Article / 05 July 2016 at 2:46 GMT

Morning Report APAC: All eyes on Reserve Bank of Australia today

APAC Sales Trading Desk / Saxo Capital Markets


  • Silver soared above $21/oz for the first time in two years
  • European stocks fell; the FTSE100 fell for the first time in five sessions
  • US markets were closed for Independence Day yesterday
  • Iron ore made gains on rising steel prices in China
  • AUD rallied on the back of a rally in precious metals and iron ore

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time: GMT plus 8 hours)

0830: TWD –CPI YoY (Exp. 1.10%, Prev. 1.24%)
0900: PHP –CPI YoY (Exp. 1.9%, Prev. 1.6%), Core YoY (Exp. 1.9%, Prev. 1.6%)
0930: AUD – Trade Balance (Exp. -1700M, Prev. -1579M)
0930: AUD – Retail Sales MoM (Exp. 0.3%, Prev. 0.2%)
0945: CNY – Caixin China PMI Composite (Prev. 50.5), PMI Services (Prev. 51.2)
0935: JPY – Nikkei  Japan PMI Services (Prev. 50.4), PMI Composite (Prev. 49.2)
1015: SGD – Nikkei  Singapore PMI (Prev. 50.1)
1230: AUD – RBA Cash Rate Target (Exp. 1.75%, Prev. 1.75%)
1300: INR – Nikkei India PMI Services (Prev. 51.0), PMI Composite (Prev. 50.9)
1500: MYR – Malaysia Foreign Reserves (Prev. $97.4Bn)
1555: EUR – Markit Germany Services PMI (Exp. 53.2, Prev. 53.2), Composite PMI (Exp. 54.1, Prev. 54.1)
1600: EUR – Markit Eurozone Services PMI (Exp. 52.4, Prev. 52.4), Composite (Exp. 52.8, Prev. 52.8)
1630: GBP – Markit UK Services PMI (Exp. 52.8, Prev. 53.5), Composite PMI (Exp. 52.0, Prev. 53.0)
2145: USD – ISM New York (Prev. 37.2)
2200: USD – Factory Orders (Exp. -0.8%, Prev. 1.9%)
2200: USD – Durable goods Orders (Exp. -2.2%, Prev. -2.2%), Ex Transportation (Exp. -0.3%, Prev. -0.3%)

1730: GBP - Carney Publishes BOE Financial Stability
1800: GBP - Bank of England Governor Mark Carney gives press conference in London
2105: EUR - ECB's Mersch Speaks in Frankfurt

Overnight news


  • Australia resumes vote counting today, but election results may not be known until the end of the week. Coalition talks could take months.
  • Prime Minister Malcolm Turnbull needs 76 seats to stay in power.
  • The RBA meets today. 13.7% chance of cut is priced in for today and 47.4% for the August meeting.

United Kingdom

  • Conservative lawmakers begin picking their next premier today, aiming to whittle down a list of five contenders to two. Home Secretary Theresa May is the favorite and Energy Minister Andrea Leadsom is gaining support.
  • Separately, UKIP leader Nigel Farage, who campaigned for a Brexit for two decades, quit. "I have got my country back, now I want my life back," he said !!!

Foreign exchange


AUD rallied on the back of a rally in precious metals and iron ore. The market seems to believe that the drag of election uncertainty will prevent the Reserve Bank of Australia from cutting rates.

NZD followed the rally of AUD with the precious metals and iron ore rally. It was the Independence day holiday in the US on Monday; and the rest of the market was quiet overnight

We still see buyers of USDJPY ATMs and upside for the Bank of Japan date (29 July) but in smaller amounts now.





The US treasury market was closed but futures traded, indicating 10 year yields remained unchanged at around 1.44%. UK and Europe bond markets were quiet as well, however maintaining a downward mood.

Yields on the 10 year gilt fell -2.0 bps to a new low of 0.833%. Bunds fell -2.0 bps to -0.141%.

Market pricing of the Fed rate hike firmed slightly, implying a 5% chance of a rate hike in September and a 15% chance by December. The market is pricing 57.5% of probability of a cut in the UK in July meeting, and 83.9% at the August meeting.

The ECB bought €241m of corporate bonds in the primary market in June vs €6.2bn in the secondary market, according to a statement from the central bank. The bank had bought€6.4b of corporate bonds as of June 30 and Holds €6.8bn of Corporate Bonds as of July 1






European stocks fell on light volume and US markets were closed for Independence Day yesterday.

Stoxx Europe 600 was largely weighed down Italian banks. Banca Monte dei Paschi di Siena SpA closed down 14% after the European Central Bank said it must cut bad loans by 30% over the next three years. Others were not spared, with Banca Popolare dell’Emilia Romagna down 6.7% and Intesa Sanpaolo SpA off 3%.

The FTSE100 fell for the first time in five sessions. Shares of retailer Marks & Spencer Group PLC fell 5.1% following a ratings downgrade to hold from buy at Investec. Other retail shares were also under pressure, with apparel seller Next PLC down 2.8% and luxury-goods producer Burberry Group PLC off 1.5%.

