Trump: Mexico Will Pay Us Back For “Great Wall”

After months of promising that Mexico would pay for a border wall, CNN reported last night that Trump was working with House Republicans on a plan to fund the wall project through appropriations, a move which they said would “break a key campaign promise.”

President-elect Donald Trump’s transition team has signaled to congressional Republican leaders that his preference is to fund the border wall through the appropriations process as soon as April, according to House Republican officials.

 

The move would break a key campaign promise when Trump repeatedly said he would force Mexico to pay for the construction of the wall along the border, though in October, Trump suggested for the first time that Mexico would reimburse the US for the cost of the wall.

And here is Anderson Cooper on the topic last night:

 

Of course, this morning Trump has fired back with yet another tweet blasting the “dishonest media” saying that any taxpayer money spent on the “Great Wall (for sake of speed), will be paid back by Mexico later!”

The dishonest media does not report that any money spent on building the Great Wall (for sake of speed), will be paid back by Mexico later!

— Donald J. Trump (@realDonaldTrump) January 6, 2017

 

Meanwhile, the ever defiant Vicente Fox maintained that while Trump may ask Mexico to pay for his border wall, “neither [he] nor Mexico would pay for his racist monument.”

Trump may ask whoever he wants, but still neither myself nor Mexico are going to pay for his racist monument.
Another promise he can’t keep.

— Vicente Fox Quesada (@VicenteFoxQue) January 6, 2017

 

So, can taxpayers charge Mexico interest?

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Frontrunning: January 6

  • December Jobs Data to Wrap Up Obama’s Economic Legacy (WSJ)
  • FBI Says Democrats Refused Access to Hacked E-Mail Servers (BBG)
  • As Trump attacks, Nissan at bigger risk than Toyota (Reuters)
  • Democratic leader Schumer emerges as Trump’s newest punching bag (Reuters)
  • PBoC raises renminbi’s daily fix by most since 2005 (FT)
  • China central bank urges rational investment in bitcoin (Reuters)
  • China Doubles Down on Defense of Yuan (WSJ)
  • Millennials Think the Trump Economy Is Going to Implode (BBG)
  • Judge Rules Against Sanofi and Regeneron in Patent Case (WSJ)
  • Ash Carter Says Putin Is Making It Harder for U.S. to Work With Russia (WSJ)
  • China Plans Scrutiny of U.S. Firms If Trump Starts Feud (BBG)
  • Duterte hopes Russia will become Philippines’ ally and protector (Reuters)
  • Russia says has begun reducing forces in Syria (Reuters)
  • Trump team has differences of opinion on shaping spy agencies (Reuters)
  • Beheading attire and sexy suicide vests? Satire of ISIS wives stirs anger and praise (Reuters)
  • Secret Report Shows Just How Badly Belgium Mishandled Hunt for ISIS Operatives (WSJ)
  • Nissan halts joint development of luxury cars with Daimler (Reuters)
  • People Are Bailing on Chris Christie’s New Jersey. How Is Your State Holding Up? (BBG)
  • Verizon Executive: Unsure About Yahoo Deal (WSJ)
  • Will OPEC Deliver Its Output Cut Deal? Here’s How We’ll Know (BBG)
  • At least 33 prisoners killed in new Brazil prison uprising (Reuters)

 

Overnight Media Digest

WSJ

– Donald Trump blasted Toyota Motor Corp for its plan to build a new Mexican plant, just hours after the head of the Japanese auto maker signaled a willingness to work with the new administration. http://on.wsj.com/2ihIF3G

– Apple Inc said its App Store generated record revenue of more than $20 billion for developers in 2016, as that business roughly maintained its growth rate even as iPhone sales volumes declined. http://on.wsj.com/2ihMaXF

– Struggling retailer Sears Holdings Corp has bought itself some breathing room through maneuvers that include the sale of its Craftsman brand for $900 million and the closure of 150 additional stores as it grapples with a prolonged sales slump and mounting losses. http://on.wsj.com/2ihIWTY

– Verizon Communications Inc is unsure whether it will proceed with its $4.83 billion purchase of Yahoo Inc’s core business, a top Verizon executive said, weeks after the internet company disclosed a second massive data breach. http://on.wsj.com/2ihCjRK

– T-Mobile US Inc plans to eliminate additional fees and taxes on the bills for its new data plan, the latest move by the wireless carrier to differentiate itself from rivals. http://on.wsj.com/2ihxIPy

– Fox News tapped veteran journalist and commentator Tucker Carlson to replace Megyn Kelly in one of its most prominent time slots, underscoring that the cable news network has no intention of moving away from its conservative roots. http://on.wsj.com/2ihxuHZ

– A U.S. federal judge ruled that drugmakers Sanofi SA and partner Regeneron Pharmaceuticals Inc infringed the patent that rival Amgen Inc holds for its new cholesterol drug. http://on.wsj.com/2ihAHre

– Shake Shack Inc’s chief financial officer, who successfully led the burger chain through its 2015 initial public offering, plans to leave company in March, according to a regulatory filing. http://on.wsj.com/2ihCA7g

– Wal-Mart Stores Inc will resume accepting Visa Inc cards in its Canadian stores in the wake of a dispute over credit-card fee terms, the two companies said Thursday. http://on.wsj.com/2ihEXHg

– Samsung Electronics Co estimated that its fourth-quarter operating profit rose 49.8 percent from a year earlier, its biggest quarter of profits in more than three years, as the world’s biggest smartphone maker leaned heavily on components to drive growth after billions of dollars were wiped out from a massive recall of its Galaxy Note 7 smartphones. http://on.wsj.com/2ihG9dD

– Online advertising network Taboola has acquired Israel-based website personalization technology firm Commerce Sciences, the companies said. Terms of the deal were not disclosed. http://on.wsj.com/2ihD90F

 

FT

Olly Robbins, the permanent secretary at the Department for Exiting the European Union, wanted to take control of United Kingdom’s negotiations with Brussels and “vigorously opposed” the appointment of Tim Barrow as Britain’s envoy to the European Union, according to several officials close to the process.

The United Kingdom’s Royal Mail Plc is moving forward with plans to close a 90,000-member pension fund, saying it had begun consulting workers on the future of the 7.4 billion pounds ($9.18 billion) defined-benefit scheme.

Barclays Plc’s Japan boss Mark Dearlove was interviewed by the United Kingdom’s Serious Fraud Office before Christmas as part of the agency’s third criminal probe into whether the bank manipulated the London Interbank Offered Rate.

