>>> Asian Update

Asia Market Update: US Senate passes tax reform in late night session, China economic work conference expected to ease deleveraging efforts in 2018

***Headlines/Economic Data***
General Trend: Asian indices trade mixed ahead of US Senate tax vote; vote passed sending dollar slightly stronger. Japan quiet ahead of Thursday’s BoJ policy statement.

Japan
-Nikkei 225 opened -0.1%; closed +0.1%
-Japanese megabanks trade generally higher: Mitsubishi UFJ +1.8%: MUFJ and Mizuho expected to raise certain fees in 2018 – Japanese Press
- Japan Display: +5% (capital injection speculation)
-TOPIX Construction Index -1%; Taisei -3.5% (lingering bid rigging concerns related to the Maglev project)
-Telecom names continue to underperform following recent plan by Rakuten to enter the mobile business: KDDI -0.8%(down for 5th straight session)
-Subaru Corp -6%: The company may have falsified certain mileage data, said a Japanese press report.
-Japan 2018 budget draft: Budget seen at ¥97.7T (in line with press speculation)
-Japan End Sept Household Assets: ¥1,845T, +4.7% y/y - BoJ Q3 Flow of Funds Report
-Japan Oct All Industry Activity Index M/M: 0.3% v 0.3%e
Looking Ahead: BoJ policy statement due on Thursday

Korea
-Kospi opened -0.2%
-Cosmetics firms trade lower for 2nd straight session, Amorepacific -2%; China said to be again banning tours to South Korea
- Hyundai Motor -0.3% (Reached tentative wage agreement with union –US financial press)
- Cheil Worldwide +4.5% (raised 2017 dividend payout ratio to 60%)
- Hynix Semi +0.7% (To create foundry with a Chinese company - Korean press)
-Samsung Electronics -1.1%: May quadruple OLED supplies to Apple in 2018 - Korean press
-South Korea to announce 2018 economic policy direction next week
-Bank of Korea (BOK) sells KRW2.41T in 2-yr monetary stabilization bonds at 2.08%
-North Korea begins tests to load anthrax onto ICBMs - Japan press; US and China talk about possible North Korea regime collapse
-US said to have given China a draft on new North Korea sanctions
-South Korea President Moon: US-South Korea joint military drills may be delayed as a step to ease tensions on Korean peninsula - NBC
-US Sec of State Tillerson: Pressure campaign on North Korea will intensify, they haven't shown willingness to talk
-One of South Korea cryptocurrency markets, YouBit, was forced to shut down on Tuesday after a hacking attack
-South Korea markets to be closed for trade on Dec 29th; to delay market opening by 1 hour on Jan 2nd

China/Hong Kong
-Hang Seng opened -0.2%, Shanghai Composite flat
Hang Seng Information Technology Index -0.4%; Services Index +1.2% (gaming names trade generally higher on broker outlooks)
China Mobile: +1.1% (Reported Nov net adds 3.0M to 883.9M total mobile subscribers)
-(CN) Former PBoC advisor Li Yang: China economy is in long process of gradual slowdown; views that China economy 'bottomed out are suspect'; China needs to stay vigilant to US economic conditions
-(CN) China Researcher: China should seek responding plans to US tax cut
-(CN) China Academy of Social Sciences (CASS): sees 2017 GDP at 6.8% and 2018 GDP at 6.7%; Sees Shanghai Composite trading between 3,200 and 3,700 in 2018
-(CN) PBoC sets yuan reference rate at 6.6066 v 6.6098 prior
-(CN) PBoC OMO: Injects CNY80B in 7,14 and 28-day reverse repos v CNY100B prior; Net injected CNY10B v CNY20B prior
-(CN) China MoF sells 3-yr bonds at 3.7348% v 3.73%e, bid to cover 1.62x; 7-yr bonds at 3.9% v 3.92%e, bid to cover 2.4x
-(CN) According to economists tighter monetary conditions with slower credit growth are possible in China next year - Chinese press
-(CN) China updates regulation on economic crime investigation, effective Jan 1st; Clarifications and guidance were given on topics such as police jurisdiction, registration of cases, use of compulsory measures, obtaining evidence and the disposal of relevant assets.
-(CN) China Researcher: China should seek responding plans to US tax cut
-(HK) Hong Kong SFC said to plan to strengthen law enforcement in 2018 – Chinese Press

