>>> Asian Update

Asia Mid-Session Update: Risk appetite returns with bond yields lower, currencies muted and equities higher

***Headlines/Economic Data***
Japan
-Nikkei 225 opened +0.9%;
-Automakers track Monday’s gains in US auto sector; Toyota +1.6%
-Steelmakers track recent gains in shares of US Steel; JFE +1%
-Mega Banks and Topix Securities Brokers index gain (rebound from prior session’s losses)
-Toshiba +4% (closed -5.8% on Monday), Softbank +1.3%, Fast Retailing +0.8%
- (JP) Japan Finance Min Aso: Tax changes need to consider work reform and an aging society; one time depreciation is a big encouraging investment
- (JP) Japan Defense Min Onodera unable to rule out more North Korea ‘provocations’ - Japanese Press

Korea
-Kospi opened +0.2%
-LG Display +4% (South Korea to decide on planned investment in China), Hynix +1.5% (Micron +3.2%); Hanwha Life -3% (stake sale)
- (KR) South Korea Nov (20 days) Exports Y/Y: 9.7% v 6.9% prior; Imports Y/Y: 14.0% v 3.1% prior
- Won reversed yesterday’s losses as risk appetite returns
- (KR) Local South Korea think tank: Expect the won to remain strong in 2018
- (US) Pres Trump: US to designate North Korea as a state sponsor of terrorism
- 034220.KR South Korea said to hold meeting related to planned investment in China - South Korean Press; +5.7%

China/Hong Kong
-Shanghai Composite opened -0.3%, Hang Seng +0.4%
-Hang Seng Information Technology Index +3.5% (Tencent +3.9%, market cap moves above Facebook’s)
-Hang Seng Financials Index +1%; Insurers gain amid rise in China 10-year bond yield
-Hang Seng Consumer Goods Index +0.8% (L’Occitane +2.5% after reporting final Q3 earnings); Property Index -0.5%
- (CN) China Energy Investment Group and China National Coal Group will keep their 2018 coal contract prices at CNY535/t, flat y/y - financial press
- (CN) China NDRC Vice Chairman Lian Weiliang says coal prices are currently relatively high and should be guided downward – Chinese Press
- USD/CNY (CN) PBoC sets yuan reference rate at 6.6356 v 6.6271 prior
- (CN) PBoC OMO: Injects CNY180B v CNY100B injected in 7,14 and 63-day reverse repos prior; Net injects CNY10B v CNY20B prior

Australia/New Zealand
-ASX 200 opened +0.2%;
-Graincorp -5% (FY17 profits below ests; CEO sees challenging year ahead)
- AUD trades at 5-month low: Morgan Stanley (MS) said to forecast the Aussie to trade at $0.65 (timing uncertain)
-The pass-through to inflation could be delayed by many factoring including retail competition, consumption growth likely to be lower in Q3 versus Q2, says the Reserve Bank of Australia (RBA) Nov Meeting Minutes.
- (AU) Australia banking regulator, APRA, Chairman Byres: Have concerns over housing and lending standards
- (AU) Australia PM Turnbull: considering tax cuts for low and middle income earner, in addition to lowering the corporate rate to 25% from 30% - speaking to Business Council of Australia
-RBA Gov Lowe to speak during European morning
- Australia Q3 Construction work done to be released on Wednesday’s session
- ATM.NZ Reports FY18 first 4-months EBITDA NZ$78.4M; Rev NZ$262.2M – AGM; +4.3%

Other Asia
- (TW) Taiwan Gov sells NT$25B in 30-yr bonds, avg yield 1.667% v 1.7%e; bid-to-cover 1.54x

North America
-US equity indices ended Monday broadly higher: Dow +0.3%, S&P 500 +0.1%, Nasdaq +0.1%, Russell 2000 +0.7%; Financials and Industrials outperformed
-After Market Movers: Intuit (INTU) Reports Q1 $0.11 adj v $0.05e, Rev $886M v $855Me; -2.4% afterhours Palo Alto Networks (PANW) Reports Q1 $0.74 v $0.68e, Rev $505.5M v $489Me; Promotes Bonanno as CFO; +7.3% afterhours; Urban Outfitters (URBN) Reports Q3 $0.41 v $0.33e, Rev $893M v $857Me; +3.1% afterhours
M&A: US DoJ seeking to block merger between Time Warner Inc and AT&T; Nestle said to show bidding interest in Hain Celestial (press report); CVS may reportedly come to definitive agreement to acquire Aetna by end of Nov (press report)
-Debt Issuance: Weight Watchers International priced $300M in high yield 2025 senior notes (offering downsized from $500M)
-Little news seen regarding US tax reform.
-(US) Janet Yellen to resign from Fed Board of Governors, effective upon the swearing in of her successor as Chair
- BABA Muddy Waters in a report calls Alibaba's Singles Day numbers "obviously fake"