 

NYT

– On Thursday, federal regulators announced a $5 million settlement with Jon Corzine, who ran MF Global when it collapsed into bankruptcy in 2011 and lost more than $1 billion in customer money. The settlement, reached unanimously at the Commodity Futures Trading Commission in the waning days of the Obama administration and approved by a federal judge this week, caps a long-running spectacle that derailed Corzine’s career and spurred a number of congressional, criminal and regulatory investigations. http://nyti.ms/2iOB5RC

– China intends to spend more than $360 billion through 2020 on renewable power sources like solar and wind, the government’s energy agency said on Thursday. The agency said in a statement that China would create more than 13 million jobs in the renewable energy sector by 2020, curb the growth of greenhouse gasses that contribute to global warming and reduce the amount of soot that in recent days has blanketed Beijing and other Chinese cities in a noxious cloud of smog. http://nyti.ms/2iHXRu1

– Frontier Airlines – known for offering scant legroom and low prices for rides on planes that have wild animals painted on the tails – is preparing an initial public offering, people with knowledge of the deal said. The Denver-based company has tapped Deutsche Bank AG, JPMorgan Chase & Co and Evercore to manage the debut, the people said. http://nyti.ms/2iWHTto

 

Canada

THE GLOBE AND MAIL

** The crushing Alberta recession has wiped out more than C$4 billion ($3.02 billion) in value of downtown Calgary office properties, city assessors warned Thursday, with some suburban office landlords and retailers expected to see higher tax bills as a result. https://tgam.ca/2iiUbvC

** Penn West Petroleum Ltd said on Thursday it plans to spend C$180 million ($135.78 million) on operations this year, up from its previous estimate of C$150 million ($113.15 million), with the largest chunk earmarked for its Alberta Cardium operations. https://tgam.ca/2ij5kMM

** International Trade Minister Chrystia Freeland portrayed Canada on Thursday as a global bulwark against populism and protectionism. While other countries build walls, Canada is opening its doors to trade and immigration, she said. https://tgam.ca/2iiYQ0w

NATIONAL POST

** Walmart and Visa have ended an acrimonious and public battle over fees that saw the retail giant refuse to accept Visa credit cards in its northern Ontario and Manitoba stores. In a brief statement Thursday afternoon, Walmart said it would allow customers in those regions to once again use Visa cards beginning Friday. http://bit.ly/2ij1inX

** A new report suggests that Canada would benefit from higher capacity of so-called “partial upgrading” technology, a process that would help oilsands players fetch a higher price for their product and ease longstanding pipeline woes. http://bit.ly/2iiZ1Jo

** Growing U.S. production of tight oil and shale gas, combined with flat U.S. oil demand, is bad news for Canada, which will have no alternative export market until it builds new oil pipelines to the coasts and liquefied natural gas plants, and even faces new competition from U.S. imports, according to the U.S. Energy Information Administration’s 2017 energy outlook. http://bit.ly/2ij2vvo

 

Britain

The Times

Britain’s retail sector weathered its fourth poor December in a row with negative like-for-like sales growth on the high street amid volatile consumer sentiment, according to BDO, the accountancy and business advisory firm. http://bit.ly/2hWbLcH

The London-listed carrier Fastjet Plc raises another $48 million through a placing of shares with City institutions and a cash injection from the South African aviation services group Solenta. http://bit.ly/2hWfmaM

The Guardian

A former Snapchat employee has accused the tech company of lying about its user numbers to deceive investors ahead of a possible initial public offering. http://bit.ly/2hWa8vF

RMT, the union behind a series of strikes disrupting services on the Southern rail network has accepted an offer of direct talks with the government in an attempt to solve the long-running dispute. http://bit.ly/2hWjW8E

The Telegraph

JPMorgan Chase & Co’s CEO Jamie Dimon has warned the French president that the country is unlikely to lure banking jobs away from London after Brexit unless the nation overhauls employment legislation. http://bit.ly/2hWh9ML

Royal Mail has launched a consultation into changes to its final salary pension scheme amid threats of strike action from unions. http://bit.ly/2hWb3MD

Sky News

Sports Direct International Plc founder Mike Ashley rescued chairman Keith Hellawell for a second time after a fresh vote by independent investors rejected his reappointment. http://bit.ly/2hW3llL

Discount supermarket Aldi Inc said on Thursday it will increase minimum wages for its British employees by 1.5 percent from February. http://bit.ly/2hWlAHJ

The Independent

Warner Bros, a unit of Time Warner Inc, has committed to keep its European headquarters in London in a move seen as a vote of confidence for UK’s entertainment industry in the wake of Britain’s vote to leave the EU. http://ind.pn/2hWhDTa

The resilience of the economy in the wake of Brexit vote has not prompted the Bank of England to change its view that Britain will suffer near-term damage from Brexit, the Bank’s chief economist, Andy Haldane, said on Thursday. http://ind.pn/2hWbFC0

 

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Frontrunning: January 6

  • December Jobs Data to Wrap Up Obama’s Economic Legacy (WSJ)
  • FBI Says Democrats Refused Access to Hacked E-Mail Servers (BBG)
  • As Trump attacks, Nissan at bigger risk than Toyota (Reuters)
  • Democratic leader Schumer emerges as Trump’s newest punching bag (Reuters)
  • PBoC raises renminbi’s daily fix by most since 2005 (FT)
  • China central bank urges rational investment in bitcoin (Reuters)
  • China Doubles Down on Defense of Yuan (WSJ)
  • Millennials Think the Trump Economy Is Going to Implode (BBG)
  • Judge Rules Against Sanofi and Regeneron in Patent Case (WSJ)
  • Ash Carter Says Putin Is Making It Harder for U.S. to Work With Russia (WSJ)
  • China Plans Scrutiny of U.S. Firms If Trump Starts Feud (BBG)
  • Duterte hopes Russia will become Philippines’ ally and protector (Reuters)
  • Russia says has begun reducing forces in Syria (Reuters)
  • Trump team has differences of opinion on shaping spy agencies (Reuters)
  • Beheading attire and sexy suicide vests? Satire of ISIS wives stirs anger and praise (Reuters)
  • Secret Report Shows Just How Badly Belgium Mishandled Hunt for ISIS Operatives (WSJ)
  • Nissan halts joint development of luxury cars with Daimler (Reuters)
  • People Are Bailing on Chris Christie’s New Jersey. How Is Your State Holding Up? (BBG)
  • Verizon Executive: Unsure About Yahoo Deal (WSJ)
  • Will OPEC Deliver Its Output Cut Deal? Here’s How We’ll Know (BBG)
  • At least 33 prisoners killed in new Brazil prison uprising (Reuters)

 

Overnight Media Digest

WSJ

– Donald Trump blasted Toyota Motor Corp for its plan to build a new Mexican plant, just hours after the head of the Japanese auto maker signaled a willingness to work with the new administration. http://on.wsj.com/2ihIF3G

– Apple Inc said its App Store generated record revenue of more than $20 billion for developers in 2016, as that business roughly maintained its growth rate even as iPhone sales volumes declined. http://on.wsj.com/2ihMaXF

