(BoA-ML) The Flow Show - Hot Japan & Banks, Cooler US & Value

An end-year week of modest flows: stocks see $1bn outflows, $3.4bn inflows to bonds, tiny $0.1bn gold outflows, and moderate $16bn money market inflows. 2016 was the largest year of equity redemptions since 2008 (Chart 1); by contrast, bond inflows continued for an eighth consecutive year.

>>> Asset Class Flows
- Equities: $1bn outflows ($7.8bn mutual fund outflows vs $6.8bn ETF inflows)
- Bonds: $3.4bn inflows (breaks 8-week streak of outflows)
- Commodities: small $0.5bn outflows (7 straight weeks)

>>> Equity Flows
- Japan: big $2.4bn inflows (largest in 7 weeks)
- Europe: $40mm outflows
- EM: $2.5bn outflow (2 straight weeks)
- US: $1.6bn outflows, largest decline in 8 weeks
- By sector: 8 straight weeks of real estate outflows ($1bn); 14 straight weeks of inflows to financials ($0.7bn); 7 straight weeks of inflows to infrastructure ($17mm). Flow winners for 2016 are materials & financials; losers are healthcare & consumer goods.

>>> Fixed Income Flows
- $2bn inflows to HY bond funds (5 straight weeks)
- 8 straight weeks of outflows from EM debt funds ($0.2bn)
- $1.4bn inflows to bank loans (7 straight weeks)
- Tiny $76mn outflows from Govt/Tsy funds
- First inflows to IG bond funds in 8 weeks ($2.2bn)
- 9 straight weeks of outflows from muni bond funds ($1.5bn)

>>> What to look at today - 2nd of January 2017 - Happy New Year

US, UK, Swiss, Ireland, Australia, Hong Kong, Japan, New Zealand, Singapore, Canada are closed today.
Korea's Kospi the only major market open in the first trading session of the year; US and Europe remain closed in extended New Years holiday; FX majors also in extremely narrow ranges. China Dec official manufacturing PMI posts 5th straight expansion, though slower than expected; New export orders in expansion for 2nd straight month; Employment component remains in contraction at 48.9 v 49.2 m/m; Input prices at multi-month highs of 69.6 v 68.3 m/m. PBoC chief economist notes the new rules on cash transactions and overseas transfers are not capital controls after Chinese central bank increased controls on individuals' FX purchases to convert up to the equivalent of $50K. Recall late last week, PBoC also requested that banks report yuan trading over CNY50K vs CNY200K previously. Japan Coast Guard: Four China vessels entered into disputed waters near Senkaku islands.

2016 Yearly Performance
Dow +13.42% S&P +9.54% Nasdaq +7.50% Russell +19.48% Brazil +38.93% Mexico +6.20% EuroStoxx +0.70% FTSE +14.43% CAC +4.86% Dax+6.87% Ibex -2.01% MIB -10.20% SMI -6.78% Nikkei +0.42% Hang Seng +0.39% CSI -11.28% Shanghai -12.30%

Macro :
- China December Manufacturing PMI at 51.4; Est. 51.5
- U.K. Sets New Penalties for Enablers of Offshore Tax Evasion
- ECB to Start a Review of EU Banks’ Internal Models: Messaggero
- France Foiled 17 Attacks This Year, Prime Minister Tells JDD
- Einhorn’s Greenlight Fund Gains 9.4% in 2016
- Spain Wants Good Relations With U.K. to Continue, Rajoy Says
- Spain Bad Bank Sareb Exceeded EU1.5B in 2016 Institutional Sales

