FX little changed ahead of Fed

Asia Mid-Session Market Update: Japan Tankan Manufacturing at 1-year high, Capex forecast reduced; ASX200 inching toward 2016 high; FX little changed ahead of Fed

US Session Highlights

- (US) Goldman Economist Chain Store Sales w/e Dec 10th w/w: +3.8%; Y/Y: +1.5%

- (US) NOV IMPORT PRICE INDEX M/M: -0.3% V -0.4%E; Y/Y: -0.1% V 0.0%E

US markets on close: Dow +0.6%, S&P500 +0.7%, Nasdaq +1.0%

- Best Sector in S&P500: Technology

- Worst Sector in S&P500: Industrials

- Biggest gainers: NBL +4.5%, STX +4.3%, NEM +3.9%, HES +3.6%, ENDP +3.5%

- Biggest losers: ALXN -4.4%, AA -3.2%, WY -3.2%, IRM -2.9%, URBN -2.8%

- At the close: VIX 12.7 (+0.1pts); Treasuries: 2-yr 1.16% (+1bp), 10-yr 2.48% (flat), 30-yr 3.15% (-1bps)

US movers afterhours

- VCEL: FDA approves Vericel's Maci for the repair of symptomatic, full-thickness cartilage defects of the knee in adult patients ; +51.9% afterhours

- ENT: Southwest Airlines enters into connectivity agreements with Panasonic Avionics and Global Eagle Entertainment; +19.6% afterhours

- NDSN: Reports Q4 $1.39 v $1.23e, R$509M v $482Me; +7.3% afterhours

Politics

- (IT) Italy PM Gentiloni wins vote of confidence in Lower House, faces Senate confidence vote tomorrow - press

Asia Key economic data:

- (JP) JAPAN Q4 TANKAN LARGE MANUFACTURING INDEX: 10 (1-year high) V 10E; MANUFACTURERS OUTLOOK: 8 (1-year high) V 9E; ALL-INDUSTRY CAPEX: 5.5% (3-quarter low) V 6.1%E

- (AU) AUSTRALIA DEC WESTPAC CONSUMER CONFIDENCE INDEX: 97.3 (lowest since April) V 101.3 PRIOR, M/M: -3.9% (2nd consecutive decline and largest decline in 7 months) V -1.1% PRIOR

- (AU) AUSTRALIA NOV NEW MOTOR VEHICLE SALES M/M: -0.6% v -2.4% PRIOR; Y/Y: -1.1% v 0.9% PRIOR

- (KR) South Korea Nov Unemployment Rate: 3.6% v 3.7%e

- (CL) CHILE CENTRAL BANK (BCCH) LEAVES OVERNIGHT RATE TARGET UNCHANGED AT 3.50%; AS EXPECTED

Asia Session Notable Observations, Speakers and Press

- Asia indices mixed; Australia favored despite the weakness in the mining space on several deals (APN Outdoor confirms all-scrip merger offer for oOh!media, Tatts Confirms non-binding proposal from Macquarie-led consortium at A$4.40-5.00/shr)

- USD majors in narrow ranges going into critical FOMC rate decision; 25bp rate hike baked in, with a focus on the dot plot and the outlook for 2017 tightening pace

- Jan WTI crude oil prices down over 1% in electronic trade after large build in API inventories; first build in 4 weeks.

- Japan Q4 Tankan mixed; Manufacturing Index and Outlook at 1-year high, but CapEx at a 3-quarter low; Survey sees tight job market with excess labor supply at lowest level since Mar 1992.

- Australia's soft Westpac Consumer Confidence report confirms weakness seen in NAB business sentiment data with the lowest Index since April and the biggest decline in 7 months. Economist citing concerns over economic growth following latest GDP against rising interest rates from banks, but still sees RBA on hold next year due to higher commodity prices, strong housing, and reduced drag from mining investment slowdown.