– Struggling retailer Sears Holdings Corp has bought itself some breathing room through maneuvers that include the sale of its Craftsman brand for $900 million and the closure of 150 additional stores as it grapples with a prolonged sales slump and mounting losses. http://on.wsj.com/2ihIWTY

– Verizon Communications Inc is unsure whether it will proceed with its $4.83 billion purchase of Yahoo Inc’s core business, a top Verizon executive said, weeks after the internet company disclosed a second massive data breach. http://on.wsj.com/2ihCjRK

– T-Mobile US Inc plans to eliminate additional fees and taxes on the bills for its new data plan, the latest move by the wireless carrier to differentiate itself from rivals. http://on.wsj.com/2ihxIPy

– Fox News tapped veteran journalist and commentator Tucker Carlson to replace Megyn Kelly in one of its most prominent time slots, underscoring that the cable news network has no intention of moving away from its conservative roots. http://on.wsj.com/2ihxuHZ

– A U.S. federal judge ruled that drugmakers Sanofi SA and partner Regeneron Pharmaceuticals Inc infringed the patent that rival Amgen Inc holds for its new cholesterol drug. http://on.wsj.com/2ihAHre

– Shake Shack Inc’s chief financial officer, who successfully led the burger chain through its 2015 initial public offering, plans to leave company in March, according to a regulatory filing. http://on.wsj.com/2ihCA7g

– Wal-Mart Stores Inc will resume accepting Visa Inc cards in its Canadian stores in the wake of a dispute over credit-card fee terms, the two companies said Thursday. http://on.wsj.com/2ihEXHg

– Samsung Electronics Co estimated that its fourth-quarter operating profit rose 49.8 percent from a year earlier, its biggest quarter of profits in more than three years, as the world’s biggest smartphone maker leaned heavily on components to drive growth after billions of dollars were wiped out from a massive recall of its Galaxy Note 7 smartphones. http://on.wsj.com/2ihG9dD

– Online advertising network Taboola has acquired Israel-based website personalization technology firm Commerce Sciences, the companies said. Terms of the deal were not disclosed. http://on.wsj.com/2ihD90F

 

FT

Olly Robbins, the permanent secretary at the Department for Exiting the European Union, wanted to take control of United Kingdom’s negotiations with Brussels and “vigorously opposed” the appointment of Tim Barrow as Britain’s envoy to the European Union, according to several officials close to the process.

The United Kingdom’s Royal Mail Plc is moving forward with plans to close a 90,000-member pension fund, saying it had begun consulting workers on the future of the 7.4 billion pounds ($9.18 billion) defined-benefit scheme.

Barclays Plc’s Japan boss Mark Dearlove was interviewed by the United Kingdom’s Serious Fraud Office before Christmas as part of the agency’s third criminal probe into whether the bank manipulated the London Interbank Offered Rate.

 

NYT

– On Thursday, federal regulators announced a $5 million settlement with Jon Corzine, who ran MF Global when it collapsed into bankruptcy in 2011 and lost more than $1 billion in customer money. The settlement, reached unanimously at the Commodity Futures Trading Commission in the waning days of the Obama administration and approved by a federal judge this week, caps a long-running spectacle that derailed Corzine’s career and spurred a number of congressional, criminal and regulatory investigations. http://nyti.ms/2iOB5RC

– China intends to spend more than $360 billion through 2020 on renewable power sources like solar and wind, the government’s energy agency said on Thursday. The agency said in a statement that China would create more than 13 million jobs in the renewable energy sector by 2020, curb the growth of greenhouse gasses that contribute to global warming and reduce the amount of soot that in recent days has blanketed Beijing and other Chinese cities in a noxious cloud of smog. http://nyti.ms/2iHXRu1

– Frontier Airlines – known for offering scant legroom and low prices for rides on planes that have wild animals painted on the tails – is preparing an initial public offering, people with knowledge of the deal said. The Denver-based company has tapped Deutsche Bank AG, JPMorgan Chase & Co and Evercore to manage the debut, the people said. http://nyti.ms/2iWHTto

 

Canada

THE GLOBE AND MAIL

** The crushing Alberta recession has wiped out more than C$4 billion ($3.02 billion) in value of downtown Calgary office properties, city assessors warned Thursday, with some suburban office landlords and retailers expected to see higher tax bills as a result. https://tgam.ca/2iiUbvC

** Penn West Petroleum Ltd said on Thursday it plans to spend C$180 million ($135.78 million) on operations this year, up from its previous estimate of C$150 million ($113.15 million), with the largest chunk earmarked for its Alberta Cardium operations. https://tgam.ca/2ij5kMM

** International Trade Minister Chrystia Freeland portrayed Canada on Thursday as a global bulwark against populism and protectionism. While other countries build walls, Canada is opening its doors to trade and immigration, she said. https://tgam.ca/2iiYQ0w

NATIONAL POST

** Walmart and Visa have ended an acrimonious and public battle over fees that saw the retail giant refuse to accept Visa credit cards in its northern Ontario and Manitoba stores. In a brief statement Thursday afternoon, Walmart said it would allow customers in those regions to once again use Visa cards beginning Friday. http://bit.ly/2ij1inX

** A new report suggests that Canada would benefit from higher capacity of so-called “partial upgrading” technology, a process that would help oilsands players fetch a higher price for their product and ease longstanding pipeline woes. http://bit.ly/2iiZ1Jo

** Growing U.S. production of tight oil and shale gas, combined with flat U.S. oil demand, is bad news for Canada, which will have no alternative export market until it builds new oil pipelines to the coasts and liquefied natural gas plants, and even faces new competition from U.S. imports, according to the U.S. Energy Information Administration’s 2017 energy outlook. http://bit.ly/2ij2vvo

 

Britain

The Times

Britain’s retail sector weathered its fourth poor December in a row with negative like-for-like sales growth on the high street amid volatile consumer sentiment, according to BDO, the accountancy and business advisory firm. http://bit.ly/2hWbLcH

The London-listed carrier Fastjet Plc raises another $48 million through a placing of shares with City institutions and a cash injection from the South African aviation services group Solenta. http://bit.ly/2hWfmaM

The Guardian

A former Snapchat employee has accused the tech company of lying about its user numbers to deceive investors ahead of a possible initial public offering. http://bit.ly/2hWa8vF

RMT, the union behind a series of strikes disrupting services on the Southern rail network has accepted an offer of direct talks with the government in an attempt to solve the long-running dispute. http://bit.ly/2hWjW8E

The Telegraph

JPMorgan Chase & Co’s CEO Jamie Dimon has warned the French president that the country is unlikely to lure banking jobs away from London after Brexit unless the nation overhauls employment legislation. http://bit.ly/2hWh9ML

Royal Mail has launched a consultation into changes to its final salary pension scheme amid threats of strike action from unions. http://bit.ly/2hWb3MD

