Asia Pacific

· BOJ Survey Shows Japan Business Mood Fragile, Highlights Abe's Challenges. Japanese business confidence barely improved in the fourth quarter and is seen worsening, giving premier Shinzo Abe a grim reminder of the challenges he faces in reviving a recession-hit economy a day after his big win in Sunday's vote. While corporate capital spending was strong, the Bank of Japan's quarterly "tankan" survey on Monday also underscored prevailing doubts among businesses about Abe's strategy to spark durable economic growth. The headline index measuring big manufacturers' sentiment fell one point from three months ago to plus 12, worse than a median market forecast of plus 13, the tankan showed. Both manufacturers and non-manufacturers expect conditions to worsen ahead, highlighting the patchy recovery. (Reuters)

· China’s Treasury Holdings Fall To Lowest Since February 2013. China’s holdings of U.S. Treasuries fell to a 20-month low in October, as yuan appreciation indicated less of an impetus to buy the government securities. China held $1.25 trillion in U.S. debt as of October, a $13.6b drop from September, the Treasury Department said in a monthly report today. The nation remains the largest foreign holder, ahead of Japan, whose stockpile increased $0.6b to $1.22 trillion, reducing the gap between the two countries to the narrowest since September 2012. (Bloomberg)

· China Says To Build $31b Worth Of New Infrastructure. China's economic planner has approved the construction of 192b yuan ($31b) of roads and an airport in the latest government effort to increase investment and support a slowing economy. Five roads will be built in the southern and central region and provinces of Guangxi, Guangdong and Sichuan, the National Development and Reform Commission said on its website. It said that 80b yuan would be invested in Beijing to build a third airport in the capital city. (Reuters)

· India's Trade Deficit Widens Amid Recovery Hopes. India's trade deficit widened to an 18-month high in November as demand for machinery and transport equipment soared, bolstering hopes of a sustained recovery in Asia's third largest economy. Higher gold imports during the month also helped swell the trade shortfall to $16.86b last month, its highest level since May 2013. Gold imports jumped 34% from October to $5.61b. (Reuters)

· India's Rapidly Cooling Inflation Supports Case For Rate Cut. India's wholesale price index showed no increase in November for the first time in near 5-1/2 years as oil prices tumbled, building a case for the central bank to start lowering interest rates early next year to help prop up economic growth. Asia's third-largest economy is recovering from the slowest phase of growth since the 1980s, having lost momentum in the last quarter which has raised calls from industry for more support. The wholesale price index (WPI) was flat in November against a year earlier, its lowest since July 2009, government data showed on Monday. That compared with a 1.41% rise forecast by economists in a Reuters poll (Reuters)

· Australia's Budget Deficit To Widen By A$10bn. Australia's government has said it expects the nation's deficit to grow to $40.4bn Australian dollars ($33.2bn) in the 12 months to June. Earlier in the year, the deficit for the period had been forecast to come in at A$29.8bn. The country's treasurer, Joe Hockey, said falling prices for key export commodities had hurt the economy. The nation's mid-year economic outlook was delayed on Monday due to a siege situation in Sydney. Mr Hockey predicted the shortfall for the 2015-16 financial year would be A$31.2bn, up from a previous forecast of A$17.1bn. (BBC)

Americas

· U.S. Factory Production Accelerates In Sign Of Economy's Strength. U.S. manufacturing output recorded its largest increase in nine months in November as production expanded across the board, pointing to underlying strength in the economy. Factory production rose 1.1% after advancing 0.4% in October, the Federal Reserve said on Monday. Manufacturing output in November was led by a 5.1% jump in automobile production after three straight months of decline. There were also solid gains in machinery, apparel and leather, and petroleum and coal products. (Reuters)

· Homebuilder Sentiment Edges Lower In December: NAHB. U.S. homebuilder sentiment declined slightly in December, though overall sentiment figures among builders remained stronger than in the first half of 2014, the National Association of Home Builders said on Monday. The NAHB/Wells Fargo Housing Market Index fell to 57 in December, down one point from 58 in November, and below the year's peak of 59 in September. However, after a soft spring, builders remained relatively more optimistic. The reading marks the sixth consecutive month above 50, the threshold for whether builders see the environment as generally favorable or unfavorable. (Reuters)

· Surprise Drop In Brazil Economic Activity Points To Weak Fourth-Quarter. Economic activity in Brazil posted a surprise drop in October, after Latin America's top economy barely struggled out of recession in the third quarter, central bank data showed on Monday. The central bank's IBC-Br economic activity index dropped 0.26% month-on-month in October in seasonally adjusted terms, well below market estimates for a 0.20% increase. The Brazilian economy has remained sluggish since 2011. Global demand for the country's commodities has cooled, inflation has remained stubbornly high and investor sentiment soured due to repeated, often erratic, government intervention in the private sector. (Reuters)