Hong Kong equities preview

Analyst views

  • L’Occitane (973 HK): Cut to neutral at UBS.
  • Prudential (2378 HK): Cut to underweight at JPMorgan.

Company news

  • CICC(3908) says in talks with China Investment Sec on strategic cooperation and business opportunities.
  • Lifestyle(1212) sees H1 investment loss on its financial assets and bank deposits of ~HK$200.9m vs $HK259.1mln gain year earlier..
  • Nirvana(1438) CVC Capital said to have made buyout offer for Nirvana Asia.
  • Country Garden (2007) January to June contracted sales +129.6% YoY; co. raises annual contract sales target to 220bn yuan from 168bn yuan.
  • Evergrande(3333) Jun contract sales +26.7% YoY; Jan to Jun contracted sales +63% YoY.
  • Logan PPT(3380) Jun contract sales +76.3% YoY; Jan to Jun contracted sales +71% YoY.
  • CTEG(1363) controlling shareholder acquired 1.14mn shares at open market yesterday
  • Golden Throat(6896) controlling shareholder acquired 277.5k shares at open market yesterday.
  • Fosun Pharma(2196) and Alipay signed framework pact for cooperation in technology, platform and market.
  • Citic Resource(1205) expects interim to record profit vs loss of $HK850mln year ago
  • BJ PPT(925) buy 60% of Cambodian developer Zhong Jian Jin Bian Jing Ji Te Qu LTD for $HK1.4bmln.
  • Dasheng(1103) forms JV with Meishan Market as part of expansion into agriculutral finance services.
  • Feiyu Tech (1022) issued profit warning, expecting interim to record loss of RMB75mn vs net profit of RMB64mln yuan a year ago.
  • Anhui Conch(914) and other cos. make bids for Lafarge India Assets.

Japan equities preview

Analyst views

  • Mitsubishi Motors (7211 JP): Cut to underperform at Credit Suisse.
  • Isuzu Motors (7202 JP): Raised to outperform at Credit Suisse.
  • Nissan Chemical (4021 JP): Rated new buy at Jefferies.
  • Sumitomo Mitsui Financial (8316 JP): Cut to reduce from hold at BNP Paribas.
  • Sumitomo Mitsui Trust (8309 JP): Downgraded to reduce from hold at BNP.

Company news

  • Arcs (9948 JP): 1Q operating profit climbed 15.6% y/y to 3.4b yen, and net income jumped 52.3% y/y to ¥2.7bn.
  • Daiichi Sankyo (4568 JP): Co. and UCB announce approval of lacosamide in Japan
  • Fuji/Ehime (8278 JP): 1Q oper. profit fell 6.8% y/y to ¥1.96bn, while net income rose 2.9% y/y to ¥1.26bn.
  • Japan Display (6740 JP), Nitto Boseki (3110 JP): Effissimo holds at least 5% in each co.
  • Kewpie (2809 JP): Half-year operating profit rose 8% y/y to ¥14.16bn while net income fell 15.1% y/y to ¥8.18bn.
  • KRS (9369 JP): Half-year operating profit jumped 22.3% to ¥2.12bn; raised full-year oper. profit forecast 4.4% to ¥4.7bn.
  • Mediaseek (4824 JP), Media Kobo (3815 JP), Adways (2489 JP) and other Line-related stocks: Line raises IPO price range to ¥2,900-¥3,300/share
  • Mitsui Fudosan (8801 JP): Credit rating raised to A from A-at S&P, with outlook stable
  • Sysmex (6869 JP): Pursuing joint development with GL-i to provide new diagnostic reagents.
  • United Arrows (7606 JP): Same-store sales +2.8% in June.
  • Warabeya Nichiyo (2918 JP): Q1 operating profit climbed 19.2% y/y to ¥1.55bn, while net income dropped 8.4% y/y to ¥983mln.
  • W-Scope (6619 JP): Agrees to increase commitment-type term loan by ¥4bn yen to ¥14bn.
  • Yondoshi Holdings (8008 JP): Q1 operating profit rose 14.8% y/y to ¥1.55bn.

Australia equities preview

Analyst views

  • SAI Global Cut to ’Neutral’ at Credit Suisse
  • Mantra Group Cut to ’Neutral’ at Credit Suisse
  • BHP Billiton Raised to ’Hold’ at Independent Research GmbH
  • Austal Raised to ’Buy’ at Argonaut Securities
  • Rio Tinto Raised to ’Buy’ at SBG Securities

Company news

  • Receiver KordaMentha proposes sale or recapitalization of Arrium Ltd. (ARI AU)

Source: CIMB / Bloomberg   

 Iron ore has made gains on rising steel prices in China, and the resurgent ore price has given the flagging Australian dollar a lift. Photo: iStock


– Edited by Robert Ryan

This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter

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