Asia Market Update: BOK raises rates, first policy move in 6-yrs; tech names remain under pressure; China PMIs rise
***Headlines/Economic Data***
General Trend Themes: Asian markets trade mostly lower
-Technology names track weakness seen in NY session; Tencent -2%
-Chipmakers weaker, Taiwan Semi down over 3%; Bank of Korea Gov Lee said the memory chip boom to stay for now. (Recall: On Monday, shares of chip-related firms declined amid a cautious US broker note on Samsung Electronics)
-China Nov PMIs rise
-GBP trades higher
Japan
Nikkei 225 opened flat; closed
-TOPIX Iron & Steel Index +1.9% (follow-through strength in steelmakers)
-Mega banks track earlier outperformance in US financials: Mitsubishi UFJ +2%; TOPIX Securities brokers Index +1.4%
-Fast Retailing +1.7%
-Tech names track declines in US: Softbank -3%
-Chip-related companies remain weak ; Tokyo Electron -2.4%, Toshiba -2%, SUMCO -1.5%,
-BoJ's Harada: USD/JPY is stable at about ¥110 since QQE started; Labor shortages have been insufficient
-JAPAN OCT PRELIM INDUSTRIAL PRODUCTION M/M: 0.5% V +1.8%E; Y/Y: 5.9% V 7.1%E
-(JP) JAPAN OCT HOUSING STARTS Y/Y: -4.8% V -2.8%E; ANNUALIZED HOUSING STARTS: 933K V 952KE
- JGB (JP) Japan MoF sells ¥2.2T v ¥2.2T indicated in 0.1% 2-yr JGBS; avg yield -0.166%; bid-to-cover 4.76x
- JGB (JP) Japan MoF sells ¥4.39T v ¥4.4T indicated in 3-Month Bills; avg yield -0.1995%
-Looking Ahead: Oct CPI, Household spending , unemployment and Q3 Capex to be released on Friday.
Korea
-Kospi opened -0.4%
-Continued weakness in chipmakers: Samsung Electronics -2.5%, Hynix -5.5%
-Woori Bank +1% (raises deposit rates following rate hike by BoK)
- BANK OF KOREA (BOK) RAISES 7-DAY REPO RATE BY 25BPS TO 1.50%, AS EXPECTED, the first policy move in 6 years. Gov Lee said that the BOK does NOT have forecasts for future rate hikes and rate policy is based on mid-term inflation. Policy to remain accommodative and will judge carefully if further adjustments needed.
- USD/KRW rises 1% on Gov Lee comments where he affirmed stance that FX rate is determined in market not benchmark rate only, FX authorities can respond to FX if volatility is extreme
-Oct Data weakens: SOUTH KOREA OCT INDUSTRIAL PRODUCTION SA M/M: -1.1% V 0.2%E; Y/Y: -5.9% V 3.0%E (sharpest decline since 2013 on holiday distortions)
(KR) South Korea Oct Retail Sales m/m: -2.9% v 3.1% prior; y/y: -0.2% v 8.4% prior
(KR) South Korea Oct Cyclical Leading Index Change: -0.3 v -0.2 prior
-(KR) On Wed, UN held emergency meeting following most recent North Korea launch: US Ambassador to -UN Haley: North Korean regime will be utterly destroyed if war comes
-(US) Pres Trump tweets: to announce major new sanctions on North Korea
Looking Ahead: South Korea Q3 GDP revision and Nov Trade Balance due for release on Friday
China/Hong Kong
- (CH) CHINA NOV OFFICIAL GOVT MANUFACTURING PMI: 51.8 V 51.4E, NON-MANUFACTURING PMI: 54.8 V 54.3 PRIOR
Markets opened lower: Hang Seng opened -1%, Shanghai -0.3%
-Hang Seng Info Technology Index -2.2%, Materials -1.2%, Consumer Goods index -1.2%, Energy -1%, Financials -0.9%, Property -0.9%
- (CN) PBoC sets yuan reference rate at 6.6034 v 6.6011 prior
- (CN) China Oct Swift Global Payments (CNY): 1.46% v 1.94% prior
- (CN) China FX Regulator SAFE Vice Head Lu Lei: China should manage FX reserves from economic stability view; FX reserves important part of macro prudential management
(CN) PBoC OMO: Injects CNY280B in 7, 14-day, 63-day reverse repos v CNY240B injected in 7,14 and 63-day reverse repos prior; Net: nil v nil prior (4th consecutive net nil)
- (HK) 1-month HK$ HIBOR falls below 1% (halting 5 days of consecutive increases); 3-month -1bps to 1.18179%; 1-week -14bps to 0.75036%
- (HK) China press looks at recent surges in HIBOR rates and how 95% of mortgages in Hong Kong are linked to Hibor and its possible negative impact
- (CN) China Beijing sells 3-yr special bond at 3.79%; 10-yr special bond at 3.96%
- China corporates continue to cancel yuan denominated bond offerings: China Datang Corp cancels planned CNY5B bond sale on ‘market fluctuation’
-(CN) China Premier Li: China is willing to expand cross border trade with Russia
-(CN) Japan, US and Europe reportedly plan to push China for action on steel overcapacity - Nikkei
-(CN) China coal prices may fall in 2018 - China Info Daily
Looking Ahead: China Nov Caixin Manufacturing PMI expected on Friday
Australia/New Zealand
ASX 200 opened -0.4%; close -0.6%
Resources Index -1.3%
Financials Index -0.8% ; Australia Government releases draft terms of reference for financial services Royal Commission; (AU) Australia PM Turnbull: Uncertainty about the banking inquiry is weighing on the economy, need to resolve it