Sky News

Sports Direct International Plc founder Mike Ashley rescued chairman Keith Hellawell for a second time after a fresh vote by independent investors rejected his reappointment. http://bit.ly/2hW3llL

Discount supermarket Aldi Inc said on Thursday it will increase minimum wages for its British employees by 1.5 percent from February. http://bit.ly/2hWlAHJ

The Independent

Warner Bros, a unit of Time Warner Inc, has committed to keep its European headquarters in London in a move seen as a vote of confidence for UK’s entertainment industry in the wake of Britain’s vote to leave the EU. http://ind.pn/2hWhDTa

The resilience of the economy in the wake of Brexit vote has not prompted the Bank of England to change its view that Britain will suffer near-term damage from Brexit, the Bank’s chief economist, Andy Haldane, said on Thursday. http://ind.pn/2hWbFC0

 

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Trump Asks “What Is Going On” After It Emerges Democrats Did Not Cooperate With FBI Hack Probe

Closing off his tweeting on Thursday evening, the president-elect questioned why the Democratic National Committee did not reportedly cooperate with the FBI’s investigation of hacks into its servers; a hack which the US intelligence agencies were quick to conclude was the action of Russia despite, allegedly, not having seen all the evidence.

As BuzzFeed initially reproted, while the DNC says the FBI never requested access to its servers after they were breached, a senior law enforcement official said the FBI repeatedly asked for access “only to be rebuffed.”  If the FBI itself never examined DNC servers, Trump wrote on Twitter, “how and why are they so sure about hacking”? 

“What is going on?” Trump added.

The Democratic National Committee would not allow the FBI to study or see its computer info after it was supposedly hacked by Russia……

— Donald J. Trump (@realDonaldTrump) January 6, 2017

So how and why are they so sure about hacking if they never even requested an examination of the computer servers? What is going on?

— Donald J. Trump (@realDonaldTrump) January 6, 2017

Earlier in the week DNC spokesman Eric Walker told BuzzFeed this week that while the DNC had several meetings with FBI agents, FBI officials “never requested access” to DNC servers.

“The DNC had several meetings with representatives of the FBI’s Cyber Division and its Washington (D.C.) Field Office, the Department of Justice’s National Security Division, and U.S. Attorney’s Offices,” he said, adding, “the FBI never requested access to the DNC’s computer servers.”

And according to BuzzFeed, no U.S. intelligence agency has done an independent forensics analysis on the servers. Instead, the FBI has relied on an analysis from CrowdStrike, the third-party security firm that investigated the DNC breach.

However, as The Hill notes, a senior law enforcement official on Thursday disputed the DNC’s characterization that the FBI never requested access to the DNC servers.

Meanwhile, later on Friday Donald Trump will have his official breifing by intelligence services explaining to him why they are convinced that Russia was the perpetrator behind the hack. Trump’s public reaction to that particular meeting could have huge consequences for the future direction of the conflict between Trump and the various US intelligence agencies which, according to a recent WSJ report, he is seeking to overhaul in an attempt to “depoliticize” them, a report which however was denied by Trump’s spokesman on Thursday.

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An Angry Japan Responds To Trump’s Toyota Taunts

After Trump’s Thursday morning twitter taunt targeted Toyota, when the President-elect warned Japan’s biggest carmaker that it will face heavy penalties if it chooses to make cars for the US market in Mexico, writing  “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax“, a tweet which sent shares of Japanese carmakers sliding on Friday with a 1.7% fall for Toyota, 2.2% for Nissan and 3.2% for Mazda, an angry Japanese government and corporate establishment pushed back against Trump’s criticism of Toyota as the attack on the country’s most powerful corporate name sent shockwaves across “Japan Inc.”

As the FT notes, CEOs of Japanese companies including Sony’s Kazuo Hirai and Nissan’s Carlos Ghosn weighed in, while analysts feared the president-elect’s targeting of Toyota would lead to a broader fallout on Japan-US trade relations, similar to concerns about an escalating trade war between the US and China.

“Toyota is responsible for large employment at US plants such as in Kentucky. It’s questionable whether the new US president has a grasp of how many vehicles Toyota builds in the US,” said Taro Aso, Japan’s finance minister.  Hiroshige Seko, minister for trade and industry, added that the Japanese government would do its part to explain to the US administration about the contribution of the country’s car industry to the US economy.

“Toyota is equivalent to Japan as a whole, so Mr Trump’s criticism could be interpreted as a message to the Japanese government,” said Koji Endo, motor industry analyst at SBI Securities, expressing concerns about the impact on bilateral trade negotiations once Mr Trump is officially appointed later this month.

Analysts said Trump’s focus on Toyota, after Ford this week announced that it would pull plans for a $1.6bn Mexican plant, is not surprising but ironic for the Japanese carmaker who was the latecomer among global rivals in shifting production to Mexico. They noted that Toyota, which has an existing manufacturing facility in Baja to build the Tacoma pick-up truck, only made about 6% of 2.2m vehicles sold in the US in Mexico during the January to November period, compared with 33% for Nissan and 47 per cent for Mazda, according to SBI Securities, both of which companies are said to be far more exposed to Trump’s future ire than Toyota.

As the FT adds, in 2015, Toyota announced plans to spend $1 billion building a new facility in the central state of Guanajuato that will make Corolla vehicles from 2019.

The decision was a symbolic one for Akio Toyoda, Toyota’s chief executive, as it marked the lifting of a three-year moratorium on plant construction. It also underscored the company’s recovery since Mr Toyoda faced a US congressional grilling in 2010 in the wake a massive recall of spontaneously accelerating Toyota vehicles.

 

Having experienced the US recall crisis and the subsequent political backlash, analysts say Toyota may eventually adjust its strategy in Mexico, either by reducing the planned number of vehicle production or increasing the capacity of existing US plants in Texas or Mississippi.

“The company will carefully try to avoid taking action that would leave a negative impression on the new US administration,” said Masahiro Akita, analyst at Credit Suisse. “Considering how Toyota has operated in the past, it wouldn’t be surprising if the company makes a policy shift.”

In response to Trump’s tweet, Toyota has said no US jobs would be lost as a result of its planned new plant in Mexico. CEO Toyoda also said the company would “see what policies the incoming president adopts” before deciding whether to take action.

Still, Mr Akita said a complete reversal of Toyota’s plan to construct a new plant in Guanajuato was unlikely considering Mr Toyoda’s concerns about the impact on employment and the regional economy.

* * *

Then again, the Trump twitter effect may soon fizzle according to Reuters Breakingviews, which noted that Toyota’s day in Donald Trump’s crosshairs “could mark peak Twitter-Trump.”