Keep an eye :
- AF FP : Air France-KLM Debt to Jump 2017 on New Accounting Rules: Echos
- AI FP : Air Liquide Completes Aqua Lung Sale to Montagu Private Equity
- AAPL US : Apple to Slice IPhone Production 10%, Calculations Show: Nikkei
- AAPL US : Apple Suppliers Fall After Report on IPhone Production Cut
- BMPS IM : Paschi Plans Bonds for Jan., Feb.; Weighs ‘Bad Bank,’ Sole Says
- BMW GY : BMW to Rely on Combustion Engines for Decade, Krueger Tells BZ
- BP IM : Banco Popolare Holders to Get 1 Banco BPM Share in Merger
- BP IM : Banco Popolare: Got Interest Expressions on 178,859 Shares
- BPM IM : Banco BPM to Hold First Board Meeting on Sunday: Messaggero
- COFA FP : Coface Gets Pretax EU75m Gain for French State Export Guarantees
- CON GY : Continental AG CEO Sees Jobs Endangered by E-Car Trend: WamS
- CSGN VX : Tanzania Says Seeking $300m Loan From Credit Suisse: Reuters
- FCC SM : FCC delisting offer to run from 30 December 2016 to 13 February 2017
- FDR FP : Fonciere Des Regions Invests EU270m in Spanish Hotels
- IAG LN : Iberia Prepares to Negotiate More Job Cuts, Cinco Dias Reports
- ITV LN : ITV Said Preparing for Exit of CEO Crozier, Finance Head: Sky
- LIN GY : Linde to drop out of bidding for Daesung Industrial Gases because of antitrust issue- thebell.co.kr
- LLOY LN : Lloyd’s May Pay Record $50m on Fisher Claim: Insurance Insider
- LUPE SS : Lundin CEO Says Lower Operational Cost Trend to Continue: DI
- MC FP : Hengdeli Holdings to sell two business units to its chairman for CNY 3.5bn (MC owns 5.97% of Hngdeli)
- MC FP : LVMH’s Biver Says Smartwatches Still in Their Infancy: Blick
- MMT FP : TF1 Audience Fell to 20.4% in 2016, M6 Rose to 10.2%: Le Figaro
- MKS LN : M&S to Lift Some Prices 15% After Supplier Rebellion: S. Times
- UG FP : French New Car Registrations Rose 5.8% in Dec., 5.1% for 2016
- RNO FP : French New Car Registrations Rose 5.8% in Dec., 5.1% for 2016
- SAN FP : Sanofi, Boehringer Ingelheim Confirm Closure of Swap on Jan 1
- SAN FP : Sanofi, Merck End Joint Vaccines Business in Europe
- UHR VX : Hengdeli Holdings to sell two business units to its chairman for CNY 3.5bn (UHR owns 9.16% of Hngdeli)
- TEL NO : Cevian Capital sees Telia and Telenor as suitable merger partners - Dagens Naeringsliv
- TELIA SS : Cevian Capital sees Telia and Telenor as suitable merger partners - Dagens Naeringsliv
- TSLA US : Elon Musk Says HW2 Autopilot Software Uploaded to 1k Cars Today
- TFI FP : TF1 Audience Fell to 20.4% in 2016, M6 Rose to 10.2%: Le Figaro
- VWS DC : Vestas Gets 67 MW Order and 29 MW Order in U.S.
- VOD LN : Liberty Global, Vodafone complete transaction to combine Dutch operations - Press Rel- http://bit.ly/2iG5mz6
- VIV FP : Vivendi Said to Seek Mediaset Board Seats Amid Fight for Control

>>> Cevian Capital sees Telia and Telenor as suitable merger partners (translate

Cevian Capital sees Telia and Telenor as suitable merger partners (translated)

Cevian Capital, the Swedish activist fund, sees the Swedish telco Telia and Norwegian Telenor as suitable merger partners, according to Dagens Naeringsliv.

The Norwegian business daily cited Cevian co-founder, Christer Gardell, who said he believes that a merger between Telia and Telenor would be a good fit despite the likelihood of disposals for regulatory reasons.

He added that synergies are more likely between market players within close geographical proximity.

He also said that he believes the European telecoms market will see further consolidation within the next five to ten years and that the Nordic region has a chance to lead.

Gardell declined to comment when asked if Cevian owns any Telia shares.

The item noted that Telia and Telenor earlier tried to create a joint venture in Denmark but the deal was halted for regulatory reasons.

>>> Asian Update

Asia Mid-Session Market Update: China official PMIs slow but remain in expansion; Bulk of Asia indices remain closed for holiday

***Friday US markets on close: Dow -0.3%, S&P500 -0.5%, Nasdaq -0.9%***
- At the close: VIX 14.0 (+0.7pts); Treasuries: 2-yr 1.20% (-2bps), 10-yr 2.45% (-3bps), 30-yr 3.06% (-2bps)
- Best Sector in S&P500: Financials
- Worst Sector in S&P500: Technology

***Weekend US Corporate Headlines***
- DEPO: KKR remains interested in acquiring Depomed - NY Post
- TSLA: Tesla Model X owner files suit in California, claiming the SUV suddenly accelerated while parked - press
- DIS: "Rogue One" remained the top film at the N America box office with $49.7M (3rd consecutive week)

