Fitch warns about China credit bubble; USD rally pauses

Asia Mid-Session Market Update: 7.3 earthquakes in Japan inflicts minimal damage; Fitch warns about China credit bubble; USD rally pauses

US Session Highlights

- (US) Fed Vice Chair Fischer: seen some appreciation of USD currency; higher USD won't stop Fed from doing what needs to be done for US economy

- (US) Oct Chicago Fed National Activity Index: -0.08 V 0.00e; prior revised lower

- OPEC experts are said to be making 'some progress' in ongoing technical meeting talks in Vienna - press

US markets on close: Dow +0.5%, S&P500 +0.8%, Nasdaq +0.9%

- Best Sector in S&P500: Basic Materials

- Worst Sector in S&P500: Healthcare

- Biggest gainers: MRO +8.9%, CHK +7.0%, RRC +7.0%, SWN +6.2%, FCX +5.6%

- Biggest losers: TSN -14.5%, HSIC -5.4%, EXR -2.6%, GPS -2.4%, TGNA -2.3%

- At the close: VIX 12.4 (-0.4pts); Treasuries: 2-yr 1.09% (flat), 10-yr 2.34% (flat), 30-yr 3.01% (flat)

US movers afterhours

- SBLK: Reports Q3 -$0.44 v -$0.65e, R$59.9M v $42.8M +10.9% afterhours; +4.1% afterhours

- SINA: Reports Q3 $0.56 v $0.40e, R$274.9M v $255Me; +1.7% afterhours

- VIPS: Reports Q3 $0.15 v $0.15e, R$1.80B v $1.84Be; -4.9% afterhours

- BECN: Reports Q4 $0.88 v $0.91e, R$1.17B v $1.27Be; -6.7% afterhours

- PNNT: Reports Q4 $0.21 v $0.25e; -10.3% afterhours

- DY: Reports Q1 $1.67 v $1.65e, R$799.2M v $801Me; -11.8% afterhours

- PANW: Reports Q1 $0.55 v $0.53e, R$398M v $400Me; Guides Q2 $0.61-0.63 v $0.63e, R$426-432M v $438Me; -12.8% afterhours

Politics

- (US) President-elect Trump releases video of planned measures on day one; To withdraw from TPP and negotiate bilateral trade deals; Canceling restrictions on production of shale energy and clean coal.

Asia Session Notable Observations, Speakers and Press

- S&P500, Dow Industrials, Nasdaq, and Russell indices all close at record highs for the first time since 1999.

- USD breaks a string of gaining sessions as US treasuries selloff subsides.

- Yuan fix set firmer for the first time in 13 days.

- Oil prices extend gains on OPEC optimism; US energy sector outperforms.

Japan

- Magnitude 7.3 earthquake reported in Japan; Initial warnings called for 3m tsunami; Subsequently, tsunami waves were much smaller and damage to property was minimal. USD/JPY initially fell 50pips below 110.50 before recovering later in the session.

- Fin Min Aso: No major damage showing from the earthquake

- PM Abe: Global economy faced with large downside risks; TPP is meaningless without participation of US, no point to implement

- BOJ Gov Kuroda: Reiterates CPI to meet 2% target around FY18; Too early to discuss exit strategy or ways to shrink BOJ balance sheet; No sharp decline in liquidity of bond markets; New policy stance (yield control) is more sustainable.

- BOJ Exec Dir Amamiya: Last week's fixed rate operations was effective, intended to stabilize the market; To continue use of this policy tool as needed - press

China

- Fitch: Affirms China A+ rating; Outlook stable; build-up of imbalances pose risks to its basic economic and financial stability; vulnerabilities will rise over our 2016-18 forecast horizon; Current policy measures do not adequately address the inherent risks of an economic model that has grown dependent on credit growth rising well in excess of nominal GDP to achieve official growth targets.

- S&P: Sales of China property developers to fall 5-10% in 2017 due to govt cooling measures vs expected increase of 20% in 2016

- Researchers call for PBoC to accelerate depreciation of CNY; Should abandon intervention in FX market - Chinese press

Asia Key economic data:

- (CN) China Oct Conference Board Leading Economic Index: 0.8% v 1.2% prior (3-month low)

- (TW) Taiwan Oct Unemployment Rate: 3.9% v 3.9%e

- (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 115.5 v 118.2 prior

Asian Equity Markets (23:30ET)

- Nikkei +0.2%, Hang Seng +1.3%, Shanghai Composite +0.7%, ASX200 +1.3%, Kospi +0.8%

FX ranges/Commodities/Futures/Fixed Income (23:30ET):

- EUR 1.0625-1.0650; JPY 110.25-110.90; AUD 0.7365-0.7400; NZD 0.7060-0.7085

- Dec Gold +0.6% at 1,217/oz; Jan Crude Oil +1.0% at $48.72/brl; Dec Copper +1.6% at $2.56/lb

- GLD: SPDR Gold Trust ETF daily holdings fall 6.5 tonnes to 908.8 tonnes; 8th straight decline; lowest since June 20th

- Equity Futures: S&P e-mini +0.4%, Dax +0.3%, FTSE100 +0.4%

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.8779 V 6.8985 PRIOR; First stronger Yuan setting in 13 sessions

- (AU) Australia Finance Ministry (AOFM) sells A$150M in 1.25% 2040 Indexed bonds; avg yield 1.0974%; bid-to-cover 2.75x

Notable movers by sector:

- Consumer discretionary: Billabong BBG.AU +8.0% (guidance); Nine Entertainment Co Holdings NEC.AU +2.4% (Macquarie raises stake)

- Consumer staples: A2 Milk ATM.NZ +6.1% (Q2 result)

- Financials: Abacus Property Group ABP.AU +5.8% (JPMorgan raised to overweight); Charter Hall Group CHC.AU +2.4% (NAB raises stake)

- Industrials: Calsonic Kansei Corp 7248.JP +8.3% (KKR tender offer speculation); DIC Corp 4631.JP +3.0% (speculation about op outflows); Downer DOW.AU +1.6% (A$2B contract)

- Technology: Technology One TNE.AU +12.3% (FY16 result); Konica Minolta Holdings 4902.JP +2.6% (Deutsche Bank raised to buy); Omron Corp 6645.JP +1.4% (Nomura raised to buy)

- Energy: Beach Energy BPT.AU +2.5% (oil rises); Oil Search OSH.AU +2.3% (guidance); JX Holdings 5020.JP +1.3% (Japan quake)

- Utilities: J-Power 9513.JP +1.8% (acquisition); Tokyo Electric Power Co 9501.JP -1.4% (Japan earthquake)