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* Expect improving traffic growth at most European airports, and better passenger mix to bolster commercial trends

Asia Mid-Session Market Update: Australia returns to trade surplus; China downplays CNY depreciation pressure, threatens closer scrutiny of US companies

***US Session Highlights***

- (US) DEC CHALLENGER JOB CUTS: 33.6K V 26.9K PRIOR; Y/Y: +42.4% V -13.0% PRIOR

- (US) DEC ADP EMPLOYMENT CHANGE: +153K V +175KE; Goods-producing:-16,000 (resource, construction, manufacturing all negative)

- (US) INITIAL JOBLESS CLAIMS: 235K (matches lowest reading since 1973) V 260KE; CONTINUING CLAIMS: 2.11M V 2.05ME

- (US) DEC FINAL MARKIT SERVICES PMI: 53.9 V 53.4E (lowest since Sept 2016, 10th consecutive month of expansion)

- (US) DEC ISM NON-MANUFACTURING COMPOSITE: 57.2 V 56.8E; New Orders Index: 61.6 v 57.0 prior (highest since Aug 2015)

***US markets on close: Dow -0.2%, S&P500 -0.1%, Nasdaq +0.2%***

- Best Sector in S&P500: Healthcare/Materials

- Worst Sector in S&P500: Financials

- Biggest gainers: ALXN +9.5%, MAT +5.7%, NEM +4.6%, DVN +3.2%, AMZN +3.1%

- Biggest losers: KSS -19.0%, M -13.9%, SIG -8.0%, LB -7.9%, FOSL -7.6%

- At the close: VIX 11.7 (-0.2pts); Treasuries: 2-yr 1.18% (-3bps), 10-yr 2.37% (-8bps), 30-yr 2.96% (-9bps)

***US movers afterhours***

- STML: Announces positive FDA meeting and agreement on expedited pathway to full approval of SL-401 in First-Line BPDCN; +27.8% afterhours

- GPS: GPS Reports Holiday SSS +2% y/y; guides FY16 EPS modestly above the high end of our previous adjusted guidance range of ~$1.92 v $1.94e; +8.6% afterhours

- MNTA: Momenta and CSL announce collaboration and license agreement to develop Fc Multimer programs, including M230, a selective immunomodulator of Fc receptors; +5.8% afterhours

- HELE: Reports Q3 $2.07 v $1.91e, R$444M v $449Me; +4.2% afterhours

- AMGN: Amgen reportedly wins ban on Sanofi's sales of Praluent - press; +3.9% afterhours; SNY -3.6% afterhours; REGN -1.1% afterhours

- GIII: Cuts FY17 $1.41-1.51* v $1.62e, R$2.41B v $2.42Be, EBITDA $148-155M (prior $1.86-1.96, R$2.43B, Adj EBITDA $163-171M); -8.7% afterhours

- RT: Reports Q2 -$0.18 v -$0.04 y/y, R$214.7M v $260.2M y/y; -15.3% afterhours

***Asia Key economic data:***

- (AU) AUSTRALIA NOV TRADE BALANCE (A$): +1.2B V -550ME; 1st trade surplus since Mar 2014

- (JP) JAPAN NOV LABOR CASH EARNINGS Y/Y: 0.2% (2nd straight increase) V 0.2%E ; REAL EARNINGS (EX-INFLATION) Y/Y: -0.2% (first decline in 11 months) V 0.0%E

***Asia Session Notable Observations, Speakers and Press***

- Asia equity markets are mixed following a session of Trump-trade profit-taking on Wall St, where FANG stocks were back in favor as financials, industrials, and apparel names sold off. US treasuries were also bid sharply higher and yields came in going into Friday's non-farm payrolls, particularly in light of softer than expected ADP.

- USD traded lower in the US session, but has since pared some of its losses in Asia. USD/JPY is the biggest gainer in relative terms with a 0.5% rise. Yuan is also off its best levels after 2 straight days of outsized gains, falling from 6.80 to 6.84 after the latest PBoC fix. Despite the setting being the strongest since early December, it was still weaker than offshore levels seen overnight, prompting a reversal. China authorities have taken note of the recent volatility in FX, as PBoC is moving to consider increasing Yuan rate expectation management. Separately, PBoC advisor Huang remarked there is little depreciation pressure on CNY from fundamental data, adding short-term events and expectations have triggered depreciation.

- Trump's Twitter habit has once again caused a ripple in auto-making industry as President-elect took aim at Toyota and its previously-planned intentions to build a new plant in Baja, Mexico. Toyota ADRs were down over 1% in US and lost 2% in Tokyo, while also prompting defense from Japan Fin Min Aso who said the issue is not related to company but rather to NAFTA. In a related note, a press report suggested China authorities could retaliate to Trump's trade war by increasing scrutiny (antitrust and tax probes) of US companies with major China operations.

