Article / 25 May 2016 at 7:00 GMT

Morning Markets: Risk appetite recovery rolls across Asia

Consulting editor / TradingFloor



  • Germany: GfK consumer climate survey (published)
  • Germany: Ifo business climate index (0800 GMT)
  • Canada: Bank of Canada rate announcement (1400 GMT)
  • US: EIA weekly petroleum report, including crude oil and petrol stocks (1430 GMT)

Asian shares rebounded on Wednesday, driven by a recovery in risk sentiment, a higher close for US stocks overnight, a firmer US dollar and advancing oil prices.

On Tuesday, US stocks had their best day since March, with the Nasdaq up 2% and the Dow and S&P 500 both gaining more than 1%, after upbeat US housing market data. The broad recovery in risk sentiment resulted in a stronger dollar.

The People's Bank of China weakened its currency fixing by 0.3% to 6.5693 to the USD, its lowest since March 2011 .

The Canadian dollar will be in focus today as the Bank of Canada meets, and a dovish statement could hit the CAD as that is not fully priced in.

Market signals

Asian session

  • China's central bank has weakened its currency fixing to the lowest since March 2011
  • Yuan reference rate was lowered by 0.3% to 6.5693 to the US dollar
  • China's state-owned firms' profits fell 8.4% year-on-year in first four months of this year
  • Coal, steel and nonferrous metals companies posted the major losses
  • Gold fell overnight, with bullion for June delivery slipping 1.8% to $1,232.20/oz
  • West Texas Intermediate crude oil rose 2.8% overnight to $49.19/barrel
  • Brent was up 2.2% overnight to $49.17/b
  • Iron ore held after a big fall the day before, rising 0.3% to $51.36/tonne
  • Asian shares rebounded on the back of US housing data and the advance in oil
  • Japanese stocks rebounded on Wednesday as exporters were boosted by stronger USD
  • The Nikkei 225 was up 277 points or 1.68% at 0501 GMT
  • The Hang Seng moved up 2.47% at 0510 GMT and in Shanghai shares were up 0.22%
  • The Mumbai Sensex was up 1.39% at 0509 GMT
  • The ASX/S&P 200 was up 1.61% at 0636 GMT to 5380 points

Forex ahead

  • South Korea’s won led gains among Asian currencies
  • US dollar rose against the yen; it was worth ¥110.1590 at 0005 GMT
  • Australian dollar retreated, falling below 0.72
  • Aussie dollar was worth just 0.7189 at 0006 GMT
  • CAD could be dented by any dovishness from the Bank of Canada
  • Yield on 10-year US Treasuries held near a three-week high 

From the Floor

Rally. "Asian shares rallied today after strong overnight sessions in both Europe and the US," says Moltke-Leth.

Bon appetit. "The key thing for all markets was yesterday’s very strong risk-appetite recovery," says Hardy. "The result was a very strong dollar."

Get all the latest from Saxo Bank's trading floors in From the Floor, within the hour.

In opinion

Even modest gains in today's update of the German business mood would justify a positive if cautious outlook for German GDP growth in the months ahead, says James Picerno

Tricky game
NZ Reserve Bank governor Graeme Wheeler is playing a tricky game of inflation catch-up and he needs the NZD currency pairs to work for him, says Max McKegg

Home run
New-home sales enjoyed their largest monthly spike in 24 years, their fastest pace of sales in eight years, and Asian markets responded, reports the Saxo Singapore team

CAD vulnerable
Chances are that Wednesday’s Bank of Canada statement will be dovish, leaving a whiff of “rate cut” in the air and supporting USDCAD, says Michael O'Neill.

Rate differentials
The US-UK interest rate differential is likely to widen further in favour of the US, and Europe faces risks with or without a Brexit, says Neil Staines

Russian bond
Russia's successful placement of a new $3 billion eurobond means a boost to FX reserves and more roubles to plug the budget deficit, killing two birds with one stone, says Nadia Kazakova.

Banff National Park, Alberta, Canada

 The Bank of (scenic) Canada holds a policy meeting on Wednesday, and markets expect the central bank to keep interest rates on hold at just 0.5%. Photo: iStock 

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