Headlines/Economic Data
General Trend: Nikkei rebounds from largest drop seen in 2017, but Asian indices are overall mixed
Profit warning from Samsung Heavy continues to weigh on shipbuilders
Shares of Tencent rebound
Japan
Nikkei 225 opened +0.6% (declined 2% on prior session), driven by tech names; closed +1.5%
Chip-related shares gain: Tokyo Electron +3%, SUMCO +2.5%
Fast Retailing +1.7% (declined 4.9% prior session)
(JP) BoJ Gov Kuroda: Reiterates long way to go to reach 2% price target, will ‘persistently’ continue ‘powerful’ easing; reiterates current yield curve appropriate for now; Prices and financial system are two most vital BoJ targets
(JP) Japan MoF sells ¥800B (incl non-competitive bids) v ¥800B indicated in 0.8% (0.8% prior) 30-yr bonds; Avg yield: 0.848% v 0.789% prior; Bid to cover: 4.38x v 3.43x prior
(JP) Japan Nov Official Reserve Assets: $1.26T v $1.26T prior
(JP) Moody’s affirms Japan’s sovereign rating at A1; outlook stable
(JP) Japan Chief Cabinet Sec Suga: Progress achieved on maritime communications with China
Looking Ahead: Japan Q3 GDP revision and Oct avg cash earnings due for release on Friday
Korea
Kospi opened +0.2%, has since moved lower
Samsung Heavy -3.5% (follow-through selling from Wed’s session); Fellow shipbuilder Hyundai Heavy -5%
Posco Steel -1%; Vale CEO commented: High prices attract inefficient producers which later hamper the market; ready to sell 50Mt of iron ore if prices get too high – financial press
Samsung Electronics +0.5%, analysts positive on shipments of 3D-sensing adopted smartphones
Korean Won (KRW) +0.2%
(KR) North Korea: nuclear war on the Korean Peninsula has become a matter of when, not if – KCNA
(KR) South Korea and Russia to step up economic cooperation – Korean press
(KR) South Korea said to be considering VAT and corporate tax on cryptocurrency
(KR) South Korea financial stability review: S. Korea urged to strengthen regulations on non-bank financial institutions
015760.KR President Cho Hwan-eik announced will resign later this week (~3-months ahead of the end of his term) – Korean press
China/Hong Kong
Markets open mixed with China drafting regulation to curb liquidity: Hang Seng +0.5%, Shanghai -0.3%
Hang Seng Materials Index -2%, Property/Construction -1.4%, Energy -0.5% Consumer Goods -0.5%; Information Technology Index +0.9% (Tencent +1.5%)
(CN) China Banking Regulatory Commission (CBRC) drafts new requirements on banks to curb liquidity risks, to go into effect March 1st, 2018 with grace period – Xinhua
PBOC conducts first open market operation (OMO) in 5 sessions; PBOC Open Market Operations (OMO): injects combined CNY270B in 7, 14 and 28-day reverse repos v skips prior; Net injection nil
(CN) PBoC sets yuan reference rate at 6.6195 v 6.6163 prior
(CN) China foreign exchange reserves likely to have risen in November (would be 10th straight increase) – press (Note: The data could be released during the European session)
(CN) IMF Review of China Financial System: Banks reported non-performing loans (NPLs) may be ‘understated’; Chinese banks may have insufficient capital to weather potential losses from the nation’s rapidly mounting credit risks
(CN) PBOC disputes IMF comments on stress tests for Chinese banks
(CN) Fitch: China 2018 GDP growth seen slowing to 6.4% from 6.8% (*Note: In June, Fitch said China’s economic growth ‘to fall slightly below 6.0% in 2018 and 2019)
(CN) China Commerce Ministry Gao: Plans WTO case against US ‘3rd country approach; China does not view US trade probes as appropriate; China and Canada have expressed willingness to seek FTA talks
(CN) China National Petroleum Corp (CNPC): China gas consumption expected to increase by 16.4% in 2017 to a fresh record high
Looking Ahead: China Nov Trade Balance data tentatively scheduled for Friday
Australia/New Zealand
ASX 200 opened flat, banks stronger and miners impacted by metal prices; ASX then moved higher to close +0.5%
ASX 200 REIT Index +1%, Financials +0.6%, Consumer Discretionary Sector +0.5%
Gold miner Newcrest +1%
Aussie declines following trade data
(AU) AUSTRALIA OCT TRADE BALANCE: $105M V $1.4BE; Exports M/M: -3.0% v 3.0% prior; Imports M/M: +2.0% v 0.0% prior
(NZ) RBNZ: Economy continues to perform well; Some evolution of decision-making may be appropriate; Governing committee should continue with consensus decision; Governor should have final decision if no consensus; Developing depositor protection proposal; Proposal to protect deposits up to NZ$10,000 – briefing to incoming ministers dated in Oct
(AU) Australia Nov Foreign Reserves: A$85.8B v A$78.1B prior
(NZ) New Zealand sells NZ$100M in 2.5% Sept 2040 inflation-indexed bonds, avg yield 2.1110%, implied bid to cover 2.14x
FCG.NZ Reports Q1 (NZ$) Rev 4B. +4% y/y, sales volumes 3.9B LME, -20% y/y; Cuts FY18 Farmgate milk price $6.40 (prior $6.75)
AIR.NZ Due to Rolls Royce engine issues will be some cancellations to international flights in the coming weeks; no change to guidance at the time
Other
Fitch sees 2018 global growth 3.3% (vs 3.1% in June) vs 3.2% (2.9% prior) expected for 2017 – 2018 Outlook Emerging Asia Sovereigns report
North America
US equity markets ended mixed: Dow -0.2%, S&P 500 flat, Nasdaq +0.2%, Russell 2000 -0.5%
S&P 500 Energy Sector -1.3%; Technology +0.6%
Government Funding/Debt Ceiling: (US) House Rules Committee passes rule for two-week stopgap spending bill until Dec 22nd; full floor debate seen occurring as early as Thurs – press
(US) Pres Trump: govt shutdown could happen; Don’t see a reason we can’t get to 4, 5 or 6% GDP growth
(US) Earlier on Wed, the White House said that President Trump would sign stop-gap spending measure advanced in the House that funds government through Dec 22nd
(US) US House Republicans said to seek to link debt ceiling increase to spending bill – US financial press; Republicans are said to be likely to increase the debt limit enough to last at least through the midterm elections due to be held in Nov of 2018, says the article; The government is expected to have to act by March on the debt ceiling in order to avoid a default.