- In notable economic data, Australia terms of trade yielded a surprise surplus - the first since Mar 2014. Exports spiked 8% y/y, while imports remained flat. Rising materials prices helped the exports spike, as value of iron ore shipped rose to highest since Aug 2014 and that of coal to highest since Jan 2012. In Japan, the battle against deflation saw a setback, as inflation-adjusted wages fell for the first time in 11 months.

China:

- (CN) China PBoC advisor Huang Yiping: There is little depreciation pressure on CNY from fundamental data, including FX reserves - financial press

- (CN) China may consider scrutiny of US companies if Trump starts trade war - financial press

- (CN) China must curb capital flows in certain "hot" cities to control property prices - Chinese press

- (CN) PBoC said to consider increasing Yuan rate expectation management - Chinese press

Japan:

- (JP) Japan Chief Cabinet Sec Suga: Japan halts FX swap agreement with South Korea over 'comfort women' issue

- (JP) Japan Fin Min Aso: US president-elect Trump tweets on Toyota is a NAFTA issue, not directly related to the company

Australia:

- (AU) NAB economist: Australia trade surplus should ease recession fears - press

***Asian Equity Indices/Futures (00:00ET)***

- Nikkei -0.7%, Hang Seng +0.4%, Shanghai Composite -0.1%, ASX200 flat, Kospi +0.3%

- Equity Futures: S&P500 flat; Nasdaq flat, Dax -0.1%, FTSE100 flat

***FX ranges/Commodities/Fixed Income (00:00ET)***

- EUR 1.0575-1.0615; JPY 115.10-116.10; AUD 0.7320-0.7350; NZD 0.7005-0.7045

- Feb Gold -0.2% at 1,178/oz; Feb Crude Oil -0.1% at $53.72/brl; Mar Copper flat at $2.54/lb

- (HK) Overnight yuan HIBOR 61.333% v 38.335% prior, 3-month yuan HIBOR 10.663% (record) v 9.695% prior

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8668 V 6.9307 PRIOR; biggest margin of strength since 2005; strongest Yuan setting since Dec 6th

- USD/CNY: Goldman Sachs sees USD/CNY at 7.30 by 2017-end - press

- (CN) PBOC to inject combined CNY80B in 7-day and 28-day reverse repos, For the week, drains CNY595B v CNY245B drain in prior week

- (JP) BOJ offers to buy ¥70B in JGBs with maturity less than 1-yr and ¥410B in 5-10yr JGBs

- (JP) Japan investors sold net ¥501B in foreign bonds v sold ¥217B in prior week; Foreign investors bought net ¥58.5B in Japan stocks v bought ¥114B bought in Japan stocks in prior week

***Asia equities / Notables / movers by sector***

- Consumer discretionary: Dongfeng Motor 489.HK -1.3% (Dec result); Fast Retailing Co 9983.JP -6.2% (Dec Uniqlo SSS), Adastria Holdings Co 2685.JP +1.4% (Dec result), ABC-MART 2670.JP +2.8% (Dec result); DeNA Co. 2432.JP +4.4%; Ardent Leisure AAD.AU -0.9% (Theme Park revenue declined); Lawson Inc 2651.JP -0.5% (9-month speculation)

- Financials: Vanke 2202.HK -1.0% (Dec result), Evergrande 3333.HK -0.4% (Dec result), Country Garden Holdings Co 2007.HK -1.0% (Dec result)

- Industrials: Hyundai Engineering and Construction 000720.KR -1.4% (regulators to review unclaimed bills); Toyota Motor Corp 7203.JP -2.0% (Trump tweets); Korean Air Lines Co 003490.KR -3.1% (KTB cuts)

- Technology: Samsung Electronics 005930.KR +1.9% (Q4 prelim result); Toshiba Corporation 6502.JP -1.6% (SMBC cuts to equal weight)

- Materials: Teranga TGZ.AU +4.8% (2016 gold production); Saracen SAR.AU +3.0%, St Barbara SBM.AU +2.5% (Gold rises)

Engie au­rait éludé pour 300 mil­lions d'im­pôts avec l'aide du Luxem­bourg

La Com­mis­sion eu­ro­péenne pré­cise ses soup­çons sur des aides d’État illé­gales oc­troyées à GDF Suez par le gou­ver­ne­ment luxem­bour­geois.

