>>> Asian Update

Asia Mid-Session Market Update: Japan Tankan Manufacturing at 1-year high, Capex forecast reduced; ASX200 inching toward 2016 high; FX little changed ahead of Fed


***US Session Highlights***
- (US) Goldman Economist Chain Store Sales w/e Dec 10th w/w: +3.8%; Y/Y: +1.5%
- (US) NOV IMPORT PRICE INDEX M/M: -0.3% V -0.4%E; Y/Y: -0.1% V 0.0%E

***US markets on close: Dow +0.6%, S&P500 +0.7%, Nasdaq +1.0%***
- Best Sector in S&P500: Technology
- Worst Sector in S&P500: Industrials
- Biggest gainers: NBL +4.5%, STX +4.3%, NEM +3.9%, HES +3.6%, ENDP +3.5%
- Biggest losers: ALXN -4.4%, AA -3.2%, WY -3.2%, IRM -2.9%, URBN -2.8%
- At the close: VIX 12.7 (+0.1pts); Treasuries: 2-yr 1.16% (+1bp), 10-yr 2.48% (flat), 30-yr 3.15% (-1bps)

***US movers afterhours***
- VCEL: FDA approves Vericel's Maci for the repair of symptomatic, full-thickness cartilage defects of the knee in adult patients ; +51.9% afterhours
- ENT: Southwest Airlines enters into connectivity agreements with Panasonic Avionics and Global Eagle Entertainment; +19.6% afterhours
- NDSN: Reports Q4 $1.39 v $1.23e, R$509M v $482Me; +7.3% afterhours

***Politics***
- (IT) Italy PM Gentiloni wins vote of confidence in Lower House, faces Senate confidence vote tomorrow - press

***Asia Key economic data:***
- (JP) JAPAN Q4 TANKAN LARGE MANUFACTURING INDEX: 10 (1-year high) V 10E; MANUFACTURERS OUTLOOK: 8 (1-year high) V 9E; ALL-INDUSTRY CAPEX: 5.5% (3-quarter low) V 6.1%E
- (AU) AUSTRALIA DEC WESTPAC CONSUMER CONFIDENCE INDEX: 97.3 (lowest since April) V 101.3 PRIOR, M/M: -3.9% (2nd consecutive decline and largest decline in 7 months) V -1.1% PRIOR
- (AU) AUSTRALIA NOV NEW MOTOR VEHICLE SALES M/M: -0.6% v -2.4% PRIOR; Y/Y: -1.1% v 0.9% PRIOR
- (KR) South Korea Nov Unemployment Rate: 3.6% v 3.7%e
- (CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED

***Asia Session Notable Observations, Speakers and Press***
- Asia indices mixed; Australia favored despite the weakness in the mining space on several deals (APN Outdoor confirms all-scrip merger offer for oOh!media, Tatts Confirms non-binding proposal from Macquarie-led consortium at A$4.40-5.00/shr)
- USD majors in narrow ranges going into critical FOMC rate decision; 25bp rate hike baked in, with a focus on the dot plot and the outlook for 2017 tightening pace
- Jan WTI crude oil prices down over 1% in electronic trade after large build in API inventories; first build in 4 weeks.
- Japan Q4 Tankan mixed; Manufacturing Index and Outlook at 1-year high, but CapEx at a 3-quarter low; Survey sees tight job market with excess labor supply at lowest level since Mar 1992.
- Australia's soft Westpac Consumer Confidence report confirms weakness seen in NAB business sentiment data with the lowest Index since April and the biggest decline in 7 months. Economist citing concerns over economic growth following latest GDP against rising interest rates from banks, but still sees RBA on hold next year due to higher commodity prices, strong housing, and reduced drag from mining investment slowdown.

China:
- (CN) China Insurance Regulatory Commission (CIRC) may be required to secure formal approval before acquiring listed companies - Caixin
- (CN) SAFE: China to continue curbing illegal FX transactions; will work with police to curb illegal forex purchases and sales using fake docs - financial press

Japan:
- (JP) Japan Govt expected to announce FY17/18 GDP forecast of 1.5% - Nikkei
- (JP) Japan Chief Cabinet Sec Suga: To monitor economic trends after today's Q4 Tankan data - press
- (JP) Bank of Japan (BOJ) Official: Increase in BOJ's super long JGB buying took into account recent rapid rises in super long JGB yields; possibility of further volatility