***Politics***
- (US) Incoming White House Press Sec Spicer: Trump plans to repeal many of Obama's regulations and executive actions on his first day in office - US press
- (KR) South Korea impeached President Park denies any wrongdoing, plays down aides influence and says she was "totally framed"

***Key economic data:***
- (CN) CHINA DEC MANUFACTURING PMI (GOVT OFFICIAL): 51.4 V 51.5E (5th consecutive month of expansion); Non-manufacturing PMI: 54.5 v 54.7 prior
- (HK) Macau Dec Casino Rev 19.8B Patacas v 18.8B m/m, +8% y/y (5th consecutive increase) v 14.4% prior; 2016 Casino Rev 223.2B Patacas, -3.3% y/y
- (KR) SOUTH KOREA DEC PMI MANUFACTURING: 49.4 V 48.0 PRIOR (5th consecutive contraction)
- (KR) SOUTH KOREA DEC TRADE BALANCE: $7.0B V $7.1BE

***Asia Session Notable Observations, Speakers and Press***
- Korea's Kospi the only major market open in the first trading session of the year; US and Europe remain closed in extended New Years holiday; FX majors also in extremely narrow ranges.
- China Dec official manufacturing PMI posts 5th straight expansion, though slower than expected; New export orders in expansion for 2nd straight month; Employment component remains in contraction at 48.9 v 49.2 m/m; Input prices at multi-month highs of 69.6 v 68.3 m/m.
- PBoC chief economist notes the new rules on cash transactions and overseas transfers are not capital controls after Chinese central bank increased controls on individuals' FX purchases to convert up to the equivalent of $50K. Recall late last week, PBoC also requested that banks report yuan trading over CNY50K vs CNY200K previously.
- South Korea PMI posts its 5th straight contraction as employment declined at fastest rate in over 2 years, even as new export orders improved for the first time in 5 months. Earlier, South Korea trade balance was in line with expectations, with exports rising for the 2nd straight month by +6.4% v 4.6%e.

China:
- (CN) China Stats Bureau: Manufacturing PMI slowed due to environmental protection measures, but expansion in high-technology and consumer goods sectors accelerated - Chinese press
- (CN) China PBoC chief economist Ma Jun: New rules on cash transactions and overseas transfers are not capital controls - Chinese press
- (CN) China President Xi calls for more efforts on construction of free trade zones (FTZ) - China Daily
- (CN) Hundreds of flights in China were cancelled and many highways shut on Jan 1st due to heavy smog conditions - Chinese press

Japan:
- (JP) Japan Center for Economic Research (JCER): Nov GDP estimated at +0.4% m/m; 3rd consecutive increase - Nikkei
- (JP) Japan Coast Guard: Four China vessels entered into disputed waters near Senkaku islands - press

***Asian Equity Markets/Futures (23:30ET)***
- Nikkei225 closed, S&P/ASX closed, Kospi +0.2%, Shanghai Composite closed, Hang Seng closed
- Equity Futures: S&P500 closed, Dax closed, FTSE100 closed

***FX ranges/Commodities/Futures/Fixed Income (23:30ET):***
- EUR 1.0515-1.0525; JPY 116.70-116.85; AUD 0.7200-0.7220; NZD 0.6915-0.6925
- Feb gold closed, Feb crude oil +0.2% at $53.90/brl, Mar copper closed
- GLD: SPDR Gold Trust ETF daily holdings fall 1.2 tonnes to 822.2 tonnes; 25th straight decline; Lowest since Apr 29th
- (KR) South Korea sells 3-year bonds; avg yields 1.635%

Recode.net : Courier-loving Trump claims he knows ‘things that other people don’

