Article / 07 September 2017 at 2:51 GMT

Morning Report APAC: Asia buoyed by US debt deal

APAC Sales Trading Desk / Saxo Capital Markets


  • Asian stocks rise as investors support deal that keeps US government funded
  • Most Asian markets up, including Hang Seng, KOSPI and Topix
  • JPY was steady at 109.13 to the USD after falling 0.4% on Wednesday

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



0015 – US: Fed’s Mester speaks on economic outlook and monetary policy
0700 – US: Fed’s Dudley speaks on US economic outlook and Monetary policy
0815 – US: Fed’s George speaks on economic outlook

Overnight news

 US: The Congress has finally agreed for a Debt Ceiling extension for three months as part of aid for Hurricane Harvey. Some Republicans wanted a longer deal.
North Korea:
A US-drafted resolution seeks to have the UN ban all oil and natural gas exports to North Korea and order a freeze on all foreign financial assets of the country and its leader Kim Jong Un. The draft circulated to council members Wednesday was obtained by The Associated Press. It would also prohibit North Korea from exporting textiles and ban all countries from hiring and paying workers from the northeast Asian nation - two key sources of foreign currency. It would also prohibit North Korea from being part of any joint ventures or cooperative agreements. The resolution is likely to face opposition from China and Russia
Federal Reserve:
Stanley Fischer resigned as Fed vice chairman, effective mid-October, enabling Trump to remake the central bank leadership before Janet Yellen's term ends in February. Gary Cohn probably won't replace her, the WSJ reported. The former Goldman exec has fallen out of favor since criticizing the president's response to white supremacists. Fischer was set to remain until June 2018, and his exit leaves four of the seven seats on the Fed board vacant.

Canada: The  Bank of Canada surprisingly raised the Overnight Lending Rate by 25 basis points to 1.00%. At the same time, BOC cited risks including continued excess capacity, subdued wage and price pressures, geopolitics and the higher CAD along with concern about the impact of rising interest rates on indebted households.

“Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation,” the Bank of Canada said Wednesday in a statement from Ottawa.
BCB cut the Selic Rate by 100 bps to 8.25% as expected. 

Foreign exchange



USD rallied slightly following the US rates after the Debt Ceiling agreement was reached. The market was overall mixed though overnight. Around 92.0 remains the level to watch for DXY.

EURUSD trades just at the resistance level of 1.2000 before the ECB meeting today. We have seen some interest to buy downside options in EUR ahead of the meeting but the main risk is Draghi talking down the EUR move and seeing another big squeeze higher. 

USDCAD dropped 1.20% following the surprising rate decision. The market seems very short USDCAD even though the pair moved 12% since May. With the rate hike, there is not many reasons to go against the trend, even at this level. There is support before 1.2000.

Emerging Markets: USDKRW has cooled down a lot since the 1% rally following after the nuclear  test from North Korea. USDBRL dropped 0.5% following the rate cut and we expect more foreign bond inflows into the country with probably more cuts to come from the central bank.

Foreign exchange movements

Funds have been buying a lot of ATM and topside AUDUSD and they have realised the pair has been has been underperforming the past two months so banks have been caught selling too much volatility and we are seeing a squeeze higher in movements in AUD.

The whole curve trades higher in USDCAD with the market on the December monetary policy meeting.


US yields were higher after US congress extended the debt limit through December, and partially supported by good data in service industries. However, market’s expectation of rate hike amid low inflation environment has dropped below 30%.

The bunds yield was higher amid risk off bull flattening, peripherals spread widening mostly due to supply flooding ahead of auctions.







US stock benchmarks closed moderately higher as lifted by energy stocks and after Trump and Democrats agreed to a three-month extension of the US debt ceiling, while concerns over North Korea, Category 5 Hurricane Irma kept a cautious tone.

Gap Inc surged 7.5% after the company said it expects its Old Navy brand to reach $10 billion in sales over the next few years, while speaking at the Goldman Sachs Global Retailing Conference. Macy’s Inc. and Kohl’s Corp were also sharply higher, up 5.5%, and 4.9% respectively.

Hewlett Packard Enterprise Co. dropped 1.9% despite as the company late Tuesday reported earnings that beat forecasts after the spinoff of some software assets.

Cruise line operators, such as Carnival Corp., Royal Caribbean Cruises Ltd. and Norwegian Cruise Line Holdings Ltd. managed to find some support from previous day’s slump due to Cat. 5 Irma may threaten more cancellations and changes.

Insurance firms were dragged down as Hurricane Irma in focus as Stoxx Europe 600 Insurance Index dropped 0.4%, as shares of Swiss insurer Zurich Insurance Group AG fell 0.7%, Swiss Re AG closed 0.9% lower, while AXA SA gave up 0.5%.

