Morning Report APAC: Asia shares slip, JPY weakens
- Nikkei turned lower in early trading, after a brief spike at the open
- JPY weakens as investors appear to be paring back long positions
- MSCI index of Asia-Pacific shares was down 0.3% in early trade
- Push by Fed speakers to 'normalise' monetary policy
- Dilma Rousseff to step down as Senate accepts impeachment procedures
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time - GMT +8)
0900: KRW – BOK 7-Day Repo Rate (Exp. 1.50%, Prev. 1.50%)
1200: MYR – GDP YoY Q3 (Exp. 4.0%, Prev. 4.5%), SA QoQ (Exp. 0.7%, Prev. 1.5%)
1300: SGD – Retail Sales SA MoM (Exp. -0.1%, Prev. 1.7%), YoY (Exp. 3.6%, Prev. -3.2%), Ex Autos YoY (Exp. -3.9%, Prev. -9.6%)
1700: EUR – Eurozone SA QoQ (Exp. 0.6%, Prev. 0.6%), SA YoY (Exp. 1.6%, Prev. 1.6%)
1830: USD – Retail Sales Advance MoM (Exp. 0.8%, Prev. -0.4%), ex-autos (Exp. 0.5%, Prev. 0.1%).
2030: USD – PPI Ex Food and Energy MoM (Exp. 0.1%, Prev. -0.1%), YoY (Exp. 0.9%, Prev. 1.0%).
2200: USD – University of Michigan Sentiment (Exp. 89.5, Prev. 89.0).
CNY – New Yuan Loans CNY (Exp. 800 bn yuan, Prev 1,370 bn yuan).
CNY – Aggregate Financing CNY (Exp. 1,300 bn yuan, 2,336 bn yuan).
1130: JPY - BoJ HaruhikoKuroda speaks in Tokyo
1700: GBP - BOE Chief Economy Andrew Haldane Speech Text Published
1830: GBP - BOE Policy Maker Martin Weale Speaks in Liverpool
- US: Continuing claims jumped unexpectedly 20,000 last week to 294,000. Many economists cited Viacom’s striking telecommunications workers for the spike. Import prices rose more than expected to -5.7% from -6.2% due to higher oil prices and the falling USD. The pace of decline continues to diminish and should be reflected in the Inflation data soon
- Federal Reserve speeches: Kansas City Fed President Esther George said that:
- She supports a gradual adjustment of short-term interest rates toward a more normal level, but views the current level as too low for today’s economic conditions.
- The economy is at or near full employment and inflation is close to the Federal Open Market Committee's target of 2%, yet short-term interest rates remain near historic lows.- Interest-sensitive sectors can take on too much debt in response to low rates and grow quickly, then unwind in ways that are disruptive.
- Because monetary policy has a powerful effect on financial conditions, it can give rise to imbalances or capital misallocation that negatively affects longer-run growth.
- Boston Federal Reserve President Eric Rosengren said:
- If the economic data that comes in over the course of this quarter confirm these trends, it will be appropriate to continue the gradual normalisation of monetary policy
- Wage growth appears to be accelerating and the unemployment rate at 5% is close to his 4.7% estimate of a full-strength labor market. Rosengren repeated his belief that financial markets are underestimating how close the economy is to requiring more rate hikes.
- UK: The May Inflation Report showed the Bank of England has lowered its forecast for growth and inflation each year through 2018. BoE sees inflation at 2.1% in two years and 2.2% in three years. The most dramatic change was to current quarter growth, which was cut to 1.2% annualised to account for a bigger drag from Brexit uncertainty. Mark Carney, the BoE governor said that a vote to leave the European Union could cause a UK recession and that any monetary-policy response would take time to work. He said that Brexit - which he called the “elephant in the room” - means uncertainty over the outlook has risen to the highest since the euro-area debt crisis.
- Brazil: The Brazilian Senate today accepted impeachment procedures against Dilma Rousseff, causing her to step down as president. Vice-President Michel Temer becomes the interim president and is widely expected to announce a cabinet reshuffle. The first challenge of the new government will be the approval of 2016 fiscal target by May 22.
The US dollar went up overnight following the several Fed speeches that are calling for a rate hike sooner than later and faster normalisation of the monetary policy.
EURUSD is back to the range after failing to break the wide resistance band of 1.14/1.15. Short term, the 50 day moving average at 1.1299 should hold. GBP managed to remain stable despite Carney’s speech on the risk of Brexit.
Despite the Senate approving the impeachment of President Dilma Rousseff, USDBRL rallied yesterday close to 1% to 3.4830. In the daily chart, 3.4500 seems to be a strong support and the impeachment could now be completely priced in. A lot of challenges in saving Brazil from recession await the interim leader Michel Temer.
Foreign exchange movement
USDCNH bid tone is creating interests from funds to buy USD calls in the six month to 1 year area as well as in the rest of Asians currencies such as the Singapore dollar.
Global yields closed the session slightly higher across all markets. US Treasury yields rose on hawkish comments from three Fed voters (Eric Rosengren, Loretta Mester, and Esther George).
Treasury 30-year bonds fell before a $15 billion sale of the securities Thursday, the last of three US auctions this week. Long-term US yields rose more than those on short-term securities ahead of the offering, which follows $47bn of Treasury issuance and at least $41 billion of new corporate debt this week.
European markets took their cue from the weaker Asian session, with weak corporate earnings and Bank of England warnings over the costs of Brexit adding to the negative tone.