Courier-loving Trump claims he knows ‘things that other people don’t know’ about hacking
In yet another unproven claim, he said he will reveal all later this week.
Last night, President-elect Donald Trump made a series of unusual — okay, outright outlandish — claims about hacking and computers that only served to make what has become a thorny issue for his incipient administration much worse.
According to pool reports, Trump continued to try to undercut substantive worries about Russian interference in the election by essentially saying no one — including intelligence agencies, all of whom posit that Russia did engage in hacking — can ever know exactly what happened.
“I just want them to be sure, because it’s a pretty serious charge,” said Trump about the CIA, the FBI and everyone else with cyber expertise, who all agree Russia was involved. “I think it’s unfair if they don’t know.”
Except him apparently, because having zero tech background except a peculiar talent for writing mean tweets qualifies him as a cyber security expert.
No, really, he is, according to him. “And I know a lot about hacking. And hacking is a very hard thing to prove. So it could be somebody else,” he said, all duded up in a tux, looking like James Bond. “And I also know things that other people don’t know, and so they cannot be sure of the situation.”
Trump then claimed he would reveal all on Tuesday or Wednesday, as if we were all living in some really bad season of “Homeland.”
All I know: Get me Carrie Mathison, stat!
But Trump did not stop at that, sounding like your really ill-informed uncle at the holidays.
“I don’t care what they say, no computer is safe,” said Trump, who has previously claimed the hack of DNC servers could have been done by “someone sitting on their bed weighing 400 pounds.”
Then Trump dragged his 10-year-old son — whose tech skills he has touted before — into the controversy. “I have a boy who’s 10 years old; he can do anything with a computer,” he said about Barron.
And then even more, giving out a tip on how to avoid potential hackers like, say, his own child: “You want something to really go without detection, write it out and have it sent by courier.”
Courier? Courier? Let me just express my incredulity again: COURIER?!?!!?
By the way, couriers can be hacked — see the Revolutionary War — pretty easily, especially if they are riding horses.
It’s all just another feint in Trump’s efforts to try to dismiss the serious issue of Russian hacking by sowing unsubstantiated doubt into the situation. Earlier this week, he issued a statement that we all should “move on” from the topic. Of course, what else would he say, since allegations that he got his job in part due to the nefarious efforts of Russian leader Vladimir Putin undercut his authority drastically.
Trump has made that notion worse by tweeting a series of mash tweets praising Putin, even as the Obama administration aimed a series of retaliatory measures against Russia over the situation, including the expulsion of 35 diplomats suspected of intelligence-gathering violations.
It’s nice to know that top Silicon Valley leaders were heartened by Trump’s tech knowledge at their meeting with him recently.

FT : Inmates escape in ‘armed attack’ on Bahrain jail

Inmates escape in ‘armed attack’ on Bahrain jail
Manhunt under way after policeman killed in assault labelled ‘terrorist operation’

Inmates have escaped after an “armed attack” on a high-security prison in Bahrain, with one policeman killed in what the Gulf state called a “terrorist operation”.

The interior ministry said the escapees from Jaw prison included a number of prisoners held on terrorism-related charges. “Policeman Abdulsalam Saif was martyred trying to deal with the terrorist elements,” it said.
The authorities declined to reveal how many prisoners were on the run but said a manhunt was under way.
Bahrain’s jails have swelled with thousands of inmates since a crackdown on dissent after pro-democracy protests in 2011 led by the Shia majority against the minority Sunni ruling family.
The government’s claim of an “armed attack” raised concerns about the radicalisation of fringes of the Shia opposition. Activists, however, caution that the state’s highlighting of so-called “terrorist operations” diverts attention from its own abuses.
What the government characterises as security and judicial reforms, activists regard as harassment with the use of judicial powers to criminalise political protest.
Jaw prison, in the sparsely populated south, suffered riots in 2015 and has seen other breakouts. Last year, 17 prisoners escaped another jail but most were rearrested the next day.
Jaw’s defences have been fortified and consist of three layers of walls, making breaking out “almost impossible”, according to former inmates.
Pro-regime voices were quick to pronounce the breakout as proof that the inmates were terrorists, rather than peaceful protesters.
Ever present, albeit low-intensity, unrest in Bahrain reflects one of the deepest sectarian sores in the Middle East. The government has in recent months moved to bar the country’s main opposition group and revoke the citizenship of its leading Shia cleric.
The ruling Al Khalifa family is strongly backed by the Sunni Gulf states as a bulwark against Iranian interference in the region.
Saudi Arabia led Gulf Arab troops on to the archipelago in 2011 to back the government’s bloody quelling of pro-democracy protests that had taken off in the wake of Arab spring unrest in north Africa.
Riyadh remains concerned that arch-rival Tehran is intervening in Syria, Iraq and Yemen.
Claims that Iran is behind the unrest in Bahrain are denied by opposition leaders who say they want a more democratic system and an end to discrimination.