Asia Pacific Stocks
Hong Kong

Analyst ratings:
-          Air China (601111 CH): A Shares Raised to Neutral at JPMorgan, PT 9.40 Yuan
-          China Resources Beer (291 HK): New Buy at China Securities, PT HK$24.30
-          China Shenhua (1088 HK): H Shares Cut to Sell at Haitong Intl, PT HK$15.60
-          China Southern Air (1055 HK): H Shares Cut to Underweight at JPMorgan
-          CRRC Times (3898 HK): H Shares Raised to Market Perform at Bernstein
-          Shenzhou Int’l (2313 HK): Cut to Hold at HSBC, PT HK$64.30
-          Tsingtao Brewery (600600 CH): H Shares New Hold at China Securities
-          Wolong Electric (600580 CH): New Outperform at SWS
-          Zoomlion (000157 CH): A Shares Cut to Underperform at Bernstein, PT 3.60 Yuan
-          China Comm Cons (1800 HK): Signs Pact for 70.8B Yuan PPP Projects
-          CK Hutchison (1 HK): Priced: Hutchison Port $500m 5Y Bond at +117.5bp
-          Geely Auto (175 HK): Aug. Sales Volume 96,505 Units, up 6% on Month
-          HNA Unit HKICIM (687 HK): Says to Scale Back Investment in a Fund to $77M
-          HKEX (388 HK): HKEX Jan.-Aug. Sec. Market Avg Daily Turnover Rises 20% on Year
-          Huawei To Tie up With AI Firm Afiniti for European Market Push
-          Kangde Xin (002450 CH): Kangde Xin, Samsung Electronics to Cooperate on Glasses-Free 3D
-          Ping An Insurance (2318 HK): Ping An Insurance Unveils First Two Insurance Fintech Products
-          Shanghai Fosun Pharma (600196 CH): Palatin in Pact with Fosun Pharma for Bremelanotide
-          Shanghai Oriental Pearl Media (600637 CH): Shanghai Oriental Pearl, Lenovo to Cooperate on Big Data, AI
-          Shenzhen Kaizhong (002823 CH): Makes Binding Offer to Buy Pacific Insight
-          Shenzhou Int’l (2313 HK): Shenzhou International Holders Seek Up to $425m in Block: Terms
-          Yuzhou Properties (1628 HK): to Raise HK$1.59B From Top-Up Placement

Analyst Ratings:
-          Asahi Kasei (3407): Cut to neutral from buy at UBS
-          Eisai (4523): Raised to neutral from underperform at Credit Suisse
-          Nissan (7201): French govt. stake in Renault no concern if autonomy respecteed, CEO says
-          NTN (6472): Cut to underweight from neutral at JPMorgan
-          Sanyo Steel (5481): Cut to neutral from buy at Haitong
-          Shinko Electric (6967): Cut to underweight from equalweight at Morgan Stanley MUFG
-          Ube Industries (4208): Cut to neutral from neutral plus at Iwai Cosmo

-          McDonald’s Holdings Co Japan (2702): Aug. same-store sales +15% y/y
-          Mitsubishi Tanabe (4508): Signs pact with Option Care Enterprises to become national provider of home infusion services for Radicava for ALS
-          Mitsui High-Tec (6966): 1H operating profit 1.26b yen vs co. target 1b yen; to invest 7b yen to build motor core plant
-          Skylark Co (3197): Aug. same-store sales +0.6% y/y
-          Tokio Marine Holdings (8766): To set up new insurance company in Luxembourg

Analyst Ratings:
-          BHP AU: BHP Cut to Underperform at Exane, PT GBP13.10
-          CBA AU: Commonwealth Bank Raised to Buy at Morningstar
-          ORE AU: Orocobre Raised to Buy at Cormark, PT C$5.60
-          RCR AU: RCR Tomlinson New Overweight at JPMorgan, PT A$5.08
-          TLS AU: Telstra Raised to Outperform at Credit Suisse, PT A$4
-          VRT AU: Virtus Health Raised to Buy at Morningstar
-          BLY AU: Boart Longyear Affirmed by Moody’s, Outlook Negative
-          RIO AU: Rio CEO Remains Patient on Future of World’s No. 2 Copper Mine
-          SIG AU: Sigma Pharma 1H Earnings
-          TGH NZ: Tegel Forecasts Underlying Ebitda Will Rise in FY2018

 Trump's deal with the Democrats has maintained stability across markets. Photo: Shutterstock

– Edited by Adam Courtenay

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