Morning Report APAC: Asian equities surge on upbeat sentiment
- The USD rallied strongly following the release of the strong nonfarm jobs data
- Gold retreated below $1260/0z as good payroll data impacted yields and USD
- Markets will closely watch signs of compliance with Opec and non-member crude cuts
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
- 2245 – US: Federal Reserve’s James Bullard speaks on US economy in Nashville, Tennessee
- 0125 – US: Fed’s