Qui a dit que la Com­mis­sion eu­ro­péenne ne tape que sur les mul­ti­na­tio­nales amé­ri­caines ? Après s’en être pris aux ru­lings fis­caux mis en place en Bel­gique sous le gou­ver­ne­ment Ve­rhof­stadt, l’exé­cu­tif eu­ro­péen en­quête à charge contre les ar­ran­ge­ments pas­sés entre l’ad­mi­nis­tra­tion fis­cale luxem­bour­geoise et le géant de l’éner­gie Engie ENGI -0.16% – un cham­pion eu­ro­péen s’il en est.

En sep­tembre der­nier, la Com­mis­sion an­non­çait ou­vrir une en­quête sur plu­sieurs ru­lings ac­cor­dés à l’en­tre­prise dont l’État fran­çais dé­tient un tiers du ca­pi­tal. Elle pu­blie à pré­sent un état des lieux dé­taillé de son en­quête. Il en res­sort que les res­crits fis­caux ac­cor­dés par Luxem­bourg au­raient per­mis à Engie – à l’époque où elle s’ap­pe­lait en­core GDF Suez – d’évi­ter de payer 300 mil­lions d’eu­ros d’im­pôts. À ce stade, le Luxem­bourg n’a pas pu don­ner de jus­ti­fi­ca­tion cré­dible à ce constat, en­tend-on à la Com­mis­sion. Si le gen­darme eu­ro­péen confirme ses soup­çons, le gou­ver­ne­ment luxem­bour­geois sera tenu de pré­sen­ter la note à Engie.

© Commission européenne

© Com­mis­sion eu­ro­péenne

"Aucun trai­te­ment fis­cal par­ti­cu­lier ou avan­tage sé­lec­tif n’a été oc­troyé."

Dans un com­mu­ni­qué, le mi­nis­tère luxem­bour­geois des Fi­nances a réagi en es­ti­mant que la Com­mis­sion se trompe. "Le Luxem­bourg est confiant que les al­lé­ga­tions d’aide d’Etat dans cette af­faire sont sans fon­de­ment", in­dique-t-il, as­su­rant que "aucun trai­te­ment fis­cal par­ti­cu­lier ou avan­tage sé­lec­tif n’a été oc­troyé" aux en­ti­tés de GDF Suez.

PU­BLI­CITÉ

François Hollande et Gérard Mestrallet. L’Etat français est le principal actionnaire d’Engie, qui aurait monté avec la complicité du Luxembourg un dispositif d’évitement fiscal. © AFP

Fran­çois Hol­lande et Gé­rard Mes­tral­let. L’Etat fran­çais est le prin­ci­pal ac­tion­naire d’En­gie, qui au­rait monté avec la com­pli­cité du Luxem­bourg un dis­po­si­tif d’évi­te­ment fis­cal. © AFP

Le mon­tage que dé­nonce la Com­mis­sion concerne des tran­sac­tions entre plu­sieurs so­cié­tés de droit luxem­bour­geois du groupe. Les en­tre­prises prê­teuses et bé­né­fi­ciaires ont toutes bé­né­fi­cié de ru­lings en vertu des­quels les tran­sac­tions n’étaient pas taxées comme elles au­raient dû l’être, ex­plique-t-on au Ber­lay­mont.

Le groupe au­rait ainsi ré­duit sa base im­po­sable de 1,15 mil­liards d’eu­ros entre 2009 et 2015.

32,76%

L'Etat fran­çais est le prin­ci­pal ac­tion­naire d'En­gie, avec 32,76% du ca­pi­tal au mois d'avril 2016.

Cette en­quête est la der­nière en date d’une série de dos­siers ou­verts par la Com­mis­sion pour lut­ter contre l’éva­sion fis­cale agres­sive. La plus re­ten­tis­sante est de loin celle conclue en août der­nier contre Apple, par la­quelle l’exé­cu­tif de­mande à la firme de s’ac­quit­ter de 13 mil­liards d’eu­ros d’im­pôts non payés.

Ce qui a mis la puce à l'oreille de l'Eu­rope

Les avan­tages fis­caux ac­cor­dés à des mul­ti­na­tio­nales sont de­puis plu­sieurs mois dans le col­li­ma­teur de la Com­mis­sion eu­ro­péenne, no­tam­ment grâce aux ré­vé­la­tions is­sues du scan­dale Lux­Leaks en 2014, puis de celui des Pa­nama Pa­pers en 2016.

En 2014, l'af­faire Lux­Leaks avait mis en lu­mière les ac­cords pas­sés par le Luxem­bourg avec des mul­ti­na­tio­nales pour les at­ti­rer sur son sol, à une époque où l'ac­tuel pré­sident de la Com­mis­sion Jean-Claude Jun­cker en était le Pre­mier mi­nistre.