>>> Asian Update

Asia Mid-Session Market Update: Australia Retail Sales top estimates; USD under modest pressure despite rising US yields

***US Session Highlights***
- (US) NOV FINAL MARKIT MANUFACTURING PMI: 54.1 V 53.9E (highest since Oct 2015)
- (US) NOV ISM MANUFACTURING: 53.2 V 52.5E; PRICES PAID: 54.5 V 54.5E (demand is straining US factory capacity slightly)

***US markets on close: Dow +0.4%, S&P500 -0.4%, Nasdaq -1.4%***
- Best Sector in S&P500: Industrials
- Worst Sector in S&P500: Technology
- Biggest gainers: DO +6.9%, SWN +6.9%, GM +5.5%, FLS +5.1%, HBAN +4.6%
- Biggest losers: MCHP -7.5%, ADI -7.0%, LRCX -7.0%, SWKS -6.6%, AMAT -6.5%
- At the close: VIX 14.1 (+0.7pts); Treasuries: 2-yr 1.14% (+2bp), 10-yr 2.44% (+7bps), 30-yr 3.10% (+8bps)

***US movers afterhours***
- FIVE: Reports Q3 $0.10 v $0.09e, R$199.5M v $200Me; +11.1% afterhours
- ULTA: Reports Q3 $1.40 v $1.37e, R$1.13B v $1.11Be; +5.9% afterhours
- ASNA: Reports Q1 $0.18 v $0.21e, R$1.68B v $1.71Be; +3.8% afterhours
- SBUX: CEO Howard Schultz to step down, to become exec Chairman; COO Kevin Johnson to take over as CEO; effective April 3, 2017; -3.3% afterhours
- ZUMZ: Reports Q3 $0.43 v $0.36e, R$221.4M v $220Me; -5.3% afterhours
- SWHC: Reports Q2 $0.68 v $0.55e, R$234M v $228Me; -5.3% afterhours
- AMBA: Reports Q3 $1.11 v $0.94e, R$100.5M v $96.0Me; Guides Q4 R$84-87M v $88.9Me; -6.3% afterhours
- ATI: Suspends quarterly dividend (prior 1.8% yield); -7.1% afterhours
- GIII: Reports Q3 $1.50 v $1.53e, R$883M v $938Me; -9.8% afterhours
- WDAY: Reports Q3 +$0.03 v -$0.04e, R$409.6M v $401Me; -11.8% afterhours

***Politics***
- (US) Goldman Sachs COO Cohn being considered for Energy Secretary by Pres-elect Trump - Fox Business
- (FR) France PM Manuel Valls to step down; To be replaced by Bernard Cazeneuve - press
- (KR) South Korea opposition parties agree to propose a motion to impeach Pres Park - Korean press

***Asia Session Notable Observations, Speakers and Press***
- Asian markets starting to strain under the pressure of rising US Treasury yields
- US tech sector under increasingly heavier selling pressure to fund rotation into Financials and Industrials.
- USD majors in narrow ranges ahead of Friday's non-farm payrolls. USD with marginal declines against JPY, EUR, AUD, NZD for 2nd straight day.
- Australia retail sales top expectations and CBA raises fixed rates as economist sentiment over RBA policy bias in 2017 differs between more cuts and highs
- Fitch joins Moody's in warning about China property sector correction in 2017.

China
- (CN) Former PBoC adviser Yu: China should cut intervention in FX market; Should not promote Yuan internationalization too aggressively - press
- (CN) Bank of Communications (BoCom) economist: Pickup of economy lifted by increasing infrastructure projects - Chinese press
- (CN) Fitch: China residential sales to fall about 15% in 2017

Japan
- (JP) Japan govt preparing to issue more debt-covering bonds due to likely shortfall in tax rev this year - Japan press
- (JP) Former BOJ member Shirai: BOJ should raise 10-year JGB yield target to 0.5-1.0% (**currenty at around 0%) - press
- (JP) Japan Fin Min Aso: no comment on appointment of Steven Mnuchin as US Treasury Sec

