Equity markets open mixed as US/China still need to sign phase 1 trade deal

Asia Market Update: Equity markets open mixed as US/China still need to sign phase 1 trade deal; China Nov industrial production beats ests, market reaction initially limited; Aussie yields decline ahead of Tuesday’s release of RBA minutes

 

General Trend:

- January becomes new focal point in US/China trade talks: US said it sees the phase 1 deal signed during the first week of Jan in Washington D.C.

- Markets in Hong Kong and Shanghai decline in early trading: Financial and property shares weigh on Shanghai market as PBOC again left MLF rate unchanged, Nov data showed slowing in home prices

- Aussie equities outperform as consumer discretionary and financial companies rise

- Japanese equities weighed down by electronics, auto and financial companies

- PBOC set yuan reference rate stronger than 7.00 (strongest yuan fix since early Aug); US/China trade deal said to cover foreign exchange

- Agricultural commodities (Wheat, Soybeans, Corn) rise after US/China comments on phase 1 deal

- Aussie yields decline as Australia government cut growth forecast, declined to step up stimulus measures; RBA to release minutes on Tuesday

- Bank of Japan (BOJ) is due to hold its monetary policy meeting on Dec 18-19th (Wed-Thursday)

 

Headlines/Economic Data

Australia/New Zealand

- ASX 200 opened +0.3%

- (AU) AUSTRALIA DEC PRELIM CBA PMI MANUFACTURING: 49.4 V 49.9 PRIOR (lowest reading since data started)

- (AU) Australia Mid-Year Economic and Fiscal Outlook: 2020-21 budget surplus A$6.1B (prior A$11.0B in Apr); 2019/20 GDP 2.25% (prior 2.75%); 2019/20 CPI 2.0% (prior 2.25%)

- (AU) Australia Treasurer Frydenberg: Global trade tensions are weighing heavily on sentiment; govt is restoring finances to pay down debt

- FMG.AU CEO Gaines: Do not see a discount for lower iron ore product having a significant pullback to where it was last year and said those spreads tend to be cyclical; China demand for iron ore looks positive – AFR

- (NZ) New Zealand Institute of Economic Research (NZIER): Cuts 2019/20 GDP forecast to 2.2% (prior 2.3%); Cuts 2020/21 GDP 2.6% (prior 2.7%)

- (AU) Australia Fin Min Cormann: Global slowdown impacting domestic economy; rejects need for more fiscal stimulus

- QAN.AU Jetstar updates on strikes by the Australian Federation of Air Pilots (AFAP) and Transport Workers Union (TWU): Sees financial impact of A$20-25M; to reduce domestic capacity by 10% in January

Japan

- Nikkei 225 opened -0.3%

- (JP) Japan to lower official drug prices by 1.55% in FY20/21 - Japan press

- (JP) Bank of Japan (BOJ) Tankan Survey: Japan companies CPI expectations: 1-year 0.8% (prior 0.9%); 3-year 1.0% (prior 1.0%); 5-year 1.1% (prior 1.1%)

- (JP) JAPAN DEC PRELIM PMI MANUFACTURING: 48.8 V 48.9 PRIOR ( 8th straight contraction or reading below 50)

- (JP) Japan Govt may raises FY20/21 GDP outlook to 1.4% (July estimate 1.2%) due to expected boost from stimulus package - Nikkei

-(JP) Japan Chief Cabinet Sec: Reiterates Japan and South Korea talks are not the place to resolve the issue of export curbs

-2651.JP KDDI expected to acquire 2% stake for ¥12.0B, both companies are expected to partner in the area of smartphone settlement - Japanese press

Korea

- Kospi opened -0.1%

- 032640.KR South Korea govt approves merger with CJ Hello – Yonhap

- (KR) South Korea Foreign Min Kang: Talks should lead to lifting of Japan export curbs - comments from meeting with Japan Trade Min Motegi

- (KR) US Special Rep for North Korea Biegun: North Korea hostile tone in statements are regrettable; US doesn't have a deadline - speaking from South Korea

