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Market Update – Asian Session: Oil Futures Rise After API

Headlines/Economic Data

General Trend: Asian equities trade mixed ahead of FOMC statement/forecasts

Chip-related shares decline

S&P 500 Futures decline, US dollar weakens as Democrat Jones projected to win the special US Senate election in Alabama

Japan

Nikkei 225 opened +0.1%; closed -0.5%

Chip-related firms generally lower: SUMCO -4%, Tokyo Electron -2%

DeNA: -3.5%, GungHo Online +8%: Nintendo said seek new game alliances, amid performance of prior alliance with DeNA, according to press report

Financials track outperformance in US banks: Sumitomo Mitsui +1.3%, Mitsubishi UFJ +1.1%;

JAPAN OCT CORE MACHINE ORDERS M/M: 5.0% V 2.9%E; Y/Y: +2.3% V -3.4%E

Japan Govt said to plan to keep the assumed interest rate at record low of 1.1% in FY18 budget draft – financial press

Japan govt said to plan to end tax liability on firms that eliminate shell companies acquired in foreign buyouts, aiming to simplify corporate structures and reduce tax avoidance – Nikkei

Toshiba (+1.3%) and Western Digital reach global settlement and agree to strengthen flash memory collaboration; participate jointly in future rounds of investment in Fab 6; agreed to withdraw all pending litigation and arbitration actions

7974.JP Reports global sales of Switch device above 10M units; -0.2%

9507.JP Japan Court bars restarting of Ikata reactor; Will file an objection over court ruling; -10%

Looking Ahead: BoJ Gov Kuroda expected to speak during the European Morning.

Japan Prelim Dec Manufacturing PMI and Oct Industrial Production due for release on Thursday

Korea

Kospi opened +0.1%

Weakness in chip sector: Hynix -1.6%, Samsung Electronics -1.1%

Financials gain: Woori +2%, Shinhan Financial +1.4%

(KR) UN Political Affairs Chief Feltman: North Korea leadership agrees it is important to avoid war

(KR) South Korea to hold emergency meeting related to trading of cryptocurrency, according to press report; Bank of Korea confirms government to announce measures on cryptocurrency trading on Friday

(KR) South Korea President Moon: South Korea and china to resume additional negotiations for FTA; Talks aimed at expanding FTA to service and investment

(KR) South Korea joint Govt statement: To consider taxing capital gains from cryptocurrency trading; Considering allowing cryptocurrency trading only on eligible exchanges that ‘uphold investor protection and trade transparency’

South Korea announces to propose bill to regulate crypocurrency speculation and exchanges – comments after special meeting on crypocurrency

Cosmetics firms gain after losses in prior session: Amorepacific +1.5%

South Korea saw a 50% drop in China tourists due to THAAD dispute – Korean press

South Korea Nov Unemployment Rate: 3.7% v 3.6%e

Sec of State Tillerson: US is ready to talk to North Korea without preconditions; North Korea must be "ready to make a choice"

UN Political Affairs Chief Feltman: North Korea leadership agrees it is important to avoid war **Note: Feltman was briefed following a visit to North Korea.

005380.KR Exec: Will dramatically beef up pure electric car (EV) lineup in the next eight years

China/Hong Kong

Hang Seng opened +0.2%, Shanghai -0.1%

Hang Seng Financial Index +0.7%, Telecom Index +0.5% (China Unicom +0.9%)

(CN) China President Xi urges sound development of China’s manufacturing – Xinhua

(CN) China securities regulator CSRC said to advise companies to avoid ‘frequent’ capital raisings – China Securities Times

(CN) China Academy of Social Sciences (CASS) official Yin Jianfeng: interbank liquidity will remain tight until the Chinese Lunar New Year given restrictions on wealth management businesses and expected Fed rate hikes, to solve problems related to liquidity, the solution is to lower the required reserve ratio (RRR)

(CN) China Academy of Social Sciences (CASS) Researcher Feng: Domestic economy on track to achieve 6.8% GDP growth; Govt to likely set 2018 GDP target at around 6.5% (unchanged from 2017 target); Govt deleveraging campaign set to intensify

(CN) Analysts note that with little change expected in the yuan through 2018, there might be limited pressure on Chinese authorities to boost Treasury holdings as part of currency intervention efforts – financial press

(CN) Said that some China financial institutions are pressuring regulators to ease restrictions – Caixin

(CN) PBOC Open Market Operations (OMO): injects CNY130B v CNY150B prior in 7 and 28-day reverse repos v skips prior; Net injections CNY60B v CNY40B prior

(CN) China MoF sells 5-yr upsized bonds at 3.8605%, bid-to-cover 3.34x

(CN) PBoC sets yuan reference rate at 6.6251 v 6.6162 prior (lowest setting in 3-weeks)

(CN) China to invest $1.0T into autonomous driving – financial press

(CN) China to build cybersecurity industrial park in Beijing – Chinese Press

HNA Group Chairman and Directors to increase capital of Bohai Capital unit by CNY8.6M – US financial press

Looking Ahead: China Nov Fixed Assets Investment, Industrial Production and Retail Sales due for release on Thursday

Australia/New Zealand

ASX 200 opened flat: closed +0.1%

ASX 200 REIT index +1.9%; Westfield [WFD.AU] +14% (received offering from Unibail-Rodamco with $24.7B EV); Utilities -0.8%, Consumer Discretionary -0.7%

RBA officials don’t address monetary policy, instead focus on cryptocurrencies

(AU) Reserve Bank of Australia (RBA) Gov Lowe: bitcoin fascination feels like speculative mania – speaking at Australian Payment Summit