Europe
-(DE) German Chancellor Merkel: new elections would be better than a minority govt; goal is still to form a stable govt - TV interview
-(DE) CDU Parliamentary Leader Kauder: we seem to be on the course for new elections in Germany
-(EU) Reportedly ECB expected to make small, incremental changes next year in discussing QE exit - press
-(UK) UK panel reportedly considering move to £40B (€45B) Brexit offer - UK press
-(UK) Unnamed source in PM May's office says nothing is agreed upon in the Brexit until everything is agreed - financial press
(UK) EU Chief Brexit Negotiator Barnier reportedly informs EU27 that more clarity is needed on the Brexit bill; believes bill cannot be tied to trade agreement
-(UK) BOE's Dep Gov Ramsden: UK economy in a weaker growth period for some time to come; domestic CPI is below the rate consistent with 2% goal

***Levels as of 00:00ET***
- Nikkei +1.0%, Hang Seng +1.22%; Shanghai Composite +0.4%; ASX200 +0.4%, Kospi +0.1%
- Equity Futures: S&P500 +0.0%; Nasdaq100 +0.1%, Dax +0.0%; FTSE100 0.0%
- EUR 1.1745-1.1730; JPY 112.70-112.51; AUD 0.7558-0.7532;NZD 0.6819-0.6789
- Dec Gold +0.4% at $1,280/oz; Dec Crude Oil +0.1% at $56.45/brl; Dec Copper +0.1% at $3.09/lb

>>> Closing Market Summary: Quiet Start to the Holiday Week

Closing Market Summary: Quiet Start to the Holiday Week

Stocks had a quiet, but positive, start to the abbreviated Thanksgiving week on lighter-than-usual trading volume.

The Dow Jones Industrial Average climbed 0.3%, finishing a step above the S&P 500 and the Nasdaq, which added 0.1% apiece. Meanwhile, small caps outperformed, sending the small-cap Russell 2000 higher by 0.7%.

Tax reform remained a topic of conversation in the media on Monday, despite the lack of new developments. The House did its part last week when it passed its version of a tax reform bill, and analysts continue to debate whether the Senate can do the same when its version goes to the floor for a vote sometime after Thanksgiving.

Fed Chair Janet Yellen announced that she will resign from the Board of Governors when Jerome Powell replaces her as Fed Chair in early February. Ms. Yellen had the right to stay on the Board of Governors until January 2024, but her decision was not a surprise and had little impact on the financial markets.

As for corporate news, there were a few notable headlines on Monday, but the day was pretty quiet overall. 

Chipmakers showed relative strength, evidenced by the 1.2% increase in the PHLX Semiconductor Index, after Marvell (MRVL 21.59, +1.30) announced that it will acquire Cavium Networks (CAVM 84.02, +8.19) for approximately $6 billion, or $80.00 per share, in cash and stock. MRVL shares added 6.4%, while CAVM shares jumped 10.8%.

The S&P 500's technology sector (+0.3%), which houses chipmakers, finished ahead of the broader market, but a ways behind the telecom services group (+1.0%), which settled at the top of the sector standings. Verizon (VZ 46.20, +0.78) led the telecom rally, adding 1.7%, after Wells Fargo upgraded VZ shares to 'Outperform' from 'Market Perform.'

Telecom giant AT&T (T 34.64, +0.13) also had a relatively positive showing, climbing 0.4%, following reports that the Department of Justice plans to make a major antitrust announcement on Monday evening that involves the company's pending acquisition of Time Warner (TWX 87.71, -1.01). TWX shares lost 1.1%.

The heavily-weighted financial sector climbed 0.5%, while the other advancing sectors added no more than 0.4%.

On the flip side, the health care space was the weakest group on Monday, moving lower by 0.4%. Within the group, Dow component Merck (MRK 54.10, -1.10) showed relative weakness, losing 2.0%, after Switzerland-based rival Roche announced positive clinical trial results for its cancer immunotherapy treatment called Tecentriq.

