Article / 23 January 2018 at 1:53 GMT

Morning Report APAC: Asian equities buoyant on Wall St surge

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • The US dollar remains on a defensive footing
  • Industrial metals benefited from the weak US dollar
  • GBPUSD reached 1.4000 for the first time since the Brexit vote
  • The Democrats and Republicans voted to approve a temporary funding fix
  • Equities hit new highs n Wall St, with gains for the Dow, the S&P and the Nasdaq

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

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Speeches (Singapore Time)
  • No significant speeches scheduled for today

Overnight news, market summary

  • USD remained on defensive footing with treasury yields consolidating. Global equities had another surge in anticipation of better earnings, in US partially lifted by stalemate broke on government shutdown.
  • Industrial metals benefited from weak USD, and the oil price firmed on news that Opec is considering extending its output curbs. 

Overnight news, US shutdown

  • The Democrats and Republicans voted to approve a temporary funding bill following assurances from the Republican that they will debate immigration legislation.

Overnight news, equities on fire

  • Equities rallied at new highs (+0.55% for the Dow, +0.81% for the S&P and +0.98% for the Nasdaq). The market is now ready for the release of about 80 earnings reports this week, for companies such as Novartis, General Electric, Intel, LVMH Moet Hennessy Louis Vuitton, Starbucks, Hyundai Motor and Fanuc Corp.
  • Netflix signed up 8.33 million customers in the fourth quarter of 2017, surpassing analysts’ estimates of 6.34 million, thanks in large part to the popularity of the fantasy series. Netflix Inc. now has 117.6 million customers worldwide, wrapping up its biggest year ever for new subscribers

Overnight news, Federal Reserve

  • Federal Reserve Bank of St. Louis President James Bullard said that “TIPS yields are based on CPI inflation, headline, so we would expect the oil price increase to feed through to inflation expectations in that market and drive nominal TIPS yields higher and feed through to other securities”.
  • He added that: “Inflation expectations have gone up somewhat. The question for that story is how sustainable is the oil price increase and to what extent will it stimulate US production”.
  • “My concern is we do not raise the policy rate into the teeth of an inverted yield curve without taking into account what that might signal about the prospects for the US economy”
 

Foreign exchange

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  • The US dollar was well offered overnight against all G10 and is on a downward move since mid-December. We are waiting for the Bank of Japan and ECB decisions this week, but we should not see any trend reversal for now.
  • Despite the rally in US rates, equities seem to hold well on good corporate results pushing as well for big inflows into emerging market currencies and global equities.
  • GBPUSD reached 1.4000 for the first time since Brexit on strong demand from local Real Money investors and Corporate. 
  • Emerging Markets: USD Emerging market currencies was fairly stable overnight despite the rally in equities; some USD selling is expected in Asia, on possible good inflows into equities.


Foreign exchange movements

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  • The market seems short upside Gamma in GBP which confirms that the interest in spot came mainly from local names.
  • Vol in USDMXN are very bid, following the uncertain Nafta talks that will be held in Montreal from today.  
  • The market is not pricing anything for oday Bank of Japan meeting in the Vol space


Rates

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  • US Treasuries pared most of the gains from investor buying on dips and tightening in swap spreads, on the news of the fix for the US government shutdown. Yields are consolidating.
  • Core European yields barely moved, while peripherals continue to outperform on residual impact from Fitch’s better rating on Spain.

Commodities 

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Equities
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US equities

  • Who doesn’t love Netflix? Not the investors on Netflix for sure as share price has been ripping higher yesterday with a 3.2% move as it traded to its all-time high. In addition, aftermarket trading activities indicate another 8.3% move as the company crosses the $100 billion market cap and posted its biggest increase in new subscribers: up 8.3million versus 6.3mln forecast.
  • Validus Holdings rose 40% after AIG made an all-cash bid for the Bermuda-based insurer and reinsurer, for 5.56 Billion. AIG meanwhile traded 0.89% lower on the acquisition deal.
  • Verizon traded 3% higher as it approaches its all-time high once again. The Dow and S&P component  is due to release its earnings result before market open tonight. Similarly, the sector has a good day with Frontier Communications has a 10% gain while AT&T (1.77%) and T-Mobile (0.36%) also made advances.

European equities

  • In Europe, Ocado Group PLC rallied 27.5% as the company announced that it will develop and online grocery business for Canadian food retailer Sobeys.
  • Pharma stock Sanofi SA fell 2.9% after the French pharmaceuticals maker said it would acquire Bioverativ Inc. for $11.6 billion and Bioverativ Inc rose 62% as a result.

Hong Kong equities

  • BYD company, the Chinese mobile manufacturer, was a notable gainer with a 8.2% move in the Hong Kong market yesterday, after breaking the $HK72.50 resistance that had been capping its gains in January. Next resistance could be at $HK80.


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Perking up ... coffee has rebounded amid reports of falling stockpiles. Photo: Shutterstock

 
– Edited by Robert Ryan


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