US stocks erased earlier declines amid a rebound in crude oil prices, which offset further falls in Apple shares. Apple (-2.4%) sank to the lowest since June 2014 after Nikkei reported that shipments of iPhone chips for the remainder of the year will likely shrink versus a year ago.
In Asia, expect technology shares to decline off the back of Apple sinking in US trading hours.
- BEA (23 HK): Cut to underweight at JPMorgan.
- Singyes Solar (750 HK): Cut to neutral at Goldman.
- COLI (688) announced Apr contracted sales was $HK15.56bn, +17.21% YoY; January-Apilr contracted sales was $HK54.9bn, +19.42% YoY.
- Chow Tai Fook(1929) issued profit warning, predicting FY16 profit to drop 40%-50% YoY, versus estimate of 36% drop.
- Yue Yuen Ind (551) 1Q net profit was US$95.33mn, +5.78% YoY.
Qtam (952) expects FY16 will continue to be profitable.
- SMIC (981) 1Q net income was US$61.4mn, +10.71% YoY, beats estijmate of $49.5mln.
- Minsheng Bank (1988) to terminate potential subscription of Quam shrs as the two haven’t agreed on terms.
- Pou Sheng Intl (3813) announced Q1 net profit was $22.79mln, +156% YoY.
- Sun Art Retail (6808) announced Q1 net profit was RMB$1.02bn, -3.48% YoY.
- BOC (3988) says BOC aviation offer price will be $HK42 each if offering proceeds.
- Dah Sing (440) said to get at least 5 bids for insurance unit, highest bid in the final round was close to $HK10bn.
- China Railway Cons (1186) signed contract with Xiamen Govt for the first PPP project in Xiamen for a total consideration of 1.48bn yuan.
- Wanda Cinema (002739 CH) to buy Wanda Media for RMB37.2bn.
- Everbright Bank (601818 CH) compay's asset management head Zhang Xuyang plans to leave the lender and join Baidu’s financial services group.
- Benesse (9783 JP): Cut to underperform from neutral at Daiwa.
- DeNA (2432 JP): Rated new outperform at Iwai Cosmo.
- Fanuc (6954 JP): Cut to underperform at Macquarie.
- Lixil (5938 JP): Downgraded to neutral from overweight at Mitsubishi UFJ Morgan Stanley Securities.
- NH Foods (2282 JP): Raised to neutral plus from neutral at Iwai Cosmo.
- TDK (6762 JP): Cut to neutral from overweight at Mitsubishi UFJ Morgan Stanley.
- Toyota (7203 JP): Downgraded to neutral plus from outperform at Iwai Cosmo.
- Fortescue Metals (FMG AU) raised to overweight from neutral at JPMorgan.
- Aristocrat (ALL AU) raised to buy vs neutral at UBS.
- AMP (AMP AU) cut to neutral vs buy at UBS; cut to hold vs buy at Shaw & Partners
- Myer (MYR AU) raised to buy vs neutral at UBS.
- Warehouse Group (WHS NZ) 3Q sales rise 5.5%, reaffirms FY16 guidance.
- Kingsgate Consolidated (KCN AU) suspends trading over Thailand mine uncertainty.
- Prima Biomed (PRR AU) says Sydys to license CVac immuno-oncology program.
Source: Bloomberg / CIMB
– Edited by Adam Courtenay
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
Join our Global Market Call daily at 1540 Singapore time. Please contact us for any market updates:
- Global Sales Trading: +65 6303 7818
- Christopher Moltke-Leth - email@example.com
- Lakshmi Thurai - firstname.lastname@example.org
- Tareck Horchani - email@example.com
- Edmund Liu - firstname.lastname@example.org
Global Macro Strategist: +65 6303 7622
- Kay Van-Petersen - email@example.com
All material contained herein is provided for your general information. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets Pte. Ltd. (“SCM SG”). Any expression of opinion (which may be subject to change without notice) is personal to the presenter and/or author; they do not reflect the view or opinion of SCM SG or its affiliates, neither do they constitute an endorsement of SCM SG’s view or analysis of the same.
None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. SCM SG does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment based on any commentaries or information provided here.
For further information, please click here.
Saxo Capital Markets Pte Ltd ("Saxo Capital Markets") is a licensed subsidiary of Saxo Bank A/S, an online trading and investment specialist. Saxo Capital Markets serves as the APAC headquarters and holds a capital markets services licence under the Monetary Authority of Singapore; and a commodity broker licence issued by the International Enterprise Singapore. Clients can trade Forex, CFDs, Stocks, Futures, Options and other derivatives via SaxoWebTrader and SaxoTrader, the leading multi-asset online trading platforms.
Trading risks are magnified by leverage - losses can exceed your deposits. Trade only after you have acknowledged and accepted the risks. You should carefully consider whether trading in leveraged products is appropriate for you based on your financial circumstances. Please consider our Risk Warning and General Business Terms before trading with us. Please see full General Disclaimer.
Thousands of serious traders receive free news and analysis from Saxo Capital Markets each day. Saxo Capital Markets never sends these emails unsolicited; they are sent following acceptance of your membership and subscription request by Saxo Capital Markets at saxomarkets.com.sg. If you do not wish to receive any emails from Saxo Capital Markets in the future, please reply to this email with the word "UNSUBSCRIBE" in the subject header.
Samsung Hub | 3 Church Street | # 30-01 | Singapore 049483
Company No. 200601141M