18^th January 2018

• Asian equities failed to be inspired by optimism in the US after it was reported that Apple is said to commit to investing USD 350bln in the US.
• USD also firms on Apple reports, while AUD is flat despite better than expected Australian jobs report.
• Looking ahead, highlights include Chinese GDP, US Building Permits & Jobless Claims and DoE Crude report.

ASIA

Asia stocks were mixed as the region faltered in late trade and gave up the momentum from Wall St. where the S&P 500 and DJIA closed above 2800 and 26000 respectively amid earnings optimism, as well as reports that Apple is to repatriate some of its cash holdings and invest in the US. ASX 200 (Unch.) and Nikkei 225 (-0.7%) both gained at the open in which the Japanese benchmark briefly rose above the 24000 level for the first time in around 27 years, although both then pared gains with Japanese stocks sliding into the close, while commodity-related stocks in Australia were dampened by disappointing production updates from Whitehaven Coal and Woodside Petroleum. Elsewhere, Hang Seng (-0.1%) and Shanghai Comp. (+0.5%) were varied in anticipation of tier-1 China data releases including GDP in which officials including Premier Li had suggested the economy grew 6.9% for 2017. Finally, 10yr JGBs were flat uneventful with early short-covering seen in prices after yields rose to a 6-month high of above 0.08%. Furthermore, mixed 30yr auction results and source reports that some at the BoJ were said to see a need for future normalization talks, failed to garner a reaction, as they also agreed that current stimulus was needed for the time-being.

PBoC injected CNY 80bln via 7-day, CNY 70bln via 14-day and CNY 10bln via 63-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.4401 (Prev. 6.4335)

China House Prices YY (Dec) 5.3% (Prev. 5.1%). (Newswires)

China Property Prices rose M/M in 57 out of 70 cities (Prev. 50) and rose Y/Y in 61 out of 70 cities (Prev. 59).

NDRC official stated that Chinese 2017 GDP grew by 6.9% vs. Exp. 6.8%. (Newswires)

Bank of Korea kept its 7-Day Repo Rate unchanged at 1.50% as expected. (Newswires)

BoK stated that the decision was unanimous and will maintain accommodative policy stance to ensure economic recovery continues and CPI stabilizes at target in mid-term.

UK

UK RICS Housing Survey (Dec) 8 vs. Exp. -1 (Prev. 0). (Newswires)

UK House of Commons approved the EU withdrawal bill as expected. (Newswires)

UK and France are said to have reached an agreement regarding border policing. (Newswires)

EU

ECB's Nouy is to meet with Bank of Italy officials and banking industry chiefs to discuss NPLs. (Newswires)

FX

In FX markets, USD firmed in late US trade after reports that Apple were to pay a USD 38bln tax bill to repatriate funds into the US, which saw EUR/USD slip below 1.2200 and GBP/USD retreat from a fresh post-Brexit high above 1.3900. Elsewhere, the strength in the greenback coupled with the heightened risk appetite during US hours pushed USD/JPY above 111.00, while AUD/USD saw a knee-jerk reaction on better than expected Australian Employment Change. However, the gains were then pared as the data also included an unexpected increase in the Unemployment Rate and was also likely influenced by seasonal factors.

Australian Employment Change (Dec) 34.7k vs. Exp. 15.0k (Prev. 61.6k, Rev. 63.6k). (Newswires)

Australian Unemployment Rate (Dec) 5.5% vs. Exp. 5.4% (Prev. 5.4%)

COMMODITIES

Commodity prices were mixed with WTI crude futures marginally underpinned to trade back above USD 64/bbl after the latest API inventory data showed a larger than expected drawdown in headline crude stockpiles. Gold languished after having declined about USD 10/oz after Apple’s repatriation announcement spurred a bid tone for the greenback considering that the tech giant is seen to hold USD 250bln in cash overseas.

US API weekly crude stocks (12 Jan, w/e) -5.120M vs. Exp. -3.500M (Prev. -11.190M). (Newswires)

GEOPOLITICAL

The US curve experienced bear flattening, as Fed dove Evans (non-voter) stuck to script and Kaplan (non-voter) reiterated his base case of 3 hikes in 2018, although he did note that further monetary tightening could occur if appropriate. US T-Note Futures settled 10+ ticks lower at 122-21. China and Japan, the two biggest foreign U.S. creditors, reduced their holdings of U.S. government debt in November. Chinese holding of US treasuries fell to USD 1.176tln (Prev. USD 1.189tln), marking its lowest in 4-months. Japanese holding of US treasuries fell to USD 1.084tln (lowest since Jun’13).

South Korea and North Korea agreed to march together at PyeongChang and field their first joint Olympic team. (Yonhap)

US Secretary of State Tillerson said he is confident US can get to the negotiating table with North Korea. (Newswires)

US President Trump said that Russia is helping North Korea evade sanctions by filling in gaps left by China. He also stated that China is doing a lot to help on North Korea but could do more. Trump declined to confirm reports that the US is debating a possible pre-emptive strike on North Korea. He also opined that he is not sure that talks with the North Korean leader Kim would lead to anything meaningful.

A North Korean diplomat said that the recent meeting in Vancouver was a “provocation” against North Korea, and is not conducive to peace and talks between the North and South. He also noted that North Korea is determined to fight sanctions and is ready for both “dialogue and confrontation.” (Newswires)

US

Fed’s Kaplan (Non-Voter, Soft Hawk) said that he expects 3 rate rises this year, but said that more may be needed. (WSJ)

Fed’s Evans (Non-Voter, Dove) said that he doesn't see much evidence of overshooting on Fed's employment mandate and is worried that the economic cycle might end before inflation gets up to the Fed’s goal. Evans added that something less than 3 hikes this year is probably appropriate and that waiting until mid-year to hike would not rule out 3 hikes this year if required. (Newswires)

Fed’s Beige book said that the economy continued to expand, with most districts saying that wages increased at a modest pace, and most reported modest to moderate price growth. (Newswires)

US President Trump said that he is considering "big damages" in probe over alleged China intellectual property theft and said that he hopes there won't be a trade war with China, but "if there is, there is". President Trump also stated that Trump he may terminate NAFTA agreement and that a lot of people would be unhappy if he did. (Newswires)

US President Trump said a government shutdown is possible and that democrats would be to blame. (Newswires)

White House Chief of Staff Kelly believes congress will pass a stop-gap spending bill to avert a shutdown and said that GOP leaders have the votes to avert a government shutdown. Furthermore, Chief of Staff Kelly also stated that the White House is looking at Mexico paying for the border wall tspanough NAFTA and visa fees. (Newswires)

There were various comments from Congress regarding the spending bill including US Sen. Majority Leader McConnell who stated that he thinks there is a good chance that Congress will pass the stopgap spending bill by the Friday deadline. Conversely, Republican Sen. Lindsey Graham said he will not vote for the stop-gap funding bill, while Freedom Caucus Chair Meadows said House doesn't have enough votes yet to pass stopgap spending bill. (Newswires)

Apple (AAPL) said to accelerate its US investment and to make a contribution of USD 350bln over five years, anticipating to pay a tax repatriation of USD 38bln as required by recent tax law changes. (Newswires)