China FX reserves slide for the 6th straight month

Asia Mid-Session Market Update: China FX reserves slide for the 6th straight month, but remain above the critical $3T level

Friday US markets on close: Dow +0.3%, S&P500 +0.4%, Nasdaq +0.6%

- Best Sector in S&P500: Technology

- Worst Sector in S&P500: Real Estate

- Biggest gainers: ILMN +5.2%; AES +3.6%; EBAY +3.5%

- Biggest losers: REGN -5.8%; -5.7%; NEW -3.1%

- At the close: VIX 11.32 (-0.35pts); Treasuries: 2-yr 1.21% (+4bps), 10-yr 2.42% (+5bps), 30-yr 3.01% (+5bps)

Weekend US Corporate Headlines

- MCD: Citic confirms acquisition of controlling interest in McDonalds China assets in a deal valued at $2.1B

- GM: CEO: Planning to keep small-car production in Mexico despite the criticism from president-elect Trump - press

- MACK: Said to be close to deal to sell 'most developed products' to Ipsen - financial press

- FCAU: Announces $1B investment in plants in Michigan and Ohio; to add 2,000 jobs

- VRTX: Guides FY16 Rev $1.68B v $1.70Be(KALYDECO Rev $703M (prior $685-705M); ORKAMBI Rev $979M); Guides FY17 KALYDECO Rev $690-710M; ORKAMBI Rev $1.1-1.3B

Politics

- (IR) Former Iran president Rafsanjani has died at age 82; Seen as a blow to moderate and reformist politicians - press

Key economic data:

- (CN) CHINA DEC FOREIGN RESERVES: $3.011T V $3.052T PRIOR (6th consecutive decline)

- (AU) AUSTRALIA NOV BUILDING APPROVALS M/M: 7.0% V 4.5%E; Y/Y: -4.8% V -5.7%E

- (AU) AUSTRALIA DEC AIG PERFORMANCE OF CONSTRUCTION INDEX: 47.0 V 46.6 PRIOR

- (AU) AUSTRALIA DEC ANZ JOB ADVERTISEMENTS M/M: -1.9% V 1.6% PRIOR

Asia Session Notable Observations, Speakers and Press

- Asian equity markets build on recent gains in the wake of steady US jobs data on Friday and further strength in US equities. S&P/ASX200 is the best index among the majors, rising to 8-month highs above 5,800 despite the weakness in top mining names.

- In FX, USD is up for the 2nd straight session, with most pronounced gains vs JPY and GBP. USD/JPY is up about 50pips amid renewed selling in US Treasuries, while GBP/USD was weighed down by comments from UK PM May reiterates commitment for Britain to leave the single market.

- China FX reserves fell for the 6th straight month to $3.01T, though the decline of $41B was slightly less than consensus drop of $51B. For the year, FX reserves fell $320B - a smaller decline than record high $513B in 2015. Speaking after the release, PBoC adviser Fan Gang said the authorities intervention in curbing outflows has not been significant, and that longer term, the decline is a positive development desired by PBoC to be done smoothly. Fan added that China needs less reserves after the Yuan inclusion in SDR basket, and also played down the worries about China's financial system risks.

- Outside China reserves, economic data from Australia were mixed. Building approvals topped expectations, reversing last months biggest decline in 11 months. Conversely, ANZ Job Ads data posted a surprise decline, though ANZ economist says it does not imply labor market momentum is stalling, adding "Business and consumer confidence remain elevated, capacity utilization appears to be on the rise, and retail sales have strengthened recently."

- Auto sector will remain in focus and likely on the crosshairs of President-elect Trump's tweets. GM CEO stated company is planning to keep small-car production in Mexico, given it made decisions on investment four years ago. Separately, Fiat announced a $1B investment in plants in Michigan and Ohio, with a promise to add 2,000 jobs.

China:

- (CN) Former IMF Deputy Dir Min Zhu Min: Latest FX reserves data reflect market and capital flows - press

- (CN) PBoC advisor Fan Gang: Intervention in FX reserves has not been large; CNY has been overvalued against USD over past 3-4 years - financial press

- (CN) China leaders to prioritize stability, allow room for slippage on GDP target - financial press

Japan:

- (JP) Japan Finance Ministry (MOF) to increase maximum sales amount of front-loading bonds to a record ¥56T, ¥8T more than initially planned - Nikkei

Asian Equity Indices/Futures (00:00ET)

- Nikkei closed, Hang Seng +0.1%, Shanghai Composite +0.6%, ASX200 +0.9%, Kospi +0.1%

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

FX ranges/Commodities/Fixed Income (00:00ET)

- EUR 1.0520-1.0545; JPY 117.00-117.50; AUD 0.7290-0.7330; NZD 0.6950-0.6975

- Feb Gold +0.1% at 1,175/oz; Feb Crude Oil -0.5% at $53.72/brl; Mar Copper +0.2% at $2.55/lb

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9262 (0.9% weaker from Fri, biggest margin of decline since June 2016) V 6.8668 PRIOR

- (CN) PBOC to inject combined CNY110B in 7-day and 28-day reverse repos v CNY89B prior

- (KR) South Korea Finance Ministry sells 5-yr govt bond at 1.85% v 1.34% prior

Asia equities/Notables/movers

- Yingde Gases 2168.HK: Received interest from Air Products & Chemicals and StellarS Capital; +12.9%

- China Agri-Industries Holdings 606.HK: Guides FY16 net profit HK$1.4B; +9.1%

- Sirtex Medical SRX.AU: Reports global H1 dose sales +5.6% y/y vs prior forecast of 4-6%; +1.9%

- Whitehaven WHC.AU: Affirms FY17 saleable coal production ~21-22Mt (100% basis); lowers production guidance for Narrabri longwall operation; -2.0%

- Town Health International Medical Gp Ltd 3886.HK: Issues FY16 profit warning; -2.4%

- Sharp 6753.JP: Said to have asked suppliers to cut prices by 20%, expected to take place in H1 - Taiwan press; -2.7%