Asia Market Update: Tech names continue to be weaker; PBOC uses MLF in place of OMO; BOJ Masai warns of downside risks to inflation
***Headlines/Economic Data***
-General Trend: Asian equities trade generally lower after US declines
-Profit warning from Samsung Heavy weighs on shipbuilders
-Volatility seen in shares of tech name Tencent
-NY Copper +0.6% (declined over 3% on prior session); Copper futures higher
Japan
-Nikkei 225 opened -0.4%; closed
-TOPIX Iron & Steel Index -2% (gained over 1.4% during prior session)
-Financials trade generally lower: TOPIX Securities index -2%
-Toshiba +2.5% (expected to hold settlement talks with Western Digital)
-BoJ Masai: Vital to show ‘determination’ to create stable prices; risks tilted to downside for prices, think downside risks to prices are 'big'
-MUFJ-MS sees Japan stocks heading for a "boom phase"
- (US) Japan govt plans to raise tax on heated tobacco to 80% of conventional tobacco tax over 5-yrs - Japan press
-Looking Ahead: 30-year JGB auction expected on Thursday
Korea
-Kospi opened flat
-Korean Won (KRW) -0.5%
-South Korea Finance Ministry: President Moon to visit China next week (Dec 13-16th)
-North Korea said to be showing some interest in Russia diplomatic initiative – press
-US to send B-1B bombers to South Korea for drills today - Korean press
-South Korea govt think tank (KDI) sees 2018 GDP at 2.9%, accommodative policy is needed
-Bank of Korea (BOK) sells KRW2.6T in 2-yr monetary stabilization bonds at 2.06%
-South Korea raises corporate tax rate to 25% for the highest earning companies (as expected) from 22% - Korean press
-South Korea parliament approves KRW428.9T budget for 2018 (as expected) - South Korea press
- 010140.KR Guides FY17 Op loss KRW490B; Planning to sell KRW1.5T in shares, opens down over 20%
-005930.KR Begins mass producing flash memory for smartphones with doubled capacity to 512 GB from 256 GB – Nikkei; -1%
China/Hong Kong
-Markets open mixed: Hang Seng flat, Shanghai -0.4%
-Bourses later move lower: Hang Seng Materials Index 3.5%; Shanghai Copper opened down over 3% (below 200-day MA)
-Hang Seng Consumer Goods index -1.9% amid weakness in auto sector (Geely -6%, BYD -4%)
-Hang Seng Information Technology Index -1.5%; Volatility seen in shares of Tencent
-Hang Seng Property/Construction Index -1.2%, Financial Index -1.1%
- (CN) Moody’s: Expects China PBOC to leave policy unchanged in 2018
-PBoC skips open market operation for 4th straight session, elects to conduct 1-year MLF operation
-(CN) PBOC LENDS CNY188B V CNY404B PRIOR IN MEDIUM-TERM LENDING FACILITY (MLF) OPERATION; OFFERS 1-YEAR LOANS AT 3.20% V 3.20% PRIOR
-(CN) PBOC Open Market Operations (OMO): skips v skips prior (4th consecutive skip)
-(CN) China Financial News: PBOC expected to conduct MLF lending one more time this month and ahead of Lunar New Year 2018
- (HK) Moody's: Raises Hong Kong Banking System outlook to Stable from Negative
-(CN) China MoF sells 1-yr upsized bonds at 3.6975% v 3.62%e, bid-to-cover 1.72x; 10-yr upsized bonds at 3.8396% v 3.85%e, bid-to-cover 2.82x
-(CN) PBoC sets yuan reference rate at 6.6163 v 6.6113 prior (8th consecutive weaker setting, longest run since Nov 2016)
-(CN) China 2018 GDP growth seen at 6.7% ahead of Central Economic Work [**Note: On Dec 4th, the State Info Center (China think tank) recommended a 2018 GDP growth target of around 6.5%]
-(CN) China Vice Premier Wang Yang: World economy is recovering
-(CN) China researcher sees China GDP at 6.3% in 3-yrs - China Securities Journal
-(CN) China Banking Regulatory Commission (CBRC) vice chairman Wang Zhaoxing: Govt will further regulate financial markets and get tough on illegal financial activities
-(CN) PBOC deputy Gov Pan Gong-sheng: China authorities were right to rein in cryptocurrencies
- (CN) US Commerce Dept to collect duties up to 265.79% on China origin steel imported from Vietnam
- (CN) China MoF sells 1-yr upsized bonds at 3.6975% v 3.62%e, bid-to-cover 1.72x; 10-yr upsized bonds at 3.8396% v 3.85%e, bid-to-cover 2.82x
-China's HNA seeks extension related to CNY3B loan linked to acquisition of Gategroup – financial press
-Looking Ahead: China trade data released on Friday
Australia/New Zealand
-ASX 200 opened flat, later moved lower; close: -0.4%
ASX 200 Resources Index -1.5% (tracks Tuesday’s decline in copper prices)
-Aussie and Australian bond yields decline after GDP data
