Bitcoin weaker on crackdowns in South Korea and China

Asia Market Update: Rio Tinto reports Q4 production, yuan continues to strengthen; Bitcoin weaker on crackdowns in South Korea and China

Headlines/Economic Data

General Trend:

- Japanese officials comment after recent gains in the Yen

- PBoC raises rate on 63-day open market operation (OMO) by 5bps to 2.95% (in line with prior 5bps increases on 7, 14 and 28-day reverse repos)

Japan

-Nikkei 225 opened flat; closed +1%

TOPIX Iron & Steel Index -1.5%

Softbank +1.9% (gained 3.2% prior session on speculation related to listing of mobile phone unit)

Fast Retailing +2.5% (reported better than expected Q1 results on Jan 11th)

- (JP) JAPAN DEC PPI (CGPI) M/M: 0.2% V 0.4%E; Y/Y: 3.1% V 3.2%E

- (JP) Japan Fin Min Aso: No comment on FX levels, do not see a big deal with dollar at ~¥110.80

- (JP) Japan Econ Min Motegi: Want to closely monitor impact that FX, financial market moves have on economy

-(JP) Japan Nov Tertiary Industry Index m/m: 1.1% v 0.3%e

-Japan MoF sells ¥1.79T v ¥2.2T indicated in 0.10% (prior 0.1%) 5-yr bonds; avg yield -0.084% v -0.107% prior; bid to cover 5.24x v 4.19x prior

Korea

-Kospi opened flat

Chipmakers gain: Samsung Electronics +1%, Hynix +1%

General weakness in financial sector: Industrial Bank of Korea -2.4%, Hana Financial -1.7%, Woori Bank -2.2%, KB Financial -1.2%

- (KR) South Korea Fin Min Kim: Irrational speculation in cryptocurrency; tax and regulation needed on crypto - Korean press

- (KR) South Korea has 147K people that have been jobless for six months or longer last year, the highest since record keeping began in 2000 - Korean press

China/Hong Kong

-Hang Seng opened +0.3%, Shanghai Composite -0.2%

-Info Technology +2%, Services +1.1% (supported by strength in gaming sector), Energy +1.4%, Materials +1.5%, Financials +1.3%, Property/Construction +1%

- (CN) China is unlikely to loosen property controls – CSJ

- (CN) Ratio of treasuries in China FX reserves is not likely to fall - Chinese press

- (CN) China debt yield may stay high and continue to rise – CSJ

- (CN) China PBOC Official Ruan Jianhong: To keep prudent and neutral monetary policy; Low M2 growth may become new normal - China Daily

-(CN) China President Xi: China and US should properly settle trade issue - Xinhua

- (CN) China PBoC OMO: Injects CNY320B in 7, 14 and 63-day reverse repos v CNY150B injected in 7 and 14-day prior: Net injects CNY270B v CNY50B drained prior; Raises 63-day reverse repo rate to 2.95% from 2.90% prior

- USD/CNY (CN) PBoC sets yuan reference rate at 6.4372 v 6.4574 prior (Strongest setting since Dec 11th 2015)

Australia/New Zealand

-ASX 200 opened +0.1%; closed -0.5%

- Rio Tinto: Opened higher but has since pared gains after Q4 production update and guidance

Energy -1%, Telecom -1%, Utilities -1%, Resources -0.5%, Financials -0.3%

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 123.5 v 122.0 prior

- (AU) Australia AOFM announces new benchmark 2.75% 2029 bond

- (AU) Australia Dec Motor Vehicle Sales m/m: 4.5% v 0.1% prior; y/y: 6.7% v 2.1% prior

- (NZ) New Zealand Dec Non-Resident Bond Holdings: 61.1% v 60.4% prior

-(NZ) ANZ’s NZ Market Focus report: productivity will need to rise if recent GDP growth is to be maintained

- Baby formula firm Bellamy's (BAL.AU) Announces Conditional Acquisition of Camperdown; Raises FY18 Rev +30-35% y/y (prior 15-20% y/y); EBITDA Margin 20-23% (prior 17-20%); +22%

- Fonterra (FCG.NZ) Reports Dec collections Total New Zealand 176.1M v 186.3M y/y; Fonterra Australia 16.1M v 12.6M y/y

- Rio Tinto (RIO.AU) Reports Q4 Pilbara iron ore shipments 90.0Mt v 89.7Mte v 87.7Mt y/y; Pilbara iron ore production 87.9Mt, +3% y/y

Other Asia

- (IN) India 10-year bond yield has risen by over 9bps on session: Reserve Bank of India (RBI) Acharya said banks shouldn't be repeatedly surprised with higher yields, Interest rate risks of banks can't be managed by regulator.

- (PH) Philippines Central Bank (BSP) Chief Espenilla: CPI could trend higher than anticipated; faces primary challenges managing risks to CPI view

- (TW) Taiwan said to consider allowing foreign banks to issue Taiwan Dollar (TWD) denominated bonds – local media

North America

- (US) GOP leaders said to be weighing spending deal to Feb 16th

Looking Ahead: Corporate earnings are expected from companies including Citi, CSX and UnitedHealth

Europe

- (UK) EU draft documents shows revised directives for EU chief negotiator Michel Barnier with more stringent conditions for a post-Brexit transition deal

– FT

- (UK) Chancellor of Exchequer Hammond (Fin Min): Britons want to keep European economic model - UK press

- (UK) PM May planning speech to outline Brexit policy in February - UK press

- (UK) PM May's EU Withdrawal Bill expected to move to the House of Lords this week and pass - financial press

- (UK) BOE’s Tenreyro: UK productivity growth could beat expectations; faster UK wage growth alone would not necessarily point to rate hike, productivity is important too; Expected to vote for "a couple more" quarter-point rises in the next three years if the economy performs in line with the BOE's expectations. - speaking at Queen Mary University of London

- (DE) Germany SPD Schulz: SPD leadership is united behind exploratory result; optimistic majority will vote for talks with Merkel; Notes ‘successful’ exploratory talks with Germany Chancellor Merkel.

- (FR) Bank of France said it already held some of currency reserves in yuan (CNY); vast majority of reserves remain invested in US dollar denominated assets

- (GR) Greece parliament approves austerity measures

- (EE) ECB’s Hansson (Estonia): Appropriate to end asset purchases after September if growth and inflation continue to evolve in-line with the central bank’s expectations - German press

- (EU) Moody's: Forecast policy rates to approach 1% for the ECB and 2% for the BoE and 3% for the US Fed by 2021.

- Fiat: CEO Marchionne: Have no intention of breaking up the company or selling individual brands to China or other parties

- BMW: Expects slight global sales growth in 2018 on new models - US financial press; Cites CFO at Detroit Auto Show.

- Continental: Said to hire JPMorgan as adviser regarding possible break-up - financial press

- Schaeffer: CEO: Guided Q4 Rev ~€3.5B, +8.5% y/y; 2017 Rev €14.0B, +5.9% y/y

Looking Ahead: UK Dec CPI due for release

Levels as of 01:00ET

- Nikkei225 +1%, Hang Seng +1.0%; Shanghai Composite +0.2%; ASX200 -0.5%, Kospi +0.8%

- Equity Futures: S&P500 +0.3%; Nasdaq100 +0.2%, Dax +0.2%; FTSE100 +0.1%

- EUR 1.2279-1.2248; JPY 110.98-110.48; AUD 0.7975-0.7949;NZD 0.7307-0.7281

- Feb Gold +0.4% at $1,340/oz; Feb Crude Oil +0.4% at $64.53/brl; Mar Copper -0.4% at $3.25/lb