Australia/New Zealand
-ASX 200 opened -0.1%; closed +0.2%
-ASX 20 Utilities Index -0.7%
-(AU) Western Australia sees iron ore price at $59.70 from 2020-2021; China steel demand slowdown risk to price over next year
-(AU) Australia Nov Skilled Vacancies m/m: 0.3% v 0.7% prior
-(AU) Financial press discusses when RBA could raise rates and how data is conflicting - financial press
-(NZ) NEW ZEALAND Q3 CURRENT ACCOUNT BALANCE (NZ$): -4.7B V -4.2BE
-(NZ) NEW ZEALAND NOV TRADE BALANCE (NZD): -1.19B V -550ME; YTD -3.44B V -2.71BE
-(NZ) New Zealand Nov Net Migration: 5.6K v 5.6K prior (12-month low)
-(NZ) New Zealand Nov Credit Card Spending m/m: 0.8% v 1.0% prior; y/y: 9.1% v 3.0% prior
-(NZ) New Zealand Fin Min: Named 10 members to tax working group
- AAD.AU Enters agreement to sell Bowling & Entertainment unit for A$160M on a debt and cash free basis to The Entertainment and Education Group; +12%

Looking Ahead: New Zealand Q3 GDP data due for release on Thursday.

Other Asia
-(MY) Malaysia Nov CPI Y/Y: 3.4% v 3.4%e (**Note: 11th straight month above target. Malaysia Central Bank has CPI range between 2.0-3.0%)
-(MY) Malaysia Finance Ministry: To leave stamp duty for property above MYR1.0B at 3%
Looking Ahead: Taiwan Nov Export orders and Bank of Thailand rate decision due later today

North America
-US equities closed lower ahead of Senate vote on tax reform: Dow -0.2%, S&P500 -0.3%, Nasdaq -0.4%, Russell 2000 -0.8%
-S&P 500 Real Estate Sector -1.9%, Utilities -1.8%
-FedEx +1.4% in afterhours (Q2 results and FY18 guidance above ests)
-Micron +5.4% in afterhours (Q1 results, Q2 guidance above ests)
-(US) Fed's Kashkari (dovish dissenter; non-voter in 2018): reiterates there is still slack in the labor market; Fed should not raise interest rates right now
-Tax Reform: (US) US House passed the tax reform bill (as expected) by a 227 to 203 vote (all Democrats opposed the measure)
-(US) SENATE HAS ENOUGH VOTES TO PASS REPUBLICAN TAX LEGISLATION; final vote 51 to 48
-Following the US House vote, the Senate parliamentarian ordered the House to re-vote on the tax bill because three provisions of the House-passed bill violated Senate rules, according to a press report; Senate said to aim to vote on bill stripped of problematic provisions tonight; House will have to re-vote on edited bill tomorrow (Wednesday)
-(US) Sen Maj Leader McConnell: expects to finish tax bill sometime tonight (Tuesday); Have held talks with Dem Leader Schumer on govt spending
-Energy: (US) Weekly API Oil Inventories: Crude: -5.2M v -7.4M prior
Looking Ahead: US Nov Existing Home Sales and DoE Weekly Crude Oil Inventories due on Wednesday

Europe
-(UK) Prime Min May spokesperson: May and Trump agreed in phone call on importance of swift post-Brexit bilateral trade agreement
-(UK) Bank of England (BoE) expected to say EU banks to be allowed to operate in the UK ‘as normal’ following Brexit – BBC
-(EU) EU reportedly pushing for ECB to take supervision over large investment banks - press
Looking Ahead: BoE Gov Carney due to speak during the NY Morning



***Levels as of 01:00ET***
- Nikkei225 %, Hang Seng -0.1%; Shanghai Composite -0.3%; ASX200 +0.1%, Kospi -0.3%
- Equity Futures: S&P500 +0.2%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.1%
- EUR 1.1847-1.1836; JPY 113.08-112.85; AUD 0.7665-0.7651;NZD 0.6986-0.6954
- Feb Gold +0.1% at $1,266/oz; Feb Crude Oil +0.3% at $57.74/brl; Mar Copper +0.1% at $3.15/lb

>>> Us After Hours Summary: BLIN +24.5%, MU +4.3%, FDX +1.8% higher an


After Hours Summary: BLIN +24.5%, MU +4.3%, FDX +1.8% higher and SFIX -11.1%, SCS -7%, REVG -4.5%, RHT -4% lower following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: BLIN +24.5%, MU +4.3%, FDX +1.8%

Companies trading higher in after hours in reaction to news: SKLN +32.5% (to purchase an equity stake in Helomics Corporation), GALT +29% (entered into $10 million unsecured line of credit facility with stockholder and new director Richard E. Uihlein), IONS +1.9% (Ionis Pharma and Biogen enter collaboration agreement to identify new antisense oligonucleotide drug candidates for the treatment of spinal muscular atrophy), TICC +1.6% (ticking higher after CEO and COO disclose additional share purchases), UAL +0.5% (slightly higher in after hours following upgrade to Buy at Buckingham), WTW +0.5% (light volume, initiated with Buy and $65 tgt at B. Riley FBR, Inc), EXEL +0.4% (continued strength after FDA approval of CABOMETYX tablets for previously untreated advanced renal cell carcinoma), UPS +0.3% (following FDX results)