*(AU) AUSTRALIA Q3 GDP Q/Q: 0.6% V 0.7%E; Y/Y: 2.8% V 3.0%E; Prior GDP q/q revised higher from 0.8% to 0.9%
(AU) Australia Treasurer Morrison: Australia having strongest job growth in 40-yrs; Q3 GDP still places near the "top of the pack" for growth compared with other wealthy nations and was driven by investment
-Amazon said its first day launch orders in Australia were ‘higher than any other launch day’; ASX 200 Consumer Discretionary Index +0.2%
(AU) Morgan Stanley comments on Amazon’s launch Australia: Says range of products offered is relatively weak, pricing of certain products higher vs some competitors – US financial press
-(AU) Australia sells A$900M v A$900M indicated in 2.25% May 2028 Bonds, avg yield 2.5846%, bid to cover 2.59x
-(AU) Australia Nov Port Hedland Iron Ore Exports 41.3M tons v 41.0M m/m, iron ore exports to China 35.2Mt v 35.2Mt m/m
-(NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +0.4% v -3.4% prior
-(NZ) New Zealand Ministry recommends Commerce Commission study into fuel market
- SCL.NZ Guides FY17 EBITDA to be at the upper end of NZ$55-62M; Guides initial FY18 NZ$58-65M; +6%
- AKP.AU Gives integration stage update; currently forecasts delivery time of wafers meeting required specifications for latter part of Q1 2018; -13%
- Looking Ahead: Australia Oct Trade Balance due for release on Thursday
Other Asia
-Moody’s: Sees 3 Fed rate hikes in 2018; Some Asian central banks to raise rates along with Fed; India may be among central banks that cut rates in 2018.
-(IN) Reserve Bank of India (RBI) due to release rate decision at 4 GMT (no changes expected)
-(MY) Malaysia Oct Trade Balance (MYR): 10.6B v 9.8Be; Exports y/y: 18.9% v 17.3%e
-(MY) Malaysia sells 2027 bonds; avg yield 3.946%
-(ID) Indonesia Central Bank Assistant Gov Waluyo: Won’t change policy rate if Rupiah and inflation within target; No reason to change rate at this time
North America
-US equity markets ended broadly lower: Dow -0.5%, S&P500 -0.4%, Nasdaq -0.2%, Russell 2000 -1%
-S&P500 Utilities Sector -1.3%, Industrials -0.9%; Technology flat
-Homebuilder Toll Brothers declined over 7% after reporting quarterly results
-UPS: Spokesperson: transit times for an unspecified number of deliveries have been extended by a day or two due to Cyber Monday sales, expects to have things back to normal by midweek
-M&A: Tronox: FTC challenges proposed merger of Tronox and Ti02 business of Cristal
-(US) Senate Banking Committee advances Jerome Powell nomination for Fed Chair by 22-1 vote – press; Nomination now heads to full Senate for confirmation vote
-(US) White House Press Sec Sanders: reports regarding subpoena sent to Deutsche Bank are totally false; still believe special counsel probe will wrap up soon
-(US) House Rules Committee Chair Sessions (R-TX): House plans vote Weds on short-term funding bill through Dec 22nd
-(US) Weekly API Oil Inventories: Crude: -5.5M v +1.8M prior
-UAE Oil Min Mazrouei: Sees crude demand increasing on cold winter; Sees 2018 oil demand at least at 2017 level
-Bank of America CEO: Trading Rev seen down 15% this quarter y/y
-Looking Ahead: US Nov ADP Employment Change, DoE Weekly Crude Inventories and Bank of Canada rate decision due for Wednesday
Europe
-(UK) EU official: UK must provide proposal on separation by Weds – press; If EU doesn't receive a proposal this week, EU won't have sufficient time to get ready for the beginning of talks on future trade agreement at the mid-Dec meeting
-(UK) Govt spokesperson: cabinet supports Prime Min May in making progress in Brexit talks; Does not believe PM May and DUP Leader Foster have not spoken yet
-(UK) DUP Leader Foster: told PM May yesterday that DUP would not support deal unless text of Brexit agreement was changed
-(UK) Ireland PM Varadkar: a huge amount of work remains on seeking border deal with UK; the ball is in London's court; very much regrets failure to reach accord; We must hold firm on the border issue
-(UK) Said to have been an Islamist suicide plot to assassinate PM May, which was foiled - Sky News
-M&A: Nestle: Confirmed agreement to acquire Atrium Innovations for $2.3B
***Levels as of 01:00ET***
- Nikkei225 -2.0%, Hang Seng -1.7%; Shanghai Composite -1.0%; ASX200 -0.4%, Kospi -1.1%
- Equity Futures: S&P500 -0.2%; Nasdaq100 -0.5%, Dax -0.2%; FTSE100 -0.3%
- EUR 1.1848-1.1816; JPY 112.63-112.10; AUD 0.7636-0.7572;NZD 0.6904-0.6871
- Feb Gold +0.3% at $1,269/oz; Jan Crude Oil -0.4% at $57.39/brl; Mar Copper +0.6% at $2.97/lb