China/Hong Kong

- Hang Seng opened -0.6%; Shanghai Composite opened +0.1%

- (CN) CHINA PBOC SETS YUAN REFERENCE RATE: 6.9915 V 7.0156 PRIOR (1st setting stronger than 7 since Nov 12th, strongest level since Aug 6th)

- (CN) CHINA NOV INDUSTRIAL PRODUCTION Y/Y: 6.2% V 5.0%E; YTD Y/Y: 5.6% (fastest pace since June) V 5.5%E

- (CN) China National Bureau of Statistics (NBS): Reiterates to keep economic operations in reasonable range, domestic economy still faces relatively big downward pressure; affirms will be able to meet 2019 GDP target of 6.0-6.5%

- (CN) CHINA NOV RETAIL SALES Y/Y: 8.0% V 7.6%E; YTD Y/Y: 8.0% V 8.0%E

- (CN) CHINA PBOC CONDUCTS CNY300B V CNY300B PRIOR IN 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) OPERATIONS AT 3.25% V 3.25% PRIOR; NET INJECTION CNY14B (AS SPECULATED)

- (CN) China govt officials: first phase of trade talks achieved 'major progress'; US and China agreed on text of first phase trade deal; US promised to step up waivers for Chinese products; Decided to cancel retaliatory tariffs scheduled to take effect on Sunday; China will import more US wheat and corn after the deal; China will step up protection of intellectual property at its own pace

- (CN) CHINA NOV NEW HOME PRICES M/M: 0.3% V 0.5% PRIOR; Y/Y: 7.1% V 7.8% PRIOR

- (CN) China Foreign Min Wang Yi: Phase 1 US/China trade agreement is major good news for the entire world

- (CN) USTR releases 'fact sheet' on Phase 1 China trade deal (see full headline 16:58:13 - 12/13)

- (CN) Follow Up Trade Rep Lighthizer: No date yet set for China phase 2 trade talks, will focus on implementing phase 1, subsequent phases will depend on how the first phase is implemented and enforced - CBS

- (CN) China PBOC to sell CNY10B in bills in Hong Kong Dec 20th

- (CN) China Nov Surveyed Jobless Rate: 5.1% v 5.1% prior

North America

- IFF To Merge with DuPont’s Nutrition & Biosciences Business, values combined company at $45.4B; IFF cuts FY19 EPS $4.85-5.05 v $6.18e; affirms Rev $5.15-5.25B v $5.14Be (prior adj EPS $6.15-6.35, adj Rev $5.15-5.25B); DD Affirms FY19 $3.77-3.82 v $3.80e; Rev $21.5B v $21.5Be; Op EBITDA lower end of prior $1.4B

- BA According to sources has signaled production change for MAX to US officials; considering cut or halt of its production, decision expected Monday/when the board meets - US financial press

- (MX) Mexico deputy foreign minister for North America Seade: Mexico will never accept disguised labor inspectors under USMCA

Europe

- (UK) Dec Rightmove House Prices m/m: -0.9% v -1.3% prior (smallest Dec decline since 2006); y/y: +0.8% v +0.3% prior

- (FR) Four branches of France’s CGT union, including railway and transport workers have threatened to increase protests/strikes unless the govt withdraws pension reform proposal this week – press

- (UK) PM Johnson is looking for parliament vote on Brexit before Christmas in order to get it done by exit deadline of Jan 31, 2020 – press

- (UK) Ministers expect to choose next Bank of England (BOE) Gov in the near term - FT

 

Levels as of 12:15ET

- Hang Seng -0.3%; Shanghai Composite +0.1%; Kospi -0.1%; Nikkei225 -0.1%; ASX 200 +1.6%

- Equity Futures: S&P500 +0.3%; Nasdaq100 +0.3%, Dax +0.2%; FTSE100 +0.6%

- EUR 1.1134-1.1122; JPY 109.44-109.31; AUD 0.6886-0.6869; NZD 0.6605-0.6588

- Commodity Futures: Gold -0.2% at $1,479/oz; Crude Oil -0.4% at $59.75/brl; Copper +0.2% at $2.79/lb