On Thursday, the U.S. president-elect threatened tariffs on the Japanese carmaker, if it sold Mexico-made Corollas in the United States. Yet a 2 percent fall in Toyota’s Tokyo-listed shares looks muted considering Ford and General Motors performed as poorly or worse on New York trading. That’s because it quickly became clear Trump had all his facts wrong. The more that happens, the less impact his tweet storms will have.

Trump’s bully pulpit, both online and at rallies, can certainly be effective. General Motors, Lockheed Martin and Boeing have all scrambled to respond. This week Ford ditched a plan to build a new plant in Mexico that Trump had slated.

 

In Toyota’s case, a 35 percent import tax on 200,000 Corollas built annually at its new plant in Mexico would add $1.4 billion to their overall cost, assuming a $20,000 sticker price per car. That’s around 10 percent of this year’s expected earnings, which either Toyota or customers would have to swallow.

 

That’s never going to happen, though, for one very simple reason: Toyota’s new plant would replace one in Canada, not America. All Corolla production for U.S. sales remains in the company’s Mississippi factory. The plant is also in Guanajuato, not Baja, as Trump asserted.

 

Getting such basic facts wrong might not bother Trump’s supporters. But shareholders are more likely to get wise to such antics and start focusing on more concrete issues.

 

Contrast Toyota with Constellation Brands, the $30 billion alcoholic drinks firm. Its shares dropped more than 7 percent on Thursday, despite strong earnings. The maker of Corona and other Mexican brews faces higher costs if tax breaks are scrapped for overseas costs. That’s a central tenet of tax reforms sought by congressional Republicans and Trump. And these would be easier to put in place than long-term cross-border tariffs, which break trade agreements.

 

None of this means Trump’s ability to micromanage via social-media bullying is over. But the more his punches fall wide of the mark, the more inclined investors will be to ignore him.

While that may eventually pan out, for now the market (and various Trump tweet scanning apps) is far more transfixed by what Trump tweets in his daily social media sermons than even statements made by many if not all Fed members.

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Chinese Volatility Explodes: Yuan Tumbles Most In One Year After Biggest 2-Day Rally Ever

While China’s unprecedented currency moves have quickly become the main talking point across global markets which otherwise have started off 2017 in an eerily calm fashion, it is the sudden surge in two-way volatility that has emerged a major threat to global market stability.

Case in point, the offshore Yuan fell as much as 1.1% to 6.8623 a dollar in Hong Kong, the most in exactly one year, after a record 2.5% surge over the past two sessions. This took place as a result of conflicting signals, as on one hand China continued to drain liquidity and sent overnight deposit rates into all time high territory, yet on the other the PBOC raised its fixing less than projected, but still the most since 2005, and Goldman Sachs advised its lients that the best time to short the yuan are just after interventions – like the recent one – which flush out bearish positions, or when China concerns were off traders’ radar screens.

China’s central bank raised its daily reference rate by 0.92% to 6.8668 per dollar on Friday the biggest rise since unpegging from the US dollar in 2005, following a 1 percent drop in a gauge of the greenback’s strength overnight. The offshore yuan was trading 0.8 percent weaker at 6.8457 per dollar as of 5:23 p.m. in Hong Kong, paring its weekly gain to 1.9 percent, the most in data going back to 2010. The onshore rate slumped 0.6 percent. Friday’s fixing was weaker than Mizuho Bank Ltd.’s prediction of 6.8447 and Australia & New Zealand Banking Group Ltd.’s estimate of 6.8456.

 

As we observed on Thursday evening, Yuan short sellers were once again squeezed in Hong Kong this week after interbank borrowing rates soared, and the dollar weakened as Bloomberg News reported that Chinese policy makers were preparing contingency plans to support the exchange rate even as they prepared for trade war with Donald Trump.

 

The three-month yuan interbank rate in Hong Kong, known as Hibor, surged to a record high, while the overnight rate jumped 23 percentage points to 61 percent, the highest since last January’s cash crunch. Rising interbank rates can make some short positions prohibitively expensive.

The move widened the offshore yuan’s premium over the onshore rate to 1.6%, the most since February last year. While borrowing rates in Hong Kong remained elevated on Friday, a broad recovery in the U.S. currency eased some of the pressure on bears.

Speaking to Bloomberg, Roy Teo, senior currency strategist at ABN Amro Bank NV in Singapore said that “The offshore yuan is sinking because there is some recovery in the dollar, perhaps the unwinding of short-yuan positions has mostly been done, and it’s closing the gap with the onshore currency.” The yuan is likely to weaken this year as capital outflows continue and the U.S. Federal Reserve increases interest rates, Teo said.

As shown in the chart below, in wildly volatile swings, the gave back much of its gains after a week that echoed the short squeeze in January of last year. That abrupt reversal marked the beginning of a nearly 5 percent rally lasting two months.

Chinese policy makers have several reasons to engineer a stronger or stable yuan in the short term. U.S. President-elect Donald Trump has pledged to label the country a currency manipulator on his first day in office, while the exchange rate came close to breaking through the psychologically-important level of 7 per dollar earlier this week. Policy makers also want to avoid a flood of capital outflows as citizens’ annual foreign-exchange quotas reset for the new year.

Meanwhile, Goldman warned that the Yuan will probably drop to 7.3 per dollar by December, emerging-market strategists led by Kamakshya Trivedi in London predicted in a note dated Thursday.

“The squeeze will have a temporary impact,” Luke Spajic, head of emerging Asia portfolio management at Pacific Investment Management Co., said in Hong Kong. “But I don’t think it necessarily changes the challenge, and the challenge is they still have to worry about the $50 billion to $60 billion a month of outflows and what they’re going to do about the value of their currency. And they have to face the fact that the U.S. is probably going to keep hiking rates.”

Benjamin Fuchs, chief investment officer at the $2 billion hedge fund BFAM Partners (Hong Kong), said China’s moves to repeatedly tighten capital controls risk eroding confidence in its currency. The dollar’s advance against the yen and other currencies has also increased competitive pressure on China to let the yuan depreciate, he said.

“We’re starting to see more and more of a negative cycle being created,” Fuchs said. China’s attempts to curb outflows are “just making people want to take money out quicker, and make companies change their behavior.”

The biggest problem, however, is that this volatility is starting to spillover into other currency, and asset markets, and as a result of the Chinese interventions even the dollar is starting to backoff from its recent 13 yearhighs.

Finally, in what may be a mockery of what traders observe every day, moments ago the PBOC said that China will keep the Yuan exchange rate “Basically Stable.” It added that it “will continue to improve yuan exchange rate formation mechanism this year” according to a statement after PBOC annual meeting on 2017 work.

Among other PBOC focuses:

  • To improve policy framework, infrastructure for global yuan: PBOC
  • To maintain prudent, neutral monetary policy: PBOC
  • To keep liquidity basically stable: PBOC

Considering that China has failed abysmally at all three so far, markets are increasingly concerned that the worst possible outcome may be inevitable: China losing control over the currency. The global consequences would be severe.