-Aussie (AUD) trades higher amid domestic and China data releases
-(AU) AUSTRALIA Q3 PRIVATE CAPITAL EXPENDITURE (CAPEX) Q/Q: 1.0% V 1.0%E ( Equipment, plant, machinery investment +0.7% q/q; Buildings, structures investment +1.2% q/q)
(AU) AUSTRALIA OCT BUILDING APPROVALS M/M: +0.9% V -1.0%E; Y/Y: 18.4% V 14.1%E
(AU) Australia Oct Private Sector Credit M/M: 0.4% v 0.4%e; Y/Y: 5.3% v 5.3%e
-AWE Ltd (oil & gas company) +19% (received takeover offer from China Energy Reserve and Chemical Group
-Kiwi (NZD) trades lower on session: (NZ) New Zealand Nov ANZ Business Confidence: -39.3 v -10.1 prior (8-yr low); Activity Outlook: 6.5 v 22.2 prior
- (NZ) NEW ZEALAND OCT BUILDING PERMITS M/M: -9.6% V -2.5% PRIOR
- APX.AU Completes A$25M institutional placement priced at at A$5.80/shr; +32%
Looking Ahead: New Zealand Q3 Terms of Trade tomorrow
Other Asia
- (SG) Singapore Central bank (MAS): Will continue to monitor property market developments and where necessary take appropriate action to maintain stable and sustainable market
North America
-US equities ended mixed: Dow Jones +0.4%, S&P 500 flat, Nasdaq -1.3%, Russell 2000 +0.4%
-S&P500 Tech Sector -2.2%, Financials Sector +1.7%
-Costco SSS above est: Reports Nov Total SSS (ex-gas) 7.9%; US SSS (ex-gas) 8.4% v 5.7%e; E-commerce sales +39%
Tax Reform: (US) Tax reform bill passes in procedural hurdle in US Senate (as expected); Vote 52 v 48; Allows for debate to begin on the Senate floor with a final vote likely by Friday
-(US) Trump sends nomination of Marvin Goodfriend for Fed to Senate; - We have contingencies in place but hope it doesn't come to that
Fed Speak: (US) Fed Chair Yellen: Strengthening US economy will warrant continued interest rate increases - prepared remarks before joint economic committee; Weak inflation likely to prove "transitory"; don't think it's a mystery why inflation was so low in past years; this year's low inflation is puzzling; Fed is keeping an eye on recent low inflation trends
(US) Fed Williams (moderate, non-voter): failing to raise rates to more normal levels could risk recession; should continue to raise rates slowly over coming year; Four rate hikes between now and end of 2018 makes sense
(US) Fed's Dudley (dove, FOMC voter): There are not a lot of excesses currently in US economy
Energy: (US) DOE CRUDE: -3.4M V -2ME
-(SA) Saudi Oil Min al-Falih: not concerned about market reaction to OPEC discussions today - comments in Vienna
-(KW) Kuwait Oil Min: ministerial committee has recommended 9-month cut agreement extension
-(RU) Russia Energy Min Novak: we have had a constructive dialogue; oil market has yet to balance; everyone agrees oil production cutting agreement should be extended; Specific details on production cuts will be discussed at Thurs OPEC meeting
-(IA) Iran Oil Minister Zangeneh: will go along with 6 or 9 month extension if it is majority decision at OPEC
Looking ahead: OPEC Meeting, US Nov Chicago PMI
Europe
-(EU) ECB's Knot: inflation outlook poses no threat to price stability; ECB communications should shift away from net purchases
-(EU) ECB’s Weidmann (Germany): remain skeptical about need for ECB QE
-(EU) ECB reportedly may postpone separate proposals to deal with both new and old non-performing loans – press
-GBP/USD: In Asia trades at highest level since Sept, above 1.3460
(UK) EU Parliament Brexit committee: have not made enough progress in the Brexit talks on citizens rights or Ireland
(UK) PM May: We are still in negotiations with the EU. For the current budget plan, I also said that we would honour our commitments and we are still in negotiations with the EU. I want to see us able to move forward together into the next stage of the talks when we can look in detail at the deep and special partnership we want to have with the EU once we leave." - Sky News interview
-(UK) Britain reportedly nearing deal on Northern Ireland border; officials on both sides reportedly predict agreement within weeks - Times UK
-*(UK) NOV GFK CONSUMER CONFIDENCE: -12 V -11E
M&A: Nokia [NOKIA.FI]: Responds to media reports: Says not in talks with Juniper Networks [JNPR] nor is it preparing an offer
-(PT) Hearing Italy will back Portugal Fin Min Centeno to be next Eurogroup chairman - financial press
-SBM Offshore NV [SBMO.NL]: Said to pay $238M to settle US bribery case
Looking Ahead: Swiss Q3 GDP, EZ Nov Prelim CPI
***Levels as of 01:00ET***
- Nikkei225 +0.7%, Hang Seng -1.4%; Shanghai Composite -0.4%; ASX200 -0.7%, Kospi -1.1%
- Equity Futures: S&P500 -0.0%; Nasdaq100 -0.1%, Dax -0.0%; FTSE100 -0.2%
- EUR 1.1871-1.1846; JPY 112.13-111.89; AUD 0.7593-0.7557;NZD 0.6889-0.6833
- Dec Gold +0.1% at $1,283/oz; Jan Crude Oil +0.3% at $57.47/brl; Mar Copper +0.2% at $3.07/lb