Morning Report APAC: Asia waiting on Xi's response
- Asian stocks fluctuated in tight ranges as traders look for Chinese trade response
- Trading volumes low, with share exchanging below their average in the last 30 days.
- The JPY was little changed at 106.80 per dollar
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
15:30 – EC – ECB’s Nouy speaks in Ljubljana
15:45 – EC – ECB’s Nowotny speaks in London
16:30 – US – Fed’s Kaplan speaks in Beijing
17:30 – UK – BOE’s Haldane speaks in Melbourne
06:30 – US – Fed’s Bostic speaks at event on Fair Housing in the US
Russia: USDRUB collapsed 4.1% and equities dropped following the US sanctions toward Russia. From the WSJ: “On Friday, the United States imposed sanctions on seven of Russia’s richest men as well as 17 government officials, taking aim at the oligarchs who dominate the economy.
"The sanctions were a response to a series of aggressions, including interference in the 2016 presidential election. Then on Sunday, after a deadly chemical attack, Mr Trump took a rare swipe at Mr Putin for his support of President Bashar al-Assad of Syria.
“Many dead, including women and children, in mindless CHEMICAL attack in Syria,” Mr. Trump wrote on Twitter. “President Putin, Russia and Iran are responsible for backing Animal Assad.”
ECB: European Central Bank President Mario Draghi said policy makers are still uncertain about a key driver of inflation even as he expressed confidence in the broad outlook for euro-area economic growth.
“We expect the pace of economic expansion to remain strong in 2018,” Draghi said in the institution’s annual report published Monday.
“While we remain confident that inflation will converge towards our aim over the medium term, there are still uncertainties about the degree of slack in the economy.”
The ECB will therefore maintain a “patient, persistent and prudent” policy stance.
USD remained offered on the small equity rally overnight against most G10 currencies. There are growing talks that we will have a deal on NAFTA soon so watch USDCAD which is close to the 200d MA at 1.2632.
Emerging Markets: the main mover as explained above was USDRUB which exploded 4.1% higher following the Russian sanctions. We are trading at the 2017 highs close to 61 which should be a strong resistance for the time being.
Foreign exchange movements
The G10 curve in vol is getting steeper with the market selling the front end and buying long end.
US treasuries paired most of the early losses after US budget deficit projection released, which
was widened as expected. Eased tension on trade also put a cap for treasuries demand.
Core European bonds were higher, helped by US treasuries on the back of poor payroll data. Peripheral underperformed as heavy supply is expected over next few weeks.
US: Dow (+46 points) and S&P 500 (+8 points), stocks pared most of the day’s gains in the final minutes of trading, closing only slightly higher following news reports that the Federal Bureau of Investigation raided the office of Michael Cohen, President Donald Trump’s personal lawyer.
Also, Tech stocks were strong, but biotech really took off on merger and acquisition news. At the same time, investors are looking ahead to the kickoff of Q1 2018 earnings season on Thursday and Friday.
In the biotech space, Novartis International AG (NVS) said it would buy AveXis Inc (AVXS) in an $8.7 billion deal that will expand its gene therapy and neuroscience capabilities.
Novartis agreed to pay $218 per AveXis share, a more than 80% premium to AveXis' closing price on Friday of $115.91. AveXis shares soared 81% to $209.90. Also, Merck (MRK) shares rose 5.2% after the drugmaker's blockbuster cancer drug, Keytruda, met the main study goal of helping previously untreated lung cancer patients live longer.
The FANG group, comprising four closely-watched momentum stocks - Facebook, Amazon, Netflix and Google parent company Alphabet - were up between 1.2% and 2.4%.
On a side note, FB chief executive Mark Zuckerberg is scheduled to testify before Congress this week regarding security issues related to the misuse of user data.
Chip stocks also led, thanks to analyst comments. Evercore ISI raised the price targets on Intel (INTC) and chip-gear firm Lam Research (LRCX), while calling Micron Technology (MU) a bargain at current prices.
Micron shares last week triggered a round-trip sell signal after erasing all gains from the 47.08 buy point of a double-bottom base. They are now slightly below the 50-day moving average.
Europe: European stock markets finished a touch higher, building on last week’s gain, with analysts attributing the advance to an easing of fears about a potential global trade war. The UK's FTSE was up 11 points and Germany's Dax closed positive 20 points.
Shares in Evraz PLC (EVR), a steel and mining company with operations in Russia but London headquarters, plunged 14%. This tumble came as another metals company that is a heavyweight in Russia - aluminum producer United Co. Rusal PLC divded 50% in Hong Kong trade after the latest US sanctions.
Glencore PLC (GLEN), was among the notable decliners, falling 3.4% as UBS analysts expressed concerns. The analysts worried about Glencore’s operations in the Democratic Republic of Congo, as well as the broader near-term price outlook for the company’s commodities, according to a Dow Jones Newswires report.
Rolls-Royce Holdings PLC (RR), rose 1.2% after the engines maker agreed to sell its German fuel-injection systems supplier L’Orange to U.S. control-systems provider Woodward Inc for an enterprise value of 700 million euros ($860 million). The stock was among the biggest gainers.
Hong Kong: Hang Seng Index (HSI) escalated 384 points, peaked at 30,514 and settled the day at 30,229, leaping 1.3%, as markets shrugged off declines seen on Wall Street after a week largely dominated by US-China trade developments.
Blue chips thrived across the board. Heavyweights HSBC HOLDINGS (5.HK) and HKEX (388.HK) surged 2.1% and 2.3%. HSBC contributed gain of 46 pts alone for HSI, company announced that the bank has recently established business finance teams in Guangdong and Hong Kong specialising in servicing innovation technology enterprises under the backdrop of steady promotion of Guangdong-Hong Kong-Macao Greater Bay Area construction. Shares price closed at 74.20.
TENCENT (700.HK) hiked 1% and SUNNY OPTICAL (2382.HK) was the top gainer of blue chips, upsurging 5.9%. China financials mirrored the uptrend.
Chinese Insurer, PING AN (2318.HK) and CHINA LIFE (2628.HK) climbed 1.1% and 1.2%, while banks ICBC (1398.HK) and CCB (939.HK) gain narrowed to 0.3% and 0.8%.
-- Edited by Adam Courtenay
– Edited by Adam Courtenay
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