Australia
- (AU) NAB: Australia Q3 real GDP seen at -0.2% q/q v +0.5% in Q2
- CBA Raises fixed rates on owner occupied investment loans

***Asia Key economic data:***
- (AU) AUSTRALIA OCT RETAIL SALES M/M: 0.5% V 0.3%E
- (JP) JAPAN NOV MONETARY BASE Y/Y: 21.5% v 22.1% PRIOR; MONETARY BASE END OF PERIOD: ¥419.8T v ¥417.6T PRIOR
- (KR) SOUTH KOREA Q3 FINAL GDP Q/Q: 0.6% V 0.7%E; Y/Y: 2.6% V 2.7%E

***Asian Equity Indices/Futures (00:00ET)***
- Nikkei -0.8%, Hang Seng -1.3%, Shanghai Composite -1.0%, ASX200 -1.0%, Kospi -0.8%
- Equity Futures: S&P e-mini -0.2%, Dax -0.3%, FTSE100 -0.4%

***FX ranges/Commodities/Fixed Income (00:00ET):***
- EUR 1.0655-1.0690; JPY 113.60-114.20; AUD 0.7400-0.7435; NZD 0.7085-0.7105
- Dec Gold +0.6% at 1,176/oz; Jan Crude Oil -0.7% at $50.67/brl; Mar Copper -1.1% at $2.61/lb
- GLD: SPDR Gold Trust ETF daily holdings fall 13.7 tonnes to 870.2 tonnes; 13th straight decline; lowest since May 31st
- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8794 V 6.8958 PRIOR; Strongest Yuan fix since Nov 17th
- (CN) PBOC to inject CNY160B in 7-day reverse repos, CNY60B in 14-day reverse repos, and CNY25B in 28-day reverse repos; Injects net CNY70B this week v injected CNY40B prior
- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥410B in 5-10yr JGBs, and ¥500B in T-Bills
- (AU) Australia Finance Ministry (AOFM) sells A$900M in 2019 bonds; avg yield 1.969%; bid-to-cover 2.72x

***Asia equities / Notables / movers by sector***
- Consumer discretionary: Clarion Co 6796.JP +13.3% (Credit Suisse raised to outperform); Sands China 1928.HK -5.1% (EPS expectations lower than peers)
- Consumer staples: Bellamy's Australia BAL.AU -41.6% (guidance)
- Industrials: Hanjin Shipping Co 117930.KR +4.0% (terminal sales speculation); Komatsu 6301.JP -1.9% (SMBC cuts to underweight); Tadano 6395.JP +5.2% (JPMorgan raises to overweight); Fuji Heavy Industries 7270.JP -1.0% (Macquarie cuts to underperform); Honda Motor 7267.JP -0.7% (Macquarie cuts to neutral); Hyundai Motor Co 005380.KR +1.5% (Nov result)
- Technology: NetDragon Websoft 777.HK -2.7% (Q3 result); Taiwan Semiconductor Manufacturing Co 2330.TW -2.5%, Catcher Tech 2474.TW -0.8%, Pegatron Corp 4938.TW -1.7% (iPhone shipment expectations reduced)
- Materials: Sims Metal Management SGM.AU +1.2% (share buyback); Alumina AWC.AU -3.5% (UBS cuts to sell); Nippon Steel & Sumitomo Metal Corp 5401.JP +1.1% (Mizuho raised to buy); Evolution Mining EVN.AU +5.8% (gold rises)
- Energy: Beach Energy BPT.AU -0.9% (Copper energy lowers stake); Karoon Gas Australia KAR.AU -1.7% (Wellington Management cuts stake); China Shenhua 1088.HK +1.6%?(China to stabilize coal market)

>>> US After Hours Summary: FIVE +11%, ULTA +6% following earnings/gu

After Hours Summary: FIVE +11%, ULTA +6% following earnings/guidance... WDAY -12%,SWHC -6%, AMBA -6%, GPS -1% following earnings/guidance/SSS, SBUX -3.5% on CEO transition news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: FIVE +11.1%, ULTA +6.2%