Australia:
- (AU) BlackRock's Miller: AUD/USD to trade in $0.70-0.75 range and RBA to stand pat on rates in 2017 - press
- (AU) Australia Treasurer Morrison: Returning budget to balance is critical - press

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.1%, Hang Seng +0.6%, Shanghai Composite +0.1%, ASX200 +0.7%, Kospi +0.1%
- Equity Futures: S&P500 flat, Nasdaq +0.1%, FTSE100 -0.1%

***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0620-1.0640; JPY 115.00-115.30; AUD 0.7400-0.7500; NZD 0.7195-0.7215
- Feb Gold +0.3% at 1,162/oz; Jan Crude Oil -1.4% at $52.24/brl; Mar Copper -0.2% at $2.59/lb
- (US) Weekly API Oil Inventories: Crude: +4.7M v -2.2M prior; first build in 4 weeks; largest build since Nov 1st
- (CN) China to raise gasoline prices by CNY435/ton; To raise diesel prices by CNY420/ton
- SLV: iShares Silver Trust ETF daily holdings fall to 10,608 tonnes from 10,664 tonnes prior; 9th straight decline; lowest since July 5th
- (CN) China MoF sells 5-yr bonds at 2.895% v 2.91%e; bid-to-cover 1.84x
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9028 V 6.8934 PRIOR
- (HK) Hong Kong 1-month HK$ HIBOR 0.65929% v 0.62429% prior; 3-month 0.91921% v 0.86571% prior
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥410B in 5-10yr JGBs, ¥200B in 10-25yr JGBs, and ¥120B in JGBs with maturity over 25-yr

***Asia equities / Notables / movers by sector***
- Consumer discretionary: Tatts Group TTS.AU +8.7% (confirms bid proposal from Macquarie-led consortium); Dulux Group: DLX.AU +3.9% (guidance); oOh!media OML.AU +9.4% (merger proposal from APN); Asahi Group Holdings 2502.JP -1.7% (confirms acquisition); Sky Network Television SKT.AU -10.5% (Fox offer, guidance); Dentsu 4324.JP +3.7% (sets up fund); Kikkoman Corp.2801.JP -2.9% (press speculation on guidance)
- Industrials: Xinyi Glass Holding Co 868.HK -1.1% (profit alert); SMC Corp 6273.JP -2.5% (rejects question on accounting issues); Aurizon Holdings AZJ.AU -3.5% (JPMorgan initiates with underweight); Nidec Corp 6594.JP +2.9% (responds to Muddy Waters report)
- Technology: NEXTDC NXT.AU +8.9% (Morgans Financial raised to add); Fujitsu 6702.JP +1.4% (expects to reach agreement with Lenovo)
- Materials: Galaxy Resources GXY.AU +13.0% (signs contract); TNG TNG.AU -3.5% (signs MOU with Sumitomo Electric); Syrah Resources SYR.AU +14.8% (South32 shows interest)
- Energy: Xinyi Solar 968.HK +3.1% (profit alert); PetroChina Co 857.HK +3.7%, Sinopec 386.HK +3.7%, Kunlun Energy 135.HK +2.1% (China to raise fuel prices);Caltex Australia CTX.AU +3.0% (UBS raised to buy); Senex Energy SXY.AU -2.9% (Citi cuts to neutral)
- Healthcare: Benitec Biopharma BLT.AU +1.1% (outlook)

>>> After Hours Summary: NDSN +8%, RICK +1% following earnings, VCE


After Hours Summary: NDSN +8%, RICK +1% following earnings, VCEL +40% on FDA approval news... ABM -2% following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: BPMX +36.5%, NDSN +7.9%, RICK +1.0%

Companies trading higher in after hours in reaction to news: VCEL +40.4% (FDA approves first autologous cellularized scaffold for the repair of cartilage defects of the knee), ENT +18% (Global Eagle discloses in a filing that they entered into a new supply & services agreement with Southwest Airlines), SKIS +15.8% (announced USCIS approved the first I-526 Petition submitted by an investor in Mount Snow's EB-5 offering, allowing the funds raised in the offering to be released from escrow immediately), REXX +9.5% (announces that Nasdaq has accepted Rex Energy's request for continued listing), DSX +5.6% (Ironwood Trading discloses a 22.2% active stake), WNC +1.8% (ticking higher, reinstates dividend; intends to pay a quarterly dividend of $0.06/share), DBD +1.2% (Atlantic Investment discloses 5.1% active stake)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: ABM -2.1%

