Gupta: Expect interest rates in Singapore to remain high; staying long S$ is a good idea
North America
US equity markets ended mostly lower: Dow -0.1%, S&P500 -0.1% Nasdaq -0.1%, Russell 2000 flat
S&P 500 Real Estate Sector -1.5%, Utilities -1.1%: Financials +0.8%
Xerox (XRX): Said to be in talks with Japan’s Fujifilm on a range of possible deals; Fujifilm not expected to acquire all of Xerox
(US) Leading Republicans said to consider not passing a ‘GOP’ budget this year amid concerns that it would not pass Senate – Politico; – As an alternative plan, GOP leaders are said to have discussed ‘deeming’ top-line spending numbers, which is only setting total spending numbers without passing a budget.
NAFTA in focus on Wednesday’s Session:
(CA) Canada officials reportedly increasingly convinced Pres Trump will soon announce a withdrawal from NAFTA – press
(US) White House official: There has been no change in Pres Trump’s position on NAFTA
(MX) Mexico Central Bank Gov Del Leon: If Trump triggers NAFTA withdrawal there will likely be an impact on Peso; would make inflation more complex
USD/MXN Trades +0.25% on report that Mexico to leave NAFTA talks if Trump triggers 6-month process to withdraw
Fed Speak:
(US) Fed’s Bullard (non-voter, dove): short of a formal shift in Fed framework, policymakers could lean toward allowing inflation float above target to make up for past shortfalls; Should not hike rates into the teeth of an inverse yield curve; the Fed should strive not to cause a yield curve inversion
(US) Fed’s Kashkari (dove, non-voter): I think the markets are pricing in a lower long-term interest rate environment, which is not actually under the control of the Fed. To me, that explains some of where asset prices are today
(US) Fed’s Kaplan (non-voter, moderate): three rate hikes is still good base case for 2018; We’ll have to see what happens with regards to China and US Treasuries
(US) Fed’s Evans (non-voter, dove): US economy has been stronger than expected; sees 2.5% GDP growth for both 2018 and 2019; Sees tax cuts adding 0.5% to GDP growth this year, total of 0.8% over two years; sees little long-run economic boost from tax cuts, sees 1.75% long-run growth; Pausing on rate hikes until midyear is a modest proposal
Energy: (US) DOE CRUDE: -4.9M V -2.5ME
(IR) US govt is said to be preparing new sanctions against Iran over cybersecurity and human rights violations – press
Looking Ahead: US Dec PPI expected to be released, along with comments from Fed’s Dudley (seen during NY afternoon)
Europe
(UK) Chancellor of Exchequer Hammond (Fin Min): UK goals for Brexit are affected by EU’s approach; EU needs to spell out what it wants post-Brexit
(FR) ECB’s Villeroy (France): Bank of France will raise France Q4 growth target to 0.6% (from 0.5%); Sees France 2017 GDP growth at 1.9% (from 1.8%)
(DE) Potential coalition parties in Germany said to favor avoiding ban on diesel – German Press
Looking Ahead: Germany 2017 annual GDP to be released, along with the ECB Account of Monetary Policy Meeting (Dec Minutes)
Levels as of 01:00ET
Nikkei225 -0.3%, Hang Seng +0.1%; Shanghai Composite -0.1%; ASX200 -0.5%, Kospi -0.3%
Equity Futures: S&P500 +0.1%; Nasdaq100 +0.0%, Dax +0.2%; FTSE100 +0.1%
EUR 1.1970-1.1941; JPY 111.82-111.32; AUD 0.7886-0.7838;NZD 0.7214-0.7183
Feb Gold -0.1% at $1,318/oz; Feb Crude Oil -0.1% at $63.51/brl; Mar Copper +0.3% at $3.24/lb\