Companies trading higher in after hours in reaction to news: CTIC +24.4% (announces results of a translational pharmacology study comparing biomarker activity profiles for three JAK inhibitors: pacritinib, ruxolitinib and momelotinib, using the BioMAP Diversity PLUS panel of in vitro human primary cell-based systems),  NEWM +4.2% (ticking higher; to join the S&P SmallCap 600)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance/SSS: WDAY -11.9%, GIII -7.9%, SWHC -6.2%, AMBA -6.2%, ZUMZ -5.3% (also reported Nov same store sales of +5.7% vs -13.8% year ago and +10.2% last month), GPS -1.2%, (reported Nov same store sales of -1% vs -8% year ago)

Companies trading lower in after hours in reaction to news: ENSV -32.4% (announces an underwritten common stock offering), CVM -24.7% (announces proposed public offering of common stock and warrants), HMLP -8.4% (agrees to acquire a 51% interest in the FSRU Hoegh Grace for about $91.80 mln; proposes a possible quarterly dividend increase of 4-5% assuming the purchase is completed; announces public offering of 5,500,000 common units), INTX -7% (to cease operations of Pet Health Monitoring business to concentrate resources on identity and privacy protection services; Loeb Holding withdrew proposal regarding a possible acquisition of the Pet Health Monitoring Business), SM -4.4% (commences 8 mln common stock offering), FMSA -4.4% (files for mixed securities shelf offering and approx 71.1 mln share secondary offering by selling security holders), VBLT -3.8% (enters into separate equity distribution agreements to implement an at the market offering program under which it may offer and sell its ordinary shares having an aggregate offering price of up to $20 mln), SBUX -3.5% (confirms that effective April 3 Chairman & CEO Howard Schultz will be appointed Executive Chairman; Replacement CEO named), ATI -3.4% (suspends quarterly dividend effective immediately), HTBX -1.9% (modestly rebounding; also files for offering of 3,020,084 shares of common stock issuable upon exercise of outstanding warrants), JNJ -0.2% (light volume; indicated lower on unfavorable hip implant verdict news)

>>> US Close Dow +0.36% S&P -0.35% Nasdaq -1.36% Russell -0.65%

Closing Market Summary: Stocks Slip Ahead of November Employment Report

The stock market ended Thursday on a mixed note ahead of Friday's Employment Situation report for November (consensus 180,000). The Dow Jones Industrial Average (+0.4%) continued its recent outperformance while the S&P 500 (-0.4%) and Nasdaq (-1.4%) ended in negative territory for the second consecutive day. The Nasdaq extended its weekly decline to 2.7%, settling just below its 50-day moving average (5264) for the first time since November 14.

Equity indices started above their flat lines, but countercyclical sectors and the top-weighted technology group displayed relative weakness from the start. The underperformance in the tech sector took a toll on the Nasdaq Composite while the broader S&P 500 benefited from solid gains in three cyclical groups.

The technology sector (-2.3%), which accounts for nearly 21.0% of the S&P 500, was pressured by daylong selling among high-beta chipmakers. The PHLX Semiconductor Index lost 4.9% with Apple (AAPL 109.47, -1.05) suppliers leading the decline after reports that the tech giant was reducing orders for the iPhone 7 due to weak demand. Apple fell 1.0% while Broadcom (AVGO 162.79, -7.70), Cirrus Logic (CRUS 49.32, -5.68), Qualcomm (QCOM 64.16, -3.97), and Skyworks (SWKS 71.78, -5.07) lost between 4.5% and 10.3%. Following today's profit taking, the PHLX Semiconductor Index remains up 26.1% for the year.

The Nasdaq also had to contend with daylong weakness in biotechnology, which sent the iShares Nasdaq Biotechnology ETF (IBB 269.49, -4.58) lower by 1.7%. However, the broader health care sector (-0.8%) settled a bit closer to its flat line.

