- The GOP’s US Senate majority was trimmed to 51-49 seats after Doug Jones won the race to be Alabama’s first Democratic Senator in 25 years
- Asia equity markets head into the closes mostly positive on what was an indecisive trading day ahead of key risk events
- Looking ahead, highlights include UK jobs report, US CPI, DoEs, Fed rate decision and press conference
Asia equity markets head into the closes mostly positive on what was an indecisive trading day with the region cautious throughout most of the session ahead of the looming FOMC and amid the Alabama Senate election results, in which the GOP’s US Senate majority was trimmed to 51-49 seats after Doug Jones won the race to be the state’s first Democratic Senator in 25 years. ASX 200 (+0.1%) was kept in a tight range and Nikkei 225 (-0.5%) was dampened by a firmer JPY, as focus centred on the developments in US which was a blow for President Trump and effectively tightens the passage for tax reforms. Hang Seng (+1.1%) outperformed and Shanghai Comp. (-0.1%) was choppy as liquidity efforts by the PBoC were counterbalanced amid the backdrop of the risk events stateside. Finally, 10yr JGBs were range-bound with early support seen amid weakness in Japanese stocks and after the BoJ Rinban announcement for JPY 960bln in 1yr-10yr JGBs, although this was later pared in 2nd half of trade in which prices returned flat.
PBoC injected CNY 70bln via 7-day reverse repos and CNY 60bln via 28-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.6251 (Prev. 6.6162)
CASS official Yin said Chinese interbank liquidity will remain tight until the Lunar New Year due to wealth management business restrictions and expected Fed hikes, while Yin added the solution to liquidity problems is to lower RRR. (Newswires)
Rebel Tory MPs are said to refuse to drop their demand for EU withdrawal bill and a vote whether MPs can reject the Brexit deal will be tomorrow, according to ITV’s Robert Peston. (Newswires)
UK PM May is being urged by some of her allies to consider the possibility of a cabinet reshuffle in order to build on her recent Brexit success. (FT)
The BoE should leave interest rates unchanged this month following November’s historic increase, The Times’s panel of experts has said in 9-0 unanimous vote. (Times)
Italian PM Gentiloni said the next Brexit talk phase will be more challenging and called for a tailor-made trade deal between EU and UK. (Newswires/FT)
USD was pressured across the board and the DXY gave up the 94.00 level after Democrat candidate Jones won the Alabama Senate election to trim the GOP’s previous 2-seat buffer at the upper chamber of congress. However, losses in the greenback was stemmed ahead of a widely anticipated Fed hike later today and as EUR/USD and GBP/USD were somewhat despondent after yesterday’s pressure. Elsewhere, JPY strengthened amid a cautious risk tone, while antipodeans remained resilient with AUD/USD supported after Westpac Consumer Sentiment data rose to a 4-year high.
Australian Westpac Consumer Confidence Index (Dec) 103.3 (Prev. 99.7). (Newswires)
Australian Westpac Consumer Sentiment (Dec) 3.6% (Prev. -1.7%)
Commodities were relatively uneventful, although WTI crude nursed losses on a rebound from below the USD 57/bbl level and after the latest API inventory report showed a larger than expected drawdown in headline crude stockpiles. Meanwhile, gold and copper traded flat overnight amid an indecisive risk and with on the looming Fed rate decision.
US API weekly crude stocks (Dec 8) -7.382M vs. Exp. -3.800M (Prev. -5.481M). (Newswires)
OPEC Secretary General Barkindo said oil market rebalancing is on its way and that 2018 global oil demand is seen higher by 1.5mln bpd which would be inline with 2017 growth. (Newswires)
UN Political Affairs Chief said North Korea did not offer any type of commitment to talks during a visit, although North Korea’s leadership agreed it is important to avoid war. (Newswires)
US Secretary of State Tillerson said US had discussions with China on how North Korean nuclear weapons could be secured and assured China that if US forces had to cross into North Korea, they would return to South Korea. In related news, President Trump is reported to put pressure on China to stop oil exports to North Korea. (Newswires/FT)
Satellite pictures showed North Korea is developing a new tunnel at the nuclear test site. (Twitter)
South Korea Defence Ministry said it successfully conducted a helicopter missile drill. (Newswires)
For much of the session, the US curve was steeper following US PPI data for November, which beat expectations (highest Y/Y rate in six years), and hinted at prices pressures in the pipeline. Losses, however, were arrested following the auction of $12bln of 30-year bonds out of the US Treasury, which stopped-through the screens by 0.4bps, though the internals weren’t exactly spectacular, and cover was slightly softer than the previous auction. US 10-Year T-Note futures settle 4+ ticks lower at 124-11+.
Democrat candidate Jones won the Alabama US Senate seat with 49.9% of votes vs. 48.4% for Republican Moore, which means Republicans will now only have a 51-49 seat majority in the Senate (Prev. 52-48). (Newswires)
Republican Senator Cornyn said that we don’t have it right now, but we are getting closer regarding tax. (Newswires)
Republican Senator Rand Paul said he cannot vote in good conscience to add to the USD 20tln national debt. (Newswires)
Republicans eye raising corporate rate to 21 percent, lowering top individual tax rate to 37% from 39.6%. (The Hill)
Reports state that text messages related to Russia collusion in the election showed 2 FBI agents had referred to Trump as an idiot during the campaign and showed their reaction to Trump was negative from early on. (Newswires)