Micron (MU) is lifting peers in after hours trade: AMAT +1.2%, LRCX +1.1%, NVDA +0.4%, INTC +0.3%, AMD +0.3%

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SFIX -11.1%, SCS -7%, REVG -4.5%, RHT -4%,

Companies trading lower in after hours in reaction to news: IDN -11.9% (thinly traded - saw spike into the close), LENS -5.4% (modestly pulling back from 80% move higher today), RIOT -5.1% (pulling back following CNBC discussion), TXMD -4.7% (announces FDA acceptance of New Drug Application and PDUFA target action date of May 29, 2018 for TX-004HR), CBIO -3.6% (proposes public offering of common stock), PXS -2% (files for 2.4 mln share common stock offering by selling shareholders),

>>> US Close Dow -0.15% S&P -0.32% Nasdaq -0.44% Russell -0.77%


Closing Market Summary: Modest Losses Ahead of Senate Vote

U.S. equities slipped from record highs on Tuesday as investors cautiously awaited the Senate's vote on tax reform.

The major indices held modest losses throughout most of the session, and a late wave of selling left them near their session lows. The Dow Jones Industrial Average lost 0.2%, the S&P 500 declined by 0.3%, and the tech-heavy Nasdaq dropped 0.4%. Small caps underperformed, sending the Russell 2000 lower by 0.8%.

Tuesday's main event was the House's vote on tax reform, which took place at around 2:30 PM ET. The House passed the GOP's bill, as expected, in a party-line vote. The bill will now go to the Senate, where it will have a more narrow path to passage as the GOP has just a two-vote majority in the upper house. Still, the measure is expected to pass.

The Senate began the ten hours of required debate on the bill shortly before the closing bell, putting a final vote on track for early Wednesday morning.

Most sectors finished Tuesday in negative territory, a reverse of Monday's session. The utilities (-1.8%) and real estate (-1.9%) groups paced the retreat, but it was the top-weighted technology space (-0.5%) that had the most bearish impact on the broader market.

Tech shares were broadly weak, but Apple (AAPL 174.54, -1.88) showed particular weakness after Nomura downgraded the tech giant's shares to 'Neutral' from 'Buy' on Tuesday morning; AAPL shares ended the day lower by 1.1%. Chipmakers outperformed their tech peers, but still pulled the PHLX Semiconductor Index lower by 0.1%.

On the upside, the consumer staples sector (+0.2%) bounced back from a relatively poor outing on Monday. The group's largest component by market cap--Wal-Mart (WMT 98.80, +0.90)--was among the top performers, adding 0.9%, after Citigroup upgraded WMT shares to 'Buy' from 'Neutral.'

Corporate news was pretty light on Tuesday, but it's worth pointing out that Darden Restaurants (DRI 96.69, +6.15)--the owner of chains like Olive Garden and LongHorn Steakhouse--jumped 6.8% after reporting better-than-expected earnings and revenues for its fiscal second quarter. The company also raised its guidance for 2018.

In the bond market, U.S. Treasuries sold off on Tuesday, with longer-dated issues showing relative weakness. The yield on the 2-yr Treasury note climbed three basis points to 1.86%, while the benchmark 10-yr yield jumped seven basis points to 2.46%--its best level in two months. The 2yr-10yr spread hit a fresh December high (60 bps).

Elsewhere, equity indices in the Asia-Pacific region finished Tuesday mostly higher, while the major European bourses ended on a mostly lower note. Japan's Nikkei (-0.2%) exhibited relative weakness in Asia and the UK's FTSE (+0.1%) outperformed its peers across the pond.

Reviewing Tuesday's economic data, which included November Housing Starts, November Building Permits, and the Current Account Balance for the third quarter:

  • Housing starts increased to a seasonally adjusted annualized rate of 1.297 million units in November (consensus 1.259 million), up from a revised 1.256 million units in October (from 1.290 million). Building permits decreased to a seasonally adjusted 1.298 million in November (consensus 1.280 million) from a revised 1.316 million in October (from 1.297 million).
    • The key takeaway from the report is that there was a 1.4% increase in permits for single-family homes and a 5.3% increase in single-family starts, as that is where supply growth is greatly needed to meet home buyer demand.
  • The current account deficit for the third quarter totaled $100.6 billion (consensus -$117.4 billion). The second quarter deficit was revised to $124.4 billion from $123.1 billion.

On Wednesday, investors will receive the weekly MBA Mortgage Applications Index and November Existing Home Sales (consensus 5.56 million). The two reports will be released at 7:00 ET and 10:00 ET, respectively.

  • Nasdaq Composite +29.4% YTD
  • Dow Jones Industrial Average +25.3% YTD
  • S&P 500 +19.8% YTD
  • Russell 2000 +13.2% YTD

FT : Softbank takes stake in US insurtech start-up Lemonade

Softbank has become the latest big name investor to take a stake in New York-based insurance start-up Lemonade.