(US) On Wed, Treasury Sec Mnuchin sent a letter to congressional leaders in order to tell them that the Treasury would begin taking extraordinary measures on Friday and urged politicians to raise the debt limit at the first opportunity; The Treasury’s extraordinary measures will enable it to continuing paying bills into next Spring.
Tax Reform: (US) S&P sovereign rating head: GOP tax plan will increase deficit and could prompt the Fed to raise rates further; fiscal policy could lead to negative rating action unless long-term challenges are addressed
(US) House Speaker Ryan: believe we can make the tax bill better in reconcillation process and Senators will support a better bill; Confident that the bill will be ready for Pres Trump to sign by Christmas
(US) Senate Majority Leader McConnell: Named Senate GOP tax bill conferees (**Note: On Dec 4th, McConnell confirmed that the Senate and House would go to conference over their tax bills)
(US) GOP congressional leaders reportedly mulling 22% corporate tax rate level (vs 20%) as bill deadline nears – Wash Post; GOP may need to find new revenue to fund last minute modifications to the bill
(US) Sen Maj Leader McConnell (R-KY): remains open to tweaking state and local tax provisions in GOP tax reform bill
(US) Sen Hatch (R-UT): doesn’t look like the corporate alternative minimum tax (AMT) will be in final tax bill
Other Politics: (US) Sen Franken (D-MN) to announce resignation on Thursday – local press
Energy: (US) DOE CRUDE: -5.6M V -2.5M
(RU) Russia Energy Min: too soon to discuss exiting oil production deal; process should be gradual; exit could take up to six months, depending on oil market recovery and oil demand
Lululemon:+7% in the afterhours (Q3 results above ests, midpoint of Q4 guidance above est, raised FY17 outlook)
Chevron: Announces FY18 Capex $18.3B, down ~7.6% vs planned spending for FY17
VALE CEO Schvartsman: High prices attract inefficient producers which later hamper the market; ready to sell 50Mt of iron ore if prices get too high – financial press
Europe
(UK) EU parliament details UK concessions on rights – financial press
(IE) Ireland PM Varadkar: had a good phone call with UK PM May, and willing to look at any proposals from the UK side; PM May did not suggest any new wording on the Irish border today; Any new wording on the Irish border must be consistent with the substance of the text that was agreed upon on Monday
(IE) Ireland PM Varadkar and UK PM May agree on the ‘paramount importance’ of no hard border in Ireland – joint statement
(UK) Govt spokesperson Slack: UK govt wants to make progress on Brexit as quickly as possible; UK cabinet to discuss the desired end state for Brexit by the end of the year
(UK) DUP Party spokesperson: Irish govt is playing a dangerous game over border issue; longer delay on border deal, the higher likelihood of no deal
(UK) Fin Min Hammond: UK and Ireland are absolutely committed to keeping an open border on the island of Ireland; Likely to get more clarity in next year or two on when UK budget will be in balance
(UK) Allies of Brexit Min Davis reportedly have launched attempt to replace Prime Min May – UK press
(DE) Germany Deputy Fin Min: govt said to focus refinancing its 30-year bonds and maybe 50yr; Gov’t spent €1.6B more than planned in Oct/Nov – German press; Jutta Doenges to be named as head of the finance agency.
Fitch sees 2018 global growth 3.3% (vs 3.1% in June) vs 3.2% (2.9% prior) expected for 2017 – 2018 Outlook Emerging Asia
M&A: Sky plc: CNBC’s Faber: Disney aims to own all of Sky as part of any Fox asset deal (not just the stake in Sky that is owned by Fox)
Looking ahead: Euro Zone Final Q3 GDP; UK 30-year Gilt Auction; ECB Draghi due to speak during NY morning
Levels as of 01:00ET
Nikkei225 %, Hang Seng +0.5%; Shanghai Composite -0.4%; ASX200 +0.5%, Kospi -0.4%
Equity Futures: S&P500 +0.2%; Nasdaq100 +0.4%, Dax +0.1%; FTSE100 +0.3%
EUR 1.1809-1.1793; JPY 112.51-112.22; AUD 0.7569-0.7542;NZD 0.6889-0.6850
Feb Gold-0.1% at $1,264/oz; Jan Crude Oil +0.1% at $56.02/brl; Mar Copper +0.0% at $2.97/lb