Similar to health care, three of the remaining four countercyclical groups spent the day in negative territory. The real estate sector (-1.6%) extended its fourth-quarter loss to 10.2% while utilities (-0.9%) and consumer staples (-0.7%) struggled as yields remained on the rise. The benchmark 10-yr yield rose six basis points to 2.44% while the 2-yr yield increased two basis points to 1.14%.

Besides pressuring defensively-oriented groups, the increase in yields was a supportive factor for the financial sector (+1.7%), which is now up 18.1% in the fourth quarter due to sharp steepening in the yield curve. Sector heavyweights Bank of America (BAC 21.50, +0.38) and JPMorgan Chase (JPM 81.79, +1.62) gained 1.8% and 2.0%, respectively.

Elsewhere on the cyclical side, energy (+0.3%) and industrials (+0.8%) continued their recent outperformance, but the energy sector slid from its high into the close. Crude oil also backed away from its best level of the day, but still settled higher by 3.3% at $51.06/bbl. The energy component is now within striking distance of its 2016 high ($51.93/bbl).

For the second day in a row, the industrial sector (+0.8%) received support from transport stocks. The Dow Jones Transportation Average climbed 0.6% with CSX (CSX 36.62, +0.81) ending among the leaders. Recall that the rail carrier raised its fourth-quarter guidance yesterday.

Today's NYSE floor volume was above the 200-day average of 926 million, as 1.1 billion shares changed hands.

Economic data included Initial Claims, Construction Spending, and ISM:

  • Initial claims for the week ending November 26 increased 17,000 to 268,000 ( consensus 253,000), marking the 91st straight week they have been below 300,000
    • Continuing claims for the week ending November 19 jumped by 38,000 to 2.081 million
  • Construction spending increased 0.5% in October (consensus +0.6%) following an upwardly revised unchanged reading (from -0.4%) for September. This will be a positive input when computing Q4 GDP
  • The ISM Manufacturing Index rose to 53.2 in November (consensus 52.1) from 51.9 in October
    • This was the third straight month that manufacturing activity has expanded and it is the highest reading since June 2016

Tomorrow, the Employment Situation report for November (consensus 180,000) will be released at 8:30 ET.

  • Russell 2000 +16.3% YTD
  • Dow Jones Industrial Average +10.1% YTD
  • S&P 500 +7.2% YTD
  • Nasdaq Composite +4.9% YTD

>>> CAT US - Guides FY17 R$38B v $38.1Be, sees FY17 EPS $3.25 consensus ex restr

CAT US - Guides FY17 R$38B v $38.1Be, sees FY17 EPS $3.25 consensus ex restructuring as too optimistic considering expected headwinds (Zack's FY17 consensus estimates is $3.36e) - investor presentation 
- $38B is a reasonable midpoint expectation. In our view, $3.25 on $38B of revenues is too optimistic considering expected headwinds
- at $38B, sales are about $1B lower than the 2016 outlook 
- that's a variable margin headwind of $350-450M
- net of headwinds and tailwinds, we remain committed to decrementals of 25-30% ex restructuring costs

ECB seeks compromise on asset buys as part of extension of programme - sources -

XCLUSIVE-ECB seeks compromise on asset buys as part of extension of programme - sources - Reuters News

01-DEC-2016 17:02:04

By Noah Barkin , John O'Donnell and Balazs Koranyi

BERLIN/FRANKFURT, Dec 1 (Reuters) - The ECB will extend its bond purchases beyond March and consider sending a formal signal after its policy meeting next Thursday that the programme will eventually end, senior sources with direct knowledge of discussions said.

Even some sceptics of more stimulus on the bank's Governing Council have accepted that an extension beyond the current expiry date of March is inevitable given weak underlying inflation and heightened political risk, they said.

They are still wrestling with the question of how to structure that extension, however, according to multiple senior sources at the European Central Bank and national central banks.

