Asia Mid-Session Market Update: PM Renzi to resign after NO victory in Italian referendum; New Zealand PM Key unexpectedly steps down
***Friday US markets on close: Dow -0.1%, S&P500 flat, Nasdaq +0.1%***
- At the close: VIX 14.1 (+0.1pts); Treasuries: 2-yr 1.08% (-2bps), 10-yr 2.39% (-5bps), 30-yr 3.06% (-3bps)
- Best Sector in S&P500: Utilities
- Worst Sector in S&P500: Financials
***Politics***
- (IT) Italy referendum early exit polls shows "no" vote ahead on PM Renzi's proposed Constitutional reforms
- (IT) Italy PM Renzi: My govt ends here (resigns as promised); Turnout was higher than anyone expected; Italian people have spoken
- (IT) Italy's 5-Star party leader Grillo: Need to take immediate early vote; 5-star is ready to form a new govt - press
- (NZ) New Zealand PM Key: To stand down as PM and will not stand for re-election in 2017; National Party would win under Deputy PM Bill English
- (AT) Austria Presidential election: Center-left candidate Alexander Van der Bellen defeats far-right Norbert Hofer by 53.3% to 46.7% margin
***Asia Session Notable Observations, Speakers and Press***
- In a high-turnout referendum, PM Renzi lost his bid for Senate reform with nearly 60% of the voters casting their ballots as NO; Renzi to tender his resignation to Italian president on Monday who will then announce plans for forming a new govt; Euro-skeptic party leader Grillo says his supporters are ready to take the reins.
- Euro falls as much as 1.5% in early Asian trade on the referendum results before paring declines to $1.0560's. Focus falls on Italian yields and banking sector.
- Austria avoids becoming the first Eurozone nation to vote in a far-right candidate.
- NZD falls as much as 70pips to 0.7070 after surprise decision by PM Key to end his tenure after 8 years of govt; Fin Min English indicates he will consider standing for Key, who also expects his party to maintain control; Moody's notes the change in leadership has no bearing on ratings.
- China Caixin Services PMI hits a 16-month high, beating consensus; Economists notes the price inflation rather than structural improvement is behind the recent recovery in economy, warning 2017 may yet face a significant downward pressure.
- Hong Kong PMI in contraction for 21st straight month, but the figure is the highest since early 2015; Staffing levels rise for the first time in since Mar 2014 and rate of input cost inflation also accelerated.
- US-China relations at risk of being strained after Pres-elect Trump accepts congratulatory phone call from president of Taiwan; When criticized for the move as a break from decades of US "one-China" foreign policy, Trump tweets about China currency devaluation and military build-up in South China Sea.
Energy:
- (NG) Nigeria Oil Min: Expect to maintain 1.9M bpd output
China:
- (TW) China "unswervingly" opposes Taiwan independence - official Xinhua news agency ( comments come after it was reported that the Taiwanese President spoke with Pres-elect Trump this week)
- (CN) US President elect Trump tweets: "Did China ask us if it was OK to devalue their currency (making it hard for our companies to compete)"
