Asia Market Update: RBA leaves rate unchanged, RBNZ Spencer comments boost Kiwi
***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