Much of the preparatory staff work has focused on a six-month extension at a steady pace of 80 billion euros per month, an option favoured by many as growth is sluggish, inflation lacks momentum and political risk from key elections keeps the chances of market volatility high, three sources said.

But some have indicated they would favour an extension at lower volumes, for example nine months at 60 billion euros a month, fearing that a straight extension could make the programme appear open-ended, two of the sources said.

A compromise under discussion would be to signal the programme's eventual end, possibly in the bank's forward guidance, indicating that the purchases cannot be extended indefinitely.

Another option is not to specify monthly purchase volumes, essentially making them dependent on economic developments, the sources said. That would allow the ECB to buy up to 80 billion euros without requiring it to spend the full amount.

"Coupled with the extension, there's a sense that you need to send a signal, also for the hawks, that we will not be in the QE (quantitative easing) business forever," one of the sources said. "We're not talking about tapering. We're talking about a signal."

Another source from a country that is not seen to be in the hawk or dove camp said he estimated there was a majority on the council in favour of sending such a signal.



TENSION

With tensions running high after around 1.4 trillion euros of bond buys, such a compromise would be an important concession to conservatives like Germany, the euro zone's biggest economy, which has been outvoted in key decisions, leading to tension between Berlin and the Bank.

Some proponents of the extension fear an ill-timed signal about reduced buying in future could heighten market volatility, potentially undoing some of the benefits of the scheme.

The sources noted that no decision has been made, that the ECB board proposals for the Dec 8 meeting have not been sent to the euro zone's 19 central banks and that the ultimate outcome could be different than the scenarios outlined above.

The ECB itself declined to comment.

Its "quantitative easing" asset-buying programme, begun in March 2015 to fight off the threat of deflation, has already been extended and enlarged as diving oil prices dragged inflation into negative territory.

The ECB has missed its target for achieving an inflation rate of below but close to 2 percent for more than three and a half years and fears that its credibility would be damaged if it gave up the fight.

The measures are likely to be presented in a package with several changes, including a tweak of the bank's forward guidance. The bank is expected to continue promising exceptionally low rates for an extended period.

Inflation has risen sharply in recent months and will comfortably exceed 1 percent by early next year, supporting calls by conservative policymakers for the ECB to take its foot off the accelerator.

But nearly all of the increase comes from past oil price falls getting knocked out of data, suggesting the rise is due to statistical factors and not an indicator of returning inflation.

"There is no movement whatsoever in core inflation," one of the sources said. "But there is very little space left for monetary policy."

Still, initial 2019 inflation forecasts due next week will be at or near target, the ECB has said, indicating that the inflation trajectory continues to point up.

Extending the asset buys would require the ECB to ease some of its self-imposed restrictions, a sensitive debate as most options on the table raise legal or political concerns, facing varying degrees of opposition within the Governing Council.

Still, ECB President Mario Draghi seemed to dismiss those concerns this week, arguing that the programme was sufficiently flexible, suggesting that parameter changes would not stand in the way if policymakers opted for the extension.

Indeed, arguing that growth stalling was the biggest risk to the euro zone economy and "very substantial" stimulus needed to be preserved, Draghi has sounded a dovish tone recently, backing expectations for more stimulus.



(Editing by Hugh Lawson)



Keywords: ECB-POLICY/ (EXCLUSIVE, URGENT, PIX)

Reuters built an algorithm to flag and verify breaking news on Twitter

Reuters built an algorithm to flag and verify breaking news on Twitter
A tool that filters out the fake
Reuters has developed a tool capable of automatically detecting and verifying breaking news on Twitter, in an attempt to report on events more rapidly and accurately. The tool, known as Reuters News Tracer, has been developed over the past two years, but Reuters only made it public this week, in interviews with the Columbia Journalism Review and Nieman Lab.

News Tracer analyzes tweets in real-time, filtering out spam and grouping similar tweets into “clusters” based on similar words. The tool then classifies the clusters into topics and generates short summaries about each one. Tweets with the words “bomb” or “explosion,” for example, might be grouped under a terrorist attack cluster.

