BOJ's Kuroda still upbeat as Japan industrial output rises again

Asian Mid-session Update: BOJ's Kuroda still upbeat as Japan industrial output rises again; Shanghai extends decline amid RMB volatility ahead of IMF SDR announcement

Economic Data

- (JP) JAPAN OCT PRELIMINARY INDUSTRIAL PRODUCTION M/M: +1.4% (2nd straight increase) V +1.8%E; Y/Y: -1.4% V -0.9%E

- (JP) JAPAN OCT RETAIL SALES M/M: 1.1% V 0.3%E; Y/Y: 1.8% V 0.9%E; LARGE RETAILERS' SALES: 2.9% V 3.0%E

- (JP) JAPAN OCT VEHICLE PRODUCTION Y/Y: -0.5% V -3.6% PRIOR; 14th consecutive negative print

- (AU) AUSTRALIA OCT PRIVATE SECTOR CREDIT M/M: 0.7% V 0.6%E; Y/Y: 6.7% V 6.6%E

- (AU) AUSTRALIA Q3 COMPANY OPERATING PROFIT Q/Q: +1.3% V +1.1%E; INVENTORIES Q/Q: 0.1% V 0.0%E

- (AU) AUSTRALIA OCT TD SECURITIES INFLATION M/M: 0.1% V 0.0% PRIOR; Y/Y: 1.8% V 1.8% PRIOR

- (KR) SOUTH KOREA OCT INDUSTRIAL PRODUCTION M/M: -1.4% V -0.9%E; Y/Y: 1.5% V 2.2%E

- (KR) SOUTH KOREA DEC MANUFACTURING BUSINESS OUTLOOK INDEX SEASONALLY ADJ: 72 V 72 PRIOR: NON-MANUFACTURING 71 V 73 PRIOR

- (NZ) NEW ZEALAND OCT BUILDING PERMITS M/M: +5.1% V -5.8% PRIOR; first rise in 3 months

- (NZ) NEW ZEALAND NOV ANZ ACTIVITY OUTLOOK: 32.0 V 23.7 PRIOR; BUSINESS CONFIDENCE: 14.6 V +10.5 PRIOR (6-month high)

- (NZ) New Zealand Sept M3 Money Supply Y/Y: 7.7% v 8.5% prior

- (US) ComScore: Black Friday desktop spending rose 10% y/y to $1.66B

Index Snapshot (as of 04:30 GMT)

- Nikkei225 -0.7%, S&P/ASX -0.5%, Kospi -1.8%, Shanghai Composite -1.8%, Hang Seng -0.2%, Dec S&P500 -0.1% at 2,087

Commodities/Fixed Income

- Dec gold -0.1% at $1,054/oz, Jan crude oil +0.1% at $41.76/brl, Mar copper -0.6% at $2.04/lb

- Upcoming OPEC meeting said to be the most contentious in years with pressure building on the Saudis to cut output - financial press

- (CN) China 9 major copper smelters said to agree lowering production by 200Kt in 2016 (5% of 2015 level) - financial press

- GLD: SPDR Gold Trust ETF daily holdings fall 0.9 tonnes to 654.8 tonnes; Lowest since 2008

- (JP) BOJ offers to buy ¥300B in 1-3yr JGBs, ¥400B in 3-5yr JGBs, ¥240B in 10-25yr JGBs, and ¥140B in JGBs with maturity over 25-yr

- USD/CNY: (CN) PBoC sets yuan mid point at 6.3962 v 6.3915 prior; weakest Yuan setting since Aug 28th

- (KR) South Korea sells KRW1.62T in 3-yr govt bond, avg yield 1.815%

Market Focal Points/FX

- Asian equity markets have started the new week on the back foot with more pronounced declines. Shanghai Composite and Korea's Kospi are leading the selling, while the Hang Seng is more resilient, supported by gains in energy companies. USD majors traded in narrow bands - USD/JPY in a 25pip range above 122.70, AUD/USD in a 25pip range below 0.72, and EUR/USD a 25pip range above 1.0570. Chinese yuan midpoint was set at the lowest level in 3 months, but offshore market saw some pronounced buying ahead of the widely expected green light by the IMF to include the Yuan in its SDR basket.

- Economic data out of Japan saw more positive developments, as industrial output rose for the 2nd straight month m/m - albeit not as strongly as expected. METI however revised upward its Nov forecast to +0.2% from -0.3%. Retail sales growth was also much higher than expected, while decline in vehicle output much smaller than anticipated. BOJ Gov Kuroda spoke extensively through the session, maintaining commitment to adjust policy if needed to achieve the 2% inflation target but also not being particularly rushed to do so. His most notable remarks continued to attribute low inflation to falling oil prices, with expectations of being able to meet 2% CPI target by H2 of next year. Kuroda also reflected on the external risks such as developments in emerging economies.

- China markets remained under pressure, falling to a 3-week low below 3,400. While Citic Securities shares have come off their lows, stress in financial sector is not going away - local press reported NPLs have hit a new record high above 2%. Also of note, as speculated last week, China's 9 major copper smelters agreed on lowering production by 200Kt in 2016, which is about 5% of 2015 level. Copper prices were modestly higher in electronic trade on that report.

- Ahead of tomorrow's RBA decision, economic data from Australia will do little to shake expectations of a hold in rates with potential for some more currency jawboning. TD inflation of 1.8% remains below the 2-3% target range, while corporate profits for Q3 were marginally better than expected. BHP remained under heavy selling pressure with another 3.6% decline amid speculation that Brazil will sue BHP and Vale for $5.0B for damages related to Samarco dam burst

Equities

Notable movers by sector:

- Consumer discretionary: Tian Ge Interactive Holdings 1980.HK -7.6% (Q3 result); PAS Group PGR.AU -2.5% (acquisition); Dick Smith Holdings DSH.AU -55.3% (non-cash impairment; cannot rely on guidance); Slater & Gordon SGH.AU +33.3% (reaffirms guidance)

- Financials: Haitong Securities 600837.CN -10.0%, CITIC Securities 600030.CN -3.9% (under probe); Investa Office Fund IOF.AU -0.5% (affirms guidance); China Vanke 000002.CN +4.8%, Poly Real Estate 600048.CN +2.1% (more provinces lift home purchase limits)

- Industrials: GrainCorp GNC.AU +0.8% (said to consider spin-off asset)

- Materials: West China Cement 2233.HK +6.9% (acquisition); Minmetals Development Co 600058.CN -10.0% (private placement); Tongling Nonferrous Metals Group Co 000630.CN -2.9%, Jiangxi Copper Company 600362.CN -4.8% (agree to cut production next year); ALS ALQ.AU -22.8% (entitlement offer); Newcrest Mining NCM.AU -4.9% (gold at 6-year low); Metcash MTS.AU +13.4% (H1 result)

- Telecom: China Mobile 941.HK -0.9% (acquisition)

- Utilities: China Yangtze Power Co 600900.CN +2.2% (NDRC to allow direct power purchase from generators)