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US Futures Flat Ahead Of December Payrolls; Dollar Rebounds

European shares fell modestly, Asian equities declined for the first day in three, and US equity futures were unchanged before the December U.S. nonfarm payrolls report. China’s offshore yuan fell the most in a year to pare a record weekly rally, while Mexico’s peso climbed after the central bank sold dollars. Oil was trading lower in early trading.

The main economic event on the financial calendar is today’s 8:30am ET December payroll report. The market consensus for today’s print is 178k which is in line with the 178k in November. It’s worth noting that there’s a reasonable range between economists though with the low forecast at 125k and the high forecast at 221k. DB’s Joe LaVorgna is at the lower end of the range and has pegged a 150k print which is more or less where yesterday’s ADP private employment survey came in at for December (153k vs. 175k expected). What might be more interesting though is whether or not the drop in the unemployment rate is sustained. As a reminder the U3 rate fell to 4.6% in November and the lowest since 2007 from 4.9% in October. The drop has been a focus for Fed officials with more talking about an undershooting of the longer run rate so it is worth watching. As always also keep an eye on average hourly earnings. The consensus is for a +0.3% mom rise in December which would have the effect of pushing the annual rate up to +2.8% yoy from +2.5%.

Should the report come in stronger than expected and provide evidence of a healthy U.S. labor market, we could see a second wind to a flagging dollar hit by doubts that Donald Trump will usher in an era of fiscal easing and rapid growth. The employment report is expected to confirm a sixth straight year with more than 2 million jobs added, which may help to stem the steepest losses on a Bloomberg gauge of 10 major currencies this week. Market positioning in options signals the dollar is poised for further gains against the euro.

Ahead of the report, world stocks held near 1-1/2 year highs and the dollar moved up from a three-week low on Friday, with investors looking to upcoming U.S. jobs data to provide clues on the pace of U.S. interest rate rises this year. The MSCI’s gauge of the world’s stock markets hit its highest since July 2015, taking its gains so far this year to 1.7 percent, helped by this week’s generally upbeat economic readings in the U.S., China and Europe. The yen, euro and British pound all weakened for the first time in three days and the Turkish lira extended its loss. European equities declined the most in a week and U.S. futures signaled losses, while the MSCI Asia Pacific Index declined for the first day in three. The three-month interbank lending rate for the offshore yuan rose to a record in Hong Kong.

A quick rundown of global indices from Bloomberg:

  • The Stoxx Europe 600 Index was down 0.2 percent, as was the Dax in Germany.
  • The MSCI Asia Pacific Index slipped 0.3 percent. The gauge is still headed for its best start to a year since 2010. Japan’s Topix Index fell 0.2 percent, though gainers outnumbered losers 996 to 859 on the gauge.
  • Hong Kong’s Hang Seng rose 0.2 percent and Australia’s S&P/ASX 200 Index was little changed. South Korea’s Kospi advanced 0.4 percent as Samsung climbed. Singapore’s Straits Times Index rose 0.2 percent in a fourth day of gains.
  • The Shanghai Composite slid 0.4 percent, while Taiwan’s Taiex index rose 0.2 percent, gaining for the fifth day. India’s S&P BSE Sensex lost 0.1 percent after climbing 0.4 percent earlier.
  • The MSCI Emerging Markets Index was little changed after rising for three straight days. The benchmark index in the Philippines rose 0.5 percent to bring its weekly gain to 6 percent.
  • Futures on the S&P 500 Index edged lower after the underlying gauge fell 0.1 percent Thursday, just below its record set on Dec. 13.

Weaker-than-expected private-sector ADP payrolls data on Thursday contributed to the dip in the dollar, despite strong data elsewhere. Investors were looking to today’s jobs figures to see if the bounceback for the dollar could be sustained.

“It’s likely that a stronger jobs number will, in the shorter term, strengthen the dollar. But (soon) people will start questioning how much of a strong dollar the Fed can stomach,” ETF Securities’ head of research and investment strategy, James Butterfill, told Reuters. “Given the sell-off in the dollar, there could be appreciation over the next few weeks, but in the coming few months we could see further dollar weakness.”

Already under pressure as the Trump rally wanes, the dollar extended losses on Thursday as China stepped up efforts to support the yuan, sparking speculation that it wants a firm grip on the currency ahead of Trump’s Jan. 20 inauguration. As noted last night, the cost of borrowing the yuan in Hong Kong, the main offshore yuan trading center, sky-rocketed and at one point hit 105%, making it too costly for speculators to sell the yuan against the dollar.

 

The offshore yuan has gained more than 2 percent in the last two sessions, its biggest two-day gain on record, to a two-month high of 6.7833 per dollar before it eased back about 1 percent in Asia on Friday to 6.8610. Having posted its biggest gain for 7 months, of 1.1 percent, in the previous session, it fetched $1.0589 EUR= on Friday.

“What’s going on is a correction of the ‘Trump trade’ since the election. The markets have been trying to fully price in his policies just based on hopes,” Standard Chartered’s executive director of finance, Koichi Yoshikawa, said. “From now on, it’s not going to be a simple one-way bet.”

Investors also closed short positions in U.S. bonds, one of the most popular plays since the election because Trump’s policies are seen as stoking inflation.

Oil prices were steady as Saudi Arabia and Abu Dhabi stared promised supply cuts, but doubts that all producers will implement output reductions agreed in a landmark OPEC deal last year kept markets from rising further. Gold retreated 0.4 percent to $1,175.17 per ounce after a three-day, 2.9 percent climb. Bitcoin slumped again and was trading at $900 at last check.

In rates, Australian bonds climbed, sending 10-year yields down five basis points to 2.68 percent, a level last seen in November; similar New Zealand rates dropped five basis points to 3.19 percent. U.S. Treasuries rallied Thursday by the most since the post-Brexit jolt, with the yield on the 10-year benchmark falling nine basis points to 2.34 percent. That was the biggest drop since June 27.

