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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 12 April 2018 at 2:25 GMT

Morning Report APAC: Asia drifts as caution reigns over Syria tensions

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

  • President Trump warned Russia to "get ready" for a US missile strike in Syria
  • Theresa May reportedly moved British submarines within the range of Syria 
  • Saudi Arabia said it intercepted a ballistic missile over Riyadh
  • The Dow fell 218 points and S&P 500 fell 14 points
  • Gold surged and oil prices continued to rise
  • Asia traded sideways in morning trade

 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

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Speeches

0830 – JN – Kuroda speaks at Branch Managers Meeting

0845 – CH – PBOC Governor Yi Gang speaks at IMF/PBOC conference in Beijing 

1430 – UK – BOE’s Ben Broadbent speaks in Sydney 

2015 – EC – ECB's Benoît Cœuré speaks in Paris 

0000 – EC – ECB’s Jens Weidmann speaks in Berlin 

0300 – CA – Mark Carney speaks at Canada Growth Summit in Toronto 

0500 – US – Fed’s Kashkari speaks in Moderated Q&A in Minneapolis


Overnight news

 

Geopolitics: President Trump warned Russia to "get ready" for a US missile strike in Syria, tweeting that relations with Moscow have never been worse. The Kremlin fired back, saying it doesn't support "Twitter Diplomacy". A Russian lawmaker said senior military officers were in contact with the US Joint Chiefs of Staff. 

The Daily Telegraph reported that Theresa May has moved British submarines within the range of Syria and recalled ministers to attend an emergency cabinet meeting to discuss the UK response to the alleged chemical attack on Douma. 

Saudi Arabia said it intercepted a ballistic missile over Riyadh and shot down two drones in another part of the country, in the latest attacks by pro-Iranian Yemeni rebels. Blasts were heard in the capital. 

US Treasuries rallied on the back of these geopolitical risk, Gold is up 1% (was 2% at a certain point last night), the UST curve is flattening even more with 2s10s now trading at 47.2 bps, 5s30s at 40 bps, and equities dropped from 0.6% to 0.9%.

 

Foreign exchange

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G10 was very quiet overnight despite all the geopolitical risks. USDCAD was lower on the back of higher oil. The trend lower is very strong and the main support is only at 1.2470.

USDJPY was offered but is still above the support level of 106.55. 

Emerging Markets: USDRUB continues to be very volatile and the interbank liquidity disappeared. We are seeing though some interests and inflows in the bond market at this level.


Foreign exchange movements

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The vols in G10 are quite depressed. We are seeing some interest to sell straddles but the risk reward at this level is not great. The idea would be to play the break of ranges though options, like 2 month 1.2500 call in EURUSD.


Rates
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US Treasuries were higher despite higher inflation indicating faster rate hikes, mainly driven by geopolitical tension buying. The yield curve further flattened with 2y10y now only a bit over 47pips.

Core European bonds were mostly supported by geopolitical tensions between US and Russia over Syria. Portugal outperformed over subscription on its EUR3bn bond sale.


Commodities 

 

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Equities
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US: The Dow fell 218 points and S&P 500 fell 14 points on Wednesday after President Donald Trump taunted Russia on Twitter to "get ready" for a possible missile strike on Syria. Major indices came under pressure in early trade after the tweets, which underlined a tense relationship with Russia. 

Facebook Inc shares (FB), rose 0.8% as CEO Mark Zuckerberg testified before US lawmakers for a second day, this time in front of the House Committee on Energy and Commerce. The Silicon Valley heavyweight’s co-founder on Tuesday endured about five hours of questioning by senators, and the market appeared to like his performance, sending Facebook’s stock higher by 4.5%. However, it remains down 4.9% for 2018 thus far. 

Shares of Mattel Inc (MAT), shot up 6.6% after Jefferies analyst Stephanie Wissink upgraded the stock to neutral from underperform.

21st Century Fox Inc stock (FOXA) fell 0.3% as the media giant’s office in the UK drew a surprise inspection on Tuesday by European Commission investigators, who are conducting an antitrust probe into sports rights and distribution of sports content. 21st Century Fox and News Corp, MarketWatch’s parent company, share common ownership.

Europe:  European stock markets finished slightly lower on Wednesday, erasing a bit of this week’s advance, as traders focused on the conflict in Syria. UK's FTSE was down 9 points and Germany's Dax closed in the red 103 points. 

Retail stocks were the best performing on earnings news, closing up over 0.9%. Tesco shares topped the European benchmark, rallying during afternoon trade to close up 7.2%. In the morning, the UK grocer had announced its first dividend in four years. The company reported a profit of £1.3 billion ($1.85 billion) in its latest financial year.

Looking at individual stocks, Deutsche Telekom was also near the top of the European benchmark, although during the final hours of trade it pared some gains to close up by 2.8%. The strong day of trading was due to reports that Sprint has restarted talks to merge with T-Mobile US.

Hong Kong: The Hang Seng Index (HSI) continued to trend up, lifted 168 pts or 0.6% to 30,897, posting a four-day surge (accumulated rise of 1,379 pts or 4.7%). 

Insurers AIA (1299.HK) breached $70, marking a new high. At close, it climbed 4.7% to $71.6, being the best performer of blue chips. MANULIFE-S (945.HK) and PRU (2378.HK) added 0.9% and 2.5%. JP Morgan said in its report that the restrictions on foreign stakes in Chinese insurers were gradually relaxing. According to the research house's analysis, Chinese life insurers under coverage were shifting their focus to protection and healthcare products and that most foreign JVs had such experiences.

Oil stocks were popular as well. CNOOC (883.HK) and PETROCHINA(00857.HK) soared 4.2% and 3.8%. SINOPEC CORP (386.HK) rose 0.3%. CHINA OILFIELD(2883.HK) and ANTON OILFIELD(3337.HK) surged 5.2% and 5.6% respectively.


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The Kremlin fired back after Trump's tweet, saying it doesn't support "Twitter Diplomacy". Photo: Shutterstock

 

– Edited by Susan McDonald


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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