(AU) Reserve Bank of Australia (RBA) Assistant Gov Kent: External finance more redily available for firms – 30th Australasian Finance and Banking Conference

(AU) Australia Dec Westpac Consumer Confidence Index: 103.3 v 99.7 prior; m/m: +3.6% v -1.7% prior

(AU) Australia sells A$1.0B v A$1.0B indicated in 2.25% Nov 2022 bonds, avg yield 2.2218%, bid to cover 3.53x

(NZ) New Zealand Gov’t expects previously announced law banning foreign house buyers to pass in early 2018; plans to introduce legislation on Thursday, Dec 14th

(NZ) New Zealand Nov Food Prices M/M: -0.4% v -1.1% prior

(NZ) New Zealand REINZ Nov House Sales Y/Y: -8.9% v -15.8% prior

Looking Ahead: Australia Nov Employment data due for release on Thursday

Other Asia

(SG) Singapore Central Bank (MAS) survey of economists: Sees 2018 GDP at 3%

Asia Development Bank raises 2017 Developing Asia GDP growth forecast to 6% from 5.9%

(IN) India 10-year bond yield opens 7.25% (up over 5bps), amid CPI data and rise in oil prices

Singapore’s Noble Group has gained over 54% in 3 sessions amid press speculation of debt-for-equity restructuring plan

North America

(US) DEMOCRAT JONES PROJECTED TO WIN ALABAMA US SENATE RACE VS REPUBLICAN MOORE – FOX NEWS AND AP; Jones with 50.38% of the vote v Moore’s 48.24%

(US) The Senate race in Alabama is not expected to impact the GOP’s plan to pass tax reform, as Republican leaders are racing to approve the tax legislation by early next week, which would be before the new Alabama Senator arrives in Washington D.C., says a financial press report

US equites closed mixed: Dow Jones +0.5%, S&P500 +0.2%, Nasdaq -0.2%, Russell 2000 -0.2%

S&P 500 Financials Index +1%; Utilities -1.7%

Western Digital [WDC]: +3.5% in afterhours: Announced settlement with Toshiba and raised Q2 EPS guidance

M&A: 21st Century Fox [FOX]: CNBC’s Faber: sources say 21st Century Fox and Disney are on "glide path" for Thursday announcement about deal for Fox assets; Still not clear on the price being discussed, said to be an all stock deal. FOX spinco would retain approx $10/shr value

(US) Private economists expect 3 Fed rate hikes in 2018; expect rate hike at upcoming Dec meeting due to be concluded on Wed – US financial press poll; The forecasts are in line with the Nov survey.

(US) TREASURY’S $12B 30-YEAR BOND REOPENING DRAWS 2.804%; BID-TO-COVER RATIO: 2.48 V 2.53 PRIOR AND 2.33 AVG OVER THE LAST 8 SALES

Tax Reform: (US) White House: US President Trump to host House and Senate conferees on Wed (regarding tax bill)

(US) Ways and Means Chair Brady (R-TX): tax bill conference report release likely Friday

(US) Rep Lamar Smith (R-TX): House leadership indicates goal is for a vote next Tuesday (12/19) on reconciled tax reform bill

(US) GOP reportedly in talks to lower top income tax rate from 39.6% to 37% as part of final tax bill – Wash Post; Also said to be settling on 21% corporate rate starting in 2018 (vs 20% in initial bills), down from 35% currently

Government Funding: (US) Sen Maj Leader McConnell (R-KY): There is no chance we’ll shut down govt

(US) Dem Leader Schumer (D-NY): negotiations on budget bill are advancing well

Energy: (US) Weekly API Oil Inventories: Crude: -7.4M v -5.5M prior

OPEC Barkindo: Affirms rebalancing of oil market ‘on its way’; Reiterates sees 2018 global oil demand up 1.5M B/D, in line with 2017

(US) Port Houston cargo handled through Nov: ~35M tons, +9% y/y; driven by steel volumes

Looking Ahead: US Fed FOMC Statement/Forecasts and US Nov CPI due to be released on Wed, along with weekly DOE Crude Inventories.

OPEC Dec Monthly Report tentatively due for release on Wed

Europe

(UK) EU Chief Brexit Negotiator Barnier: Friday’s Brexit deal was an important step; we all must remain cautious on Brexit; Draft withdrawal agreement will come early 2018; Brexit treaty will include declaration on trade

Energy: (UK) Scotland Min: there are no plans to shut down Grangemouth refinery (200K bpd capacity) after Forties pipeline shutdown; Grangemouth refinery has enough oil stocks to run for about a week

Centrica [CNA.UK]: Revises end date for outage at UK North Morecambe gas sub-terminal to Dec 13th from Dec 12th

M&A: Abertis [ABE.ES]: Atlantia reportedly mulling all-cash offer for Abertis to outbid Hochtief – press

Levels as of 01:00ET

Nikkei225 %, Hang Seng +1.0%; Shanghai Composite +0.4%; ASX200 +0.1%, Kospi +0.5%

Equity Futures: S&P500 -0.1%; Nasdaq100 -0.0%, Dax -0.1%; FTSE100 +0.1%

EUR 1.1762-1.1736; JPY 113.57-113.13; AUD 0.7581-0.7553;NZD 0.6961-0.6932

Feb Gold +0.4% at $1,246/oz; Jan Crude Oil +0.7% at $57.55/brl; Mar Copper 0.0% at $3.02/lb

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