In the bond market, U.S. Treasuries moved lower in another curve-flattening trade, reducing the 2yr-10-yr spread to just 62 basis points. The yield on the benchmark 10-yr Treasury note climbed two basis points to 2.37%, while the 2-yr yield jumped three basis points to 1.75%. Yields move inversely to prices.

Elsewhere, efforts to form a coalition government in Germany fell apart overnight, leaving Europe's largest economy in a state of political uncertainty. However, European equities were able to climb despite the news, with Germany's DAX (+0.5%) pacing the advance.

Major indices in the Asia-Pacific region ended Monday on a mixed note, with Japan's Nikkei (-0.6%) slipping for the seventh time in nine sessions.

Reviewing Monday's economic data, which was limited to October Leading Indicators:

  • The Conference Board Leading Economic Index increased 1.2% in October (0.8%). The prior month's reading was revised to +0.1% from -0.2%.

On Tuesday, investors will again receive just one economic report--October Existing Home Sales (consensus 5.42 million)--which will be released at 10:00 ET.

  • Nasdaq Composite +26.2% YTD
  • Dow Jones Industrial Average +18.6% YTD
  • S&P 500 +15.3% YTD
  • Russell 2000 +10.8% YTD

->>> AT&T Time Warner

AT&T Statement on Latest Developments in Proposed Acquisition of Time Warner, Inc.
AT&T Statement on Latest Developments in Proposed Acquisition of Time Warner, Inc.
PR Newswire
DALLAS, Nov. 20, 2017
DALLAS, Nov. 20, 2017 /PRNewswire/ -- The following is attributed to David R. McAtee II, Senior Executive Vice President and General Counsel, AT&T Inc.:
"Today's DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent.  Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.  
"Our merger combines Time Warner's content and talent with AT&T's TV, wireless and broadband distribution platforms.  The result will help make television more affordable, innovative, interactive and mobile.  Fortunately, the Department of Justice doesn't have the final say in this matter.  Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law.  We are confident that the Court will reject the Government's claims and permit this merger under longstanding legal precedent."

WSJ :
U.S. Set to File Suit Challenging AT&T-Time Warner Deal
The Justice Department is expected to file a lawsuit Monday challenging AT&T's proposed acquisition of Time Warner, according to people familiar with the matter.

The companies are expected to fight the lawsuit, a move that would leave the fate of the transaction in the hands of a judge. The deal was valued at $85 billion when it was announced in October 2016 as one of the largest media deals ever.

Egypt's Sisi issues warning to Ethiopia over dam construction project

Egypt's Sisi issues warning to Ethiopia over dam construction project

Sisi issued a stern warning to Ethiopia over a dam it is building.
Sisi issued a stern warning to Ethiopia on Saturday over a dam it is building after the two countries and Sudan failed to approve a study on its potential effects. Tags: Egypt, Ethiopia, Sudan, Nile, dam, Sisi
Egyptian President Abdel Fattah al-Sisi issued a stern warning to Ethiopia on Saturday over a dam it is building, which could limit water supplies to Cairo.

It comes after Egypt, Ethiopia and Sudan failed to approve a study on its potential effects of the Grand Ethiopian Renaissance Dam.

Addis Ababa's plan will be the first major dam on the Blue Nile, which will eventually start filling the giant reservoir behind it to power Africa's largest hydroelectric dam.

Egypt fears the construction will cut into its water supply and destroy precious farmland. Dam construction on international rivers often lead to disputes over the downstream impact.

Cairo said last week that the three countries had failed to approve an initial study by a consultancy firm on the dam's potential effects on Egypt and Sudan.

Ethiopia says the dam is essential to its development and has repeatedly sought to reassure Egypt.

But Cairo's efforts to persuade Addis Ababa to engage in closer coordination over the dam appear to have made little headway.

"No one can touch Egypt's share of water," Sisi said in televised comments while attending the inauguration of a fish farm in the Nile Delta province of Kafr el-Sheikh.

"We view positively the developmental needs of our friends and brothers in Ethiopia," he said.

"We are capable of protecting our national security and water to us is a question of national security. Full stop."

The Egyptian government has publicly ruled out military action but in recent months officials have escalated their rhetoric.

Earlier in November Sisi issued a similar warning to Ethiopia during a news conference at the Red Sea resort of Sharm el-Sheikh.

The Nile provides over 90 percent of Egypt's water supply.

It already receives the lion's share of Nile waters - more than 55 billion of the around 88 billion cubic meters of water that flow down the river each year.