Companies trading lower in after hours in reaction to news: EGLE -6.4% (announces $100 mln private placement of approx 22.2 mln shares of common stock at a purchase price of $4.50 per share), CPE -2.9% (subsidiary buys acreage in core southern Delaware Basin for $615 mln in cash; commenced underwritten public offering of 34 mln shares of its common stock), ANW -2% (intends to offer $100,000,000 of convertible senior notes due 2021 in a private offering), HTZ -1.7% (announces Kathryn Marinello to become President and Chief Executive Officer effective January 3, 2017; announced that its three longest serving directors, Non-Executive Chair Linda Fayne Levinson, Compensation Committee Chair Carl Berquist and Financing Committee Chair Michael Durham have chosen to leave), TLRD -1.1% (appoints Jack Calandra as CFO effective January 3, 2017), WFC -1% (FDIC/Fed Reserve agencies jointly determined that Wells Fargo did not adequately remedy two of the firm's three deficiencies)

>>> US CLose Dow +0.58% S&P +0.65% Nasdaq +0.95% Russell +0.03%

Closing Market Summary: Market Hits Fresh Record Ahead of Expected Rate Hike

The stock market followed its Monday downtick with a Tuesday surge that lifted the key indices to new record highs. The S&P 500 gained 0.7% while the Nasdaq (+1.0%) outperformed ahead of tomorrow's FOMC policy statement, which will be released at 14:00 ET and is expected to call for a 25-basis point rate hike.

With the market believing that a rate hike will be announced tomorrow for all the right economic reasons, equity indices were free to continue their climb to stratospheric heights. However, the Russell 2000 (UNCH) spent the day near its flat line, suggesting the small cap rally may be running out of steam. The Russell 2000 narrowed its post-election gain to 14.9% versus a 6.2% gain in the S&P 500.

All eleven sectors began the trading day in the green with most maintaining that posture into the close while materials (-0.2%) and industrials (-0.1%) recorded slim losses.

The energy sector (+1.3%) ended in the lead while crude oil added 0.4% to settle at $52.98/bbl. The energy component received another measure of support on top of the weekend non-OPEC production cut agreement, as the International Energy Agency raised its oil demand forecast for 2017.

Energy spent the day jockeying for position with the technology sector (+1.2%). The top-weighted tech space spiked at the start thanks to gains among some of its largest components like Apple (AAPL 115.19, +1.89), Microsoft (MSFT 62.98, +0.81), and Facebook (FB 120.31, +2.54). Chipmakers also took part in the rally, sending the PHLX Semiconductor Index higher by 1.1%.

The market saw some afternoon backtracking, but daylong strength in other influential sectors like health care (+0.7%) and consumer discretionary (+0.8%) kept the S&P 500 in the top half of today's trading range. The health care sector received some support from biotech names, evidenced by a 0.6% gain in the iShares Nasdaq Biotechnology ETF (IBB 269.05, +1.52). Alexion Pharmaceuticals (ALXN 110.01, -5.07), however, fell 4.4% on top of yesterday's 12.9% dive.

Elsewhere, the industrial sector (-0.1%) underperformed throughout the day while the Dow Jones Transportation Average (+0.3%) was limited to a slight uptick, which masked a 4.2% jump in the shares of JetBlue Airways (JBLU 22.53, +0.91) after the carrier issued upbeat guidance.

Treasuries saw gains in overnight action, but the 10-yr note returned to its flat line by the close. The benchmark yield settled at 2.47% while the 2-yr yield rose two basis points to 1.17%. The long bond ended higher, pressuring its yield two basis points to 3.14%.

Today's participation was above average as more than one billion shares changed hands at the NYSE floor.

Investors received just one economic report today. Import prices excluding oil decreased 0.1% in November after declining 0.1% last month while export prices excluding agriculture also declined 0.1% after increasing 0.2% in October.

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while November Retail Sales (consensus 0.3%) and November PPI (consensus 0.1%) will cross the wires at 8:30 ET. November Industrial Production (consensus -0.1%) and Capacity Utilization (consensus 75.1%) will be reported at 9:15 ET while October Business Inventories (consensus -0.1%) will be released at 10:00 ET.

  • Russell 2000 +20.9% YTD
  • Dow Jones Industrial Average +14.3% YTD
  • S&P 500 +11.1% YTD
  • Nasdaq Composite +9.1% YTD