The idea, according to Reg Chua, Reuters’ executive editor of data and innovation, is to help automate the news gathering process. “A large part of our DNA is built on the notion of being first, so we wanted to figure out how to build systems that would give us an edge on tracking this stuff at speed and at scale,” Chua tells Nieman Lab. “You can throw a million humans at this stuff, but it wouldn’t solve the problem.”

The algorithm also helps verify breaking news by assigning a credibility score to each cluster, based on a range of factors: the location and identity of the person tweeting, how the tweet spreads, and whether the information is being confirmed or debunked on Twitter. As Nieman Lab notes, “Reuters essentially taught its algorithm to think like a reporter.”

Other newsrooms have explored different forms of automation. Last year, the Associated Press began using algorithms to write full stories, with a tool called Automatic Insights. The French newspaper Le Monde is also working on a browser extension that will automatically flag fake or misleading news — something that Facebook has been notoriously reluctant to address.

>>> US Gapping up

Gapping up
In reaction to disappointing earnings/guidance:
  • CBK +19.2%, TLYS +18.3%, SMTC +6%, LZB +5.4%, (also increases quarterly dividend by 10% to $0.11 per share), BOX+3.4%, VSM +2.5%
  • NWY +1%, DSGX +0.7%, PVH +0.6%
M&A news: CLC +16.3% (to be acquired by Parker Hannifin (PH) for $83.00/share in cash), KZ +2.1% (agrees to be taken private for $7.55/share), SYT +1.8% (Reuters details that ChemChina plans to setup $5 bln fund to finance Syngenta), .

Select EU financial related names showing strength: CS +3.4%, RBS +2.5%, BCS +1.2%, DB +1%

Select oil/gas related names showing early strength:
  • TPLM +10.4%, LEI +9.8%, NAO +8.3%, SDRL +8.2%, WTI +6.5%, MRO +4.9%, CRC +4.6%, OAS +4.5%, CHK +4%,ESV +4%
  • BAS +3.9%, REXX +3.7%, RIG +3.6%, RDS.A +1.9%, BP +1.8%
Other news:
  • BSTG +27.5% (confirms that its Cellspan Esophageal Implant was granted Orphan Drug Designation by the FDAg)
  • BLUE +24% ( announces interim Phase 1 dose escalation data for Anti-BCMA CAR T product candidate in patients with relapsed/refractory multiple myeloma; 100% of patients in second and third dose cohorts achieved objective response; two patients MRD-negative; overall response rate 78%)
  • FF +8.6% (declares a special cash dividend of $2.29/share)
  • SKX +6.9% (CEO disclosed purchase of 500K shares worth more than $5.5 mln; also upgraded to Buy from Neutral at Buckingham Research)
  • CLRB +6.7% (updates on the first two cohorts of its Phase I clinical study of CLR 131)
  • CYTK +4.2% (announces that Amgen (AMGN) has started GALACTIC-HF)
  • COL +3.5% (Starboard may push for Rockwell to reconsider its pending merger with BEAV)
  • JUNO +3.2% (in sympathy with BLUE)
  • KITE +3.1% (in sympathy with BLUE)
  • PNLYY +2.9% (thinly traded ADR; PostNL acknowledges receipt of revised final proposal from bpost; is reviewing and considering bpost's revised conditional offer)
  • MBLY +1.9% (initiated with a Buy at Needham; tgt $55 )
  • ZIOP +1.5% (in sympathy with BLUE)
Analyst comments:
  • WLL +7.2% (upgraded to Buy from Hold at Stifel)
  • SMTC +6.8% (upgraded to Outperform from Perform at Oppenheimer)
  • SM +4.3% (upgraded to Buy from Hold at Stifel)
  • EOG +2% (upgraded to Buy from Hold at Stifel)
  • APC +1.9% (upgraded to Buy from Hold at Stifel)
  • DE +1.4% (upgraded to Buy from Neutral at BofA/Merrill)