- China’s holdings of U.S. Treasuries declined in November for a sixth straight month, as the world’s second-largest economy uses its foreign-exchange reserves to support the yuan. Japan’s holdings also dropped but the country kept its spot as America’s largest foreign creditor. A monthly Treasury Department report released in Washington on Wednesday showed China held $1.05 trillion in U.S. government bonds, notes and bills in November, a drop of $66.4 billion from the prior month that was the steepest since December 2011. Japan’s portfolio decreased for fourth consecutive month, falling by $23.3 billion to $1.11 trillion, according to the data. The People’s Bank of China, owner of the world’s biggest foreign-exchange reserves, has burned through a quarter of its war chest since 2014. U.S. Treasury data show the country has dumped about $270 billion of U.S. government debt since its holdings peaked at $1.32 trillion in 2013 and is using the funds to underpin the yuan and stem capital outflows.
- A new-found enthusiasm for riskier assets greeted Asian traders, with stocks climbing and the yen weakening after Janet Yellen said she stands ready to raise interest rates if the American economy strengthens as the central bank anticipates. Treasuries slumped. Japan’s Topix index rose 1.3 percent as of 9:40 a.m. in Tokyo and Australia’s S&P/ASX 200 Index gained 0.4 percent. Hang Seng futures climbed 0.1 percent.
- When OPEC and Russia meet this weekend to gauge progress on their oil-supply deal, they’ll be trying to dispel the shadow of previous unfulfilled promises. Oil prices rose 20 percent in the month after OPEC agreed to cut output, reaching $54.06 a barrel in New York on Dec. 28. Since then, they’ve slipped almost 5 percent as traders, with one eye on rising U.S. shale production, await proof that OPEC and other producers will live up to their deal. They recall how Russia broke its pledge during cutbacks in 2008, while some members of the producers group failed to fully implementthe agreement.
- Federal Reserve Chair Janet Yellen said the U.S. economy is “close” to the central bank’s objectives of full employment and stable prices and she’s confident it will continue to improve. “It is fair to say the economy is near maximum employment and inflation is moving toward our goal,” Yellen told the Commonwealth Club in San Francisco Wednesday. While “it makes sense to gradually reduce the level of monetary policy support,” the timing of the next interest-rate increase “will depend on how the economy actually evolves over coming months,” she said.
- Canadian Pacific Railway Ltd. appointed Keith Creel as chief executive officer to replace Hunter Harrison, who is stepping down earlier than planned after seeking the board’s permission to work for another railroad.
- . Steven Mnuchin has finally come out to defend the thorniest issue about his nomination: His record running OneWest Bank. Now, he will face 26 U.S. senators in a public hearing seeking clarity on his policy views as he interviews for the job of Treasury secretary. The Senate Finance Committee hearing on Thursday, which kicks off at 10 a.m. in Washington, will be “contentious and downright uncomfortable,” said Isaac Boltansky, policy analyst at Compass Point Research & Trading LLC. Democrats have promised an ugly fight that the Republican majority and Mnuchin will likely win to secure the former Goldman Sachs Group Inc. partner’s confirmation. nal Holdings
Wall Street Journal:
- Flurry of IPOs Poised to Test Market for New Offerings. Last year was the slowest year for U.S.-listed IPOs since 2003 in terms of money raised.
- Mexican President Enrique Peña Nieto Loses Support, Poll Finds. Leader’s approval rating plummets as country’s challenges mount with arrival of Trump administration.
- The Trumped-Up Dollar. Faster growth from better economic policies will lead to a bigger buck.
- "Costs Are Rising, Wages Are Dropping" - The 'Real' Economy That Obama Left For Trump. (graph)
- Over $100 Billion Redeemed From Hedge Funds In 2016 As Only 32% Outperform Their Benchmark.
- The 'Soda Police' Just Learned A Valuable Lesson About Taxes.
- Foreign Central Banks Liquidate Record $405 Billion In US Treasuries As China Sells Most US Paper Since 2011. (graph)
- Trump's (Not So) Invisible Hand. (graph)
- Oil Unsure As Huge Gasoline Inventory Build Offsets Crude Draw. (graph)
- Netflix Soars Despite Slashing Domestic Subscriber Outlook & Record Cash-Burn. (graph)
- Dow Drops As Dollar, Bond Yields Spike Most Since Election. (graph)
- 'The problem with Europe is Europe,' warns Italian finance minister Padoane problem with Europe is Europe,' warns Italian finance minister Padoan.
- Mexican resort area reels from back-to-back shootings. A tranquil Mexican seaside region reeled Wednesday from two shootings that left nine people dead and shattered the peace in a beach resort area beloved by US and European tourists. Mexico's so-called "Mayan Riviera" had largely avoided the major drug-related violence plaguing other regions. But on Tuesday gunmen opened fire on the state prosecutors' office in Cancun, triggering a firefight a day after a murky nightclub shooting in a nearby resort sent music festival-goers fleeing in terror.
Earnings of Note
8:30 am EST
- BOJ Mulls Raising Growth Rate Outlook at Policy Meeting. Bank of Japan considers upward revision of economic growth outlook at next policy meeting on Jan. 30-31.
- Asian equity indices are -.25% to +.5% on average.
- Asia Ex-Japan Investment Grade CDS Index 116.75 +.25 basis point.
- Asia Pacific Sovereign CDS Index 34.0 -.5 basis point.
- Bloomberg Emerging Markets Currency Index 69.92 -.08%.
- S&P 500 futures unch.
- NASDAQ 100 futures unch.
Earnings of Note
8:30 am EST
- Housing Starts for December are estimated to rise to 1187K versus 1090K in November.
- Building Permits for December are estimated to rise to 1225K versus 1201K in November.
- Initial Jobless Claims for last week are estimated to rise to 252K versus 247K the prior week.
- Continuing Claims are estimated to fall to 2075K versus 2087K prior.
- Philly Fed Business Outlook for January is estimated to fall to 15.1 versus 21.5 in December.
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +128,360 barrels versus a +4,097,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +2,075,000 barrels versus a +5,023,000 barrel gain the prior week. Distillate inventories are estimated to rise by +561,270 barrels versus a +8,356,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to fall by -.7% versus a +1.6% gain prior.
- None of note
- The ECB rate decision, ECB press conference, China GDP/Industrial Production/Retail Sales reports, Bloomberg Economic Expectations Index for January, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.