- (CN) PBOC Deputy Gov Fan Yifei: many companies have to take new loans to take new loans to pay down old debt; hard for private sector to get loans - Caixin
Japan:
- (JP) Japan PM Abe: Expect BOJ to use appropriate and bold policy to reach price goal
- (JP) Japan Chief Cabinet Sec Suga: To continue monitoring political situation in Italy - press
- (JP) Japan Vice Fin Min of International Affairs (currency chief) Asakawa: Brexit vote created a new European context; BOJ alone cannot overcome deflationary mindset
Australia:
- (AU) CitiGroup: Expect RBA Gov Lowe to "chill-out" for at least a few months over the Australian summer on further policy moves; Lowers AUD/USD forecast for 2017 to $0.70 from $0.78 and for 2018 to $0.71 from $0.79
- Westpac to increase interest rates on new and existing mortgage loans beginning Dec 16 - AFR
- NAB.AU: Raises variable rate on investor mortgages by 0.15%
***Asian Equity Markets/Futures (00:00ET)***
- Nikkei225 -1.0%, S&P/ASX -0.8%, Kospi -0.2%, Shanghai Composite -1.4%, Hang Seng -0.3%
- Equity Futures: S&P500 -0.3%, Dax -0.7%, FTSE100 -0.2%
***FX ranges/Commodities/Futures/Fixed Income (00:00ET):***
- EUR 1.0505-1.0660; JPY 112.85-113.85; AUD 0.7410-0.7455; NZD 0.7070-0.7140
- Feb gold flat at $1,178/oz, Jan crude oil -0.7% at $51.30/brl, Mar copper +1.3% at $2.66/lb
- (KR) Bank of Korea (BOK) sells KRW700B in 3-month bonds at 1.4%
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8870 V 6.8794 PRIOR
***Key economic data:***
- (CN) CHINA OCT CAIXIN CHINA SERVICES PMI: 53.1 (16-month high) V 52.4 PRIOR; COMPOSITE PMI: 52.9 V 52.9 PRIOR
- (HK) HONG KONG NOV COMPOSITE PMI: 49.5 V 48.2 PRIOR; highest since Mar 2015; 21st consecutive month of contraction
- (JP) JAPAN NOV SERVICES PMI: 51.8 V 50.5 PRIOR; COMPOSITE PMI: 52.0 V 51.3 PRIOR
- (SG) SINGAPORE NOV PMI COMPOSITE: 52.8 V 50.5 PRIOR (7th consecutive expansion)
- (IN) INDIA NOV PMI SERVICES: 46.7 V 54.5 PRIOR (1st contraction reading in 17 months and lowest since Dec 2013)
- (AU) AUSTRALIA Q3 COMPANY OPERATING PROFIT Q/Q: 1.0% V 3.0%E; INVENTORIES Q/Q: 0.8% V 0.3%E
- (AU) AUSTRALIA NOV ANZ JOB ADVERTISEMENTS M/M: 1.7% V 1.0% PRIOR (3-month high)
- (AU) AUSTRALIA NOV MELBOURNE INSTITUTE INFLATION M/M: 0.1% V 0.2% PRIOR; Y/Y: 1.5% V 1.5% PRIOR
- (AU) AUSTRALIA NOV AIG PERF OF SERVICES INDEX: 51.1 V 50.5 PRIOR; 2nd straight expansion
- (NZ) NEW ZEALAND NOV ANZ COMMODITY PRICE M/M: 2.7% v 0.7% PRIOR
- (UK) NOV BRC SHOP PRICE INDEX Y/Y: -1.7% V -1.7% PRIOR (43rd straight month of decline)
***Asia movers***
- DUE.AU: Hong Kong's Cheung Kong Infrastructure makes an unsolicited conditional A$3.00/shr cash offer, A$7.5B offer; +16.6%
- Renesas 6723.JP: Goldman Sachs Raised 6723.JP to Buy from Neutral; +6.4%
- Lonking Holdings 3339.HK: Issues positive H2 profit alert; +5.0%
- G8 Education GEM.AU: Guides FY16 EBIT A$158-162M; +2.4%
- Fantasia Holdings 1777.HK: Reports Nov Sales CNY751M v CNY858M m/m; YTD CNY11.1B; +1.9%
- CitiGroup Raised Fortescue FMG.AU +1.8%, BHP +0.6%, Rio Tinto +1.0%
- Paradise Entertainment 1180.HK: Issues FY16 profit warning; -1.4%
- Woodside Petroleum WPL.AU: Shell said to be interested in selling its A$3.0B stake in Woodside following rally in oil - Australian; -1.9%
- China Vanke 2202.HK: Nomura Cuts 2202.HK to Neutral from Buy; -7.9%