Markets Snapshot

  • S&P 500 futures down less than 0.1% to 2262
  • Stoxx 600 down 0.2% to 365
  • FTSE 100 down less than 0.1% to 7194
  • DAX down 0.2% to 11561
  • German 10Yr yield up less than 1bp to 0.25%
  • Italian 10Yr yield down 2bps to 1.92%
  • Spanish 10Yr yield up 2bps to 1.5%
  • S&P GSCI Index up 0.5% to 399.8
  • MSCI Asia Pacific down 0.2% to 139
  • Nikkei 225 down 0.3% to 19454
  • Hang Seng up 0.2% to 22503
  • Shanghai Composite down 0.4% to 3154
  • S&P/ASX 200 up less than 0.1% to 5756
  • US 10-yr yield up less than 1bp to 2.35%
  • Dollar Index up 0.08% to 101.6
  • WTI Crude futures up 0.9% to $54.25
  • Brent Futures up 0.9% to $57.38
  • Gold spot down 0.2% to $1,178
  • Silver spot down 0.6% to $16.49

Global Headline News

  • Carlyle Said to Explore Sale of Vitamin Maker Nature’s Bounty: Company said to be valued at about $6 billion
  • China Said to Mull Scrutiny of U.S. Firms Amid Trump Tension: Options include antitrust, tax probes of American companies
  • Trump Axing Obama Power Plan Means Coal Supplying 61% More Power: U.S. would use 523 billion kilowatt-hours more of electricity generated from coal in 2050 if Obama’s Clean Power Plan is dropped
  • Trump Hits Toyota on Mexico as Car Criticism Spreads to Japanese: threatens to tax Toyota into building a plant in the U.S. instead
  • FBI Says Democrats Refused Access to Hacked E-Mail Servers: Trump scheduled to be briefed Friday on campaign breach
  • Marchionne Enters Final Push to Free Fiat Chrysler From Debt: Executives have expressed increasing confidence at recent investor meetings that they’ll reach their goals, according to people familiar
  • Mylan’s EpiPen Sales Plan: Schools Today, Everywhere Tomorrow: wants to set up its own pharmacy to cut out middlemen and lobby for new laws that could expand sales of its biggest product
  • Boeing Said Close to $10.1 Billion Order From India SpiceJet: Deal for 92 jets may grow based on outcome of negotiations
  • Brevan Howard’s Hedge Fund Posts First Gain in Three Years: Returns 3% according to an investor letter
  • McDonald’s Japan Same- Store Dec. Sales Rose 17% Y/y; 2016 Same-Store sales rose 20%
  • Frontier Airlines Said to Aim to Raise About $500m in IPO that would imply a valuation of ~$2b company: NYT
  • Morgan Stanley Said to Cut Equities Traders’ Bonus Pool Up to 4%: Firm is set to pay annual bonuses to employees next month

In Asian markets, stocks traded mixed following a lacklustre lead from Wall Street where financials underperformed, although the NASDAQ 100 still finished positive on strength in pharmaceuticals and FANG stocks. Asian stocks decline for first day in three. With MSCI Asia Pacific down 0.3% today it’s still headed for its best start to a year since 2010. Hong Kong stocks post their biggest weekly advence in three months. 6 out of 11 sectors drop as retail, material stocks underperform, real estate, telecoms outperform. Asian bourses were also indecisive as participants were tentative ahead of NFP, with Nikkei 225 (-0.3%) dampened by JPY strength and losses in Fast Retailing after Uniqlo same-store sales fell 5% Y/Y in December. ASX 200 (Unch.) was uneventful and traded flat while the KOSPI (+0.3%) was underpinned by better than expected Q4 preliminary results from Samsung Electronics. Chinese markets were mixed with the Hang Seng (+0.2%) led by energy names, while Shanghai Comp (-0.4%) lagged following a large net weekly drain of CNY 595BN by the PBoC. 10-yr JGBs traded higher amid the dampened risk sentiment in Japan with the yield curve flatter on outperformance in the long end, while the recent weekly securities transactions data also showed foreign investors returned to net buying of Japanese bonds.

Top Asian News

  • Tata Sons Calls Shareholders Meeting to Oust Mistry From Board: Extraordinary general meeting scheduled to be held Feb.
  • Bitcoin Buyers Eye Beijing Nervously as Price Drops Off High: Yuan accounts for 98% of bitcoin trading due to zero fees
  • Wartime Sex Slave Dispute Resurfaces to Rattle Japan-Korea Ties; Tokyo suspends talks with Seoul over a foreign currency swap arrangement; temporarily recalls ambassador to South Korea; halts high-level economic talks
  • Fiery Booze Drinkers Drive China’s Biggest Gains in Stocks: consumer staples surge led by baijiu-makers Moutai, Wuliangye
  • China Seen Keeping Reserves Near $3 Trillion to Avoid Alarm: Stockpile is seen holding above key level for December

In Europe equity markets (Stoxx600 -0.1%) are trading mildly in the red as mining underperform in the FTSE 100 (flat) in what has been a particularly quiet session ahead of NFP. Stoxx Europe 600 Index declines 0.3% as travel & leisure, utility and commodity stocks underperform; real estate stocks gain. 18 of 19 sectors decline. 31% of Stoxx 600 members gain; 56% decline. Financials are the outperforming sector after some notable broker moves for Worldpay (WPG LN) and Lloyds (LLOY LN), subsequently both Co.’s are at the top of the FTSE leader board. Fixed income markets have not seen too much action thus far, with Bunds trading lower by 8 ticks and in the periphery 10 year PGB yield has found support at the 4% psychological area.

Top European News

  • Sanofi Shares Slump After Amgen Wins Ban on Cholesterol Medicine: Court ruling blocks Sanofi and partner Regeneron Pharmaceuticals from selling the cholesterol-lowering medicine Praluent in the U.S. because it infringes Amgen’s patents
  • Euro-Area Confidence Jumps to Highest Since 2011 on ECB Stimulus: recovery in the 19-nation region showed further signs of strengthening
  • Draghi’s German Problem Flares as Inflation Jump Stirs Anger: Germans fret that the guardian of price stability will let them down
  • BOE’s Haldane Says ‘Fair Cop’ to Getting Brexit Forecasts Wrong: Says economists have a lot of work to do to recover from failed predictions over the global financial crisis and Brexit
  • U.K.’s May Tries to Charm Trump, Hoping for Early 2017 Meeting: Premier’s chiefs of staff made secret trip to U.S. in December
  • TP ICAP Shares Soar After U.S. Election Boosts Revenue Growth: Company says 2016 revenue will probably rise 12% to 796 million pounds
  • France Sees Three-Way Race for President as Fillon Bounce Fades: Independent Emmanuel Macron gains support, Socialist Party’s Valls would be well out of run- off range

In currencies,  the offshore yuan fell 1.1 percent to 6.8599 per dollar after a four-day climb. The onshore yuan fell 0.6 percent. The euro declined 0.2 percent to 1.05843 per dollar and the pound was down 0.3 percent at 1.23793. The Bloomberg Dollar Spot Index rose 0.2 percent after falling 1 percent Thursday in its biggest slide since July on a closing basis. Companies added fewer jobs than forecast in December, according to a private research group. The yen fell 0.7 percent to 116.18 per dollar after strengthening 1.7 percent Thursday. The Aussie and kiwi dropped 0.3 percent and 0.2 percent, respectively. South Korea’s won lost 0.6 percent. Mexico’s peso jumped 0.5 percent after Banxico sold dollars to bolster the exchange-rate. The currency Thursday erased an advance of 1.5 percent after  Trump threatened Toyota Motor Corp. with a border tax for planning to build a factory in Mexico. The Turkish lira was down 0.8 percent at a record low 3.6226 per dollar following a 0.6 percent drop the previous day.