The Japanese company has taken part in a $120m funding round for Lemonade. It joins Allianz, Sequoia Capital and Google Ventures, which had already backed the company.

Lemonade, which sells insurance to people who rent property in the US, is one of the most high profile of the wave of so-called insurtech start-ups aiming to disrupt the centuries-old insurance industry.

The company recruited behavioural economist Dan Ariely to give it insights into customer behaviour, and says that it has paid out on claims as little as three seconds after they were made. It also has a novel business model, taking a flat fee for its services and giving a portion of unused premiums to charity each year.

Unlike many other start-ups, Lemonade has been going through the laborious process of securing its own insurance licences. It now has licences in 25 US states and has sold 80,000 policies since launching a year ago.

The company says it will use the new money raised for global expansion in 2018.

“By combining big data and AI with a seamless user experience, Lemonade is truly revolutionizing the insurance industry,” said David Thevenon, a senior investment professional at SoftBank. “We have been impressed by the team’s creative approach to disrupting the traditional insurance model.”

Lemonade is not SoftBank’s first foray into insurtech. Earlier this year it was a cornerstone investor in ZhongAn’s $10bn IPO in Hong Kong.

WSJ : Which Digital Currency Will Be the Next Bitcoin?

Which Digital Currency Will Be the Next Bitcoin?
Litecoin is benefiting from bitcoin’s surging popularity

Investors in cryptocurrencies are hoping lightning strikes twice, as the outsize recent gains in bitcoin are encouraging migration to several digital relatives.

So-called “altcoins”—alternative versions of bitcoin—have been rising along with bitcoin itself. Most prominently, a digital currency called litecoin surged about 60% last Wednesday alone, trading at a record-high $341.72, according to coinmarketcap.com.

It began the month at just $88 and the year at $4.33. While bitcoin is up more than 1,600% this year, litecoin is up about 7,000%, even after settling a bit to trade Sunday around $323, according to coinmarketcap.com.

Bitcoin’s gains—it is trading at about $19,000—has investors willing to consider anything that looks like the surging virtual currency, said Jimmy Song, a bitcoin developer based in Austin, Texas. “Retail investors in Korea are driving a lot of the price,” he said. “They will buy anything that looks reasonably cheap.”

Many cryptocurrencies have been benefiting this year from a combination of greater recognition in countries such as Japan and South Korea, rising interest from institutional investors and Wall Street firms, and a boom in a new fundraising method called the initial coin offering, which has attracted more than $4 billion in new capital this year alone.

The universe of cryptocurrencies has a total market value of about $600 billion. Bitcoin, at $323 billion, comprises most of that, but there are several notable alternatives, such as Ethereum ($71 billion), Ripple ($29 billion), Bitcoin Cash ($32 billion) and litecoin ($17.6 billion). Twenty-six of these currencies have market values above $1 billion. Before 2017, only bitcoin and Ethereum were at that level.

The gains for bitcoin have created a situation where investors are jumping into any currency that looks like the next good bet, which can have an outsize effect on what are relatively small, thinly traded markets.

Litecoin, launched in 2011 and the first major alternative version of bitcoin, is especially benefiting from bitcoin’s surging popularity. For one thing, several industry insiders have noted, Coinbase’s online exchange GDAX supports trading of the currency. Since Coinbase has emerged as the first service many newcomers are trying out, they are also being exposed to litecoin for the first time.

Charlie Lee, the currency’s creator, wrote on Twitter on Wednesday, that litecoin is getting “so much mainstream exposure.” He warned that investors shouldn’t expect these gains to last. “Every crypto bull run I’ve seen has been followed by a bear cycle,” he wrote. Mr. Lee couldn’t be reached for comment.

Bitcoin was released in 2009 by an anonymous creator known as Satoshi Nakamoto. Because the software was open-sourced, it meant anybody could copy it and produce a new version with any tweaks or changes they wanted. That malleability is the reason there are now more than 1,000 of these altcoins.

Analysts say that many of those tokens have marginal prospects or are pump-and-dump schemes. But the largest have billion-dollar valuations themselves and could prove to be viable bitcoin alternatives.

Mr. Lee is a software engineer who worked at Google and Coinbase. In October 2011, he released his version of bitcoin, which he dubbed litecoin. It tweaked some features of bitcoin, resulting in a network with faster settlement times for transactions and lower fees. He often would characterize it as the silver to bitcoin’s gold.

Litecoin has been around long enough, and has enough developers working on it, that it appears more stable than some of the newer currencies. That development team also has a reputation for testing and implementing upgrades that later show up in bitcoin, Mr. Song and others noted. Still, it has not been able to attract as many developers and businesses to it as bitcoin has, and that has limited its appeal somewhat compared with its larger peers.