China:

- (CN) China Insurance Regulatory Commission (CIRC) may be required to secure formal approval before acquiring listed companies - Caixin

- (CN) SAFE: China to continue curbing illegal FX transactions; will work with police to curb illegal forex purchases and sales using fake docs - financial press

Japan:

- (JP) Japan Govt expected to announce FY17/18 GDP forecast of 1.5% - Nikkei

- (JP) Japan Chief Cabinet Sec Suga: To monitor economic trends after today's Q4 Tankan data - press

- (JP) Bank of Japan (BOJ) Official: Increase in BOJ's super long JGB buying took into account recent rapid rises in super long JGB yields; possibility of further volatility

Australia:

- (AU) BlackRock's Miller: AUD/USD to trade in $0.70-0.75 range and RBA to stand pat on rates in 2017 - press

- (AU) Australia Treasurer Morrison: Returning budget to balance is critical - press

Asian Equity Indices/Futures (00:00ET)

- Nikkei +0.1%, Hang Seng +0.6%, Shanghai Composite +0.1%, ASX200 +0.7%, Kospi +0.1%

- Equity Futures: S&P500 flat, Nasdaq +0.1%, FTSE100 -0.1%

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

- EUR 1.0620-1.0640; JPY 115.00-115.30; AUD 0.7400-0.7500; NZD 0.7195-0.7215

- Feb Gold +0.3% at 1,162/oz; Jan Crude Oil -1.4% at $52.24/brl; Mar Copper -0.2% at $2.59/lb

- (US) Weekly API Oil Inventories: Crude: +4.7M v -2.2M prior; first build in 4 weeks; largest build since Nov 1st

- (CN) China to raise gasoline prices by CNY435/ton; To raise diesel prices by CNY420/ton

- SLV: iShares Silver Trust ETF daily holdings fall to 10,608 tonnes from 10,664 tonnes prior; 9th straight decline; lowest since July 5th

- (CN) China MoF sells 5-yr bonds at 2.895% v 2.91%e; bid-to-cover 1.84x

- USD/CNY: (CN) PBOC SETS YUAN MID POINT AT 6.9028 V 6.8934 PRIOR

- (HK) Hong Kong 1-month HK$ HIBOR 0.65929% v 0.62429% prior; 3-month 0.91921% v 0.86571% prior

- (JP) BOJ offers to buy ¥400B in 1-3yr JGBs, ¥420B in 3-5yr JGBs, ¥410B in 5-10yr JGBs, ¥200B in 10-25yr JGBs, and ¥120B in JGBs with maturity over 25-yr

Asia equities/Notables/movers by sector

- Consumer discretionary: Tatts Group TTS.AU +8.7% (confirms bid proposal from Macquarie-led consortium); Dulux Group: DLX.AU +3.9% (guidance); oOh!media OML.AU +9.4% (merger proposal from APN); Asahi Group Holdings 2502.JP -1.7% (confirms acquisition); Sky Network Television SKT.AU -10.5% (Fox offer, guidance); Dentsu 4324.JP +3.7% (sets up fund); Kikkoman Corp.2801.JP -2.9% (press speculation on guidance)

- Industrials: Xinyi Glass Holding Co 868.HK -1.1% (profit alert); SMC Corp 6273.JP -2.5% (rejects question on accounting issues); Aurizon Holdings AZJ.AU -3.5% (JPMorgan initiates with underweight); Nidec Corp 6594.JP +2.9% (responds to Muddy Waters report)

- Technology: NEXTDC NXT.AU +8.9% (Morgans Financial raised to add); Fujitsu 6702.JP +1.4% (expects to reach agreement with Lenovo)

- Materials: Galaxy Resources GXY.AU +13.0% (signs contract); TNG TNG.AU -3.5% (signs MOU with Sumitomo Electric); Syrah Resources SYR.AU +14.8% (South32 shows interest)

- Energy: Xinyi Solar 968.HK +3.1% (profit alert); PetroChina Co 857.HK +3.7%, Sinopec 386.HK +3.7%, Kunlun Energy 135.HK +2.1% (China to raise fuel prices);Caltex Australia CTX.AU +3.0% (UBS raised to buy); Senex Energy SXY.AU -2.9% (Citi cuts to neutral)

- Healthcare: Benitec Biopharma BLT.AU +1.1% (outlook