In commodities, crude was down 0.4 percent at $53.55 a barrel after climbing 0.9 percent Thursday following a report that Saudi Arabia is cutting production as it implements an agreement to ease a global supply glut sparked the turnaround. However, further gains have been struggling on trader caution over OPEC implementation of last year’s output agreements. This morning there have been reports of Kuwait making a larger cut in production than required. Oil pushed higher but holds off weekly highs. Performance in base metals also staggering, and with recent gains all on fiscal spending hopes, while Gold prices come off better levels, but marginally so as yet.  Gold retreated 0.4 percent to $1,175.17 per ounce after a three-day, 2.9 percent climb.

US Event Calendar

  • 8:30am: Trade Balance, Nov., est. -$45.4b (prior -$42.6b)
  • 8:30am: Change in Nonfarm Payrolls, Dec., est. 175k (prior 178k); Unemployment Rate, Dec., est. 4.7% (prior 4.6%)
  • 10am: Factory Orders, Nov., est. -2.3% (prior 2.7%); Durable Goods Orders Nov. F, est. -4.6% (prior -4.6%)
  • 11:15am: Fed’s Evans Speaks on Economy and Policy in Chicago
  • 1pm: Baker Hughes rig count
  • 3:30pm: Fed’s Kaplan Speaks in Chicago

DB’s Jim Reid completes the overnight wrap

It may be a holiday shortened week but there’s been more than enough news to keep markets on their toes in the first few days 2017. Global growth hopes have been boosted following the latest round of PMI’s. The FOMC minutes revealed that “uncertainty” is the new buzzword while one eye has been closely kept on the latest appointments by President-elect Trump. Meanwhile European politics continues to bubble below the surface. The latest food for thought though and the big focus over the last 24 hours has been in China where we’re back to watching the moves in the Renminbi closely after the offshore currency posted the biggest two-day rally on record.

We’ll dig into that shortly but before we get there we’ve got the final US employment report of 2016 to preview. As always nonfarm payrolls will be the big focus and the market consensus for today’s print is 175k which is just a shade below the 178k in November. It’s worth noting that there’s a reasonable range between economists though with the low forecast at 125k and the high forecast at 221k. Our US economists are at the lower end of the range and have pegged a 150k print which is more or less where yesterday’s ADP private employment survey came in at for December (153k vs. 175k expected). What might be more interesting though is whether or not the drop in the unemployment rate is sustained. As a reminder the U3 rate fell to 4.6% in November and the lowest since 2007 from 4.9% in October. The drop has been a focus for Fed officials with more talking about an undershooting of the longer run rate so it is worth watching. As always also keep an eye on average hourly earnings. The consensus is for a +0.3% mom rise in December which would have the effect of pushing the annual rate up to +2.8% yoy from +2.5%. All that to look forward to at 1.30pm GMT.

Back to China where yesterday the offshore Renminbi rallied a further +1.12% to 6.7889 and in doing so clocked a +2.51% two-day gain and the most on record. In fact up to yesterday’s close the currency had rallied +2.76% in 2017 already having weakened -6.20% last year. As a result the PBoC also moved to strengthen the fixing in the onshore currency this morning by the most since 2005 or since the Renminbi was de-pegged from the US Dollar. The rally for the offshore Renminbi has however faded a bit this morning (currently -0.50%). The catalyst for that earlier surge appears to be the crackdown by the PBoC on capital outflows at the end of last year – something we talked about in Tuesday’s EMR. In addition overnight lending rates in Hong Kong have surged in recent days (CNH Hibor touched 61% this morning and the second highest level on record) and liquidity is thin which is helping to exacerbate the moves.

It wasn’t just the Renminbi which had a good day against the Greenback yesterday with EM currencies also surging. The USD index actually closed -1.15% and is already back to mid-December levels. It’s little changed this morning. The Mexican Peso was also back in focus yesterday after Mexico’s Central Bank stepped in to stem the recent slide which helped the currency to rally back over +2%. However that was short lived with President-elect Trump taking to social media again and targeting Toyota this time with a border tax for planning to build a new plant in Mexico to import into the US. Meanwhile Treasuries were notably stronger with the benchmark 10y yield rallying 9.5bps to 2.345% – the lowest level since December 7th. Similar maturity Bund yields also edged down 3.3bps although the periphery was notably weaker (yields 5bps to 14bps higher).

There wasn’t much to report at the other end of the risk spectrum. The S&P 500 (-0.08%) paused for breath with financials and retailers suffering while in Europe the Stoxx 600 finished the day +0.10%. Elsewhere, over in credit markets the focus continues to be on the flying start for primary issuance in the US. Another $10bn priced in US IG yesterday which takes the week-to-date figure past $50bn and making it one of the biggest weeks of all time. What perhaps makes this more incredible is that, unlike in other record weeks, this week’s issuance total has not been boosted by one or two jumbo deals. Rather it’s been a steady diet of benchmark size deals.

Over in Asia this morning it’s been another fairly mixed start. The Nikkei (-0.39%) is in the red while the Hang Seng (+0.54%) and Kospi (+0.42%) are firmer. The Shanghai Comp and ASX are little changed. There’s been some focus on a Bloomberg story this morning too which suggests that China is prepared to step up measures aimed at scrutinizing US companies conducting business in China should Trump take punitive measures against the country. It’s hard to gauge how reliable the story is but it’s one to watch.

Moving on. While yesterday’s ADP print in the US may have come in a tad disappointing, data out of the services sector was less so. The services PMI was revised up at the final count to 53.9 in December from the earlier 53.4 flash reading. Meanwhile the ISM non-manufacturing print came in at 57.2 which, while unchanged versus November, was still better than expected (56.8 expected). Notably the new orders component ticked up to 61.6 from 57.0. The remaining data was the latest weekly initial jobless reading which saw claims fall steeply to 235k from 263k. There was also some Fedspeak yesterday with San Francisco Fed President Williams saying that three hikes in 2017 is a “pretty reasonable” assumption. Meanwhile in Europe yesterday the only significant data was in the UK where the services PMI for the December was reported as rising 1pt to 56.2 and to the highest since July 2015.

Before we look at today’s calendar a quick mention that this morning our European Equity Strategist Sebastian Raedler has raised his year-end Stoxx 600 target from 345 to 375 (3% upside from current levels). He expects 9% EPS growth this year, helped by the rebound in global growth momentum, stronger commodity prices and euro weakness. This would make 2017 the first year of meaningful European EPS growth since 2010. He argues that European equities benefit from two important inflection points. First, global growth is accelerating for the first time since 2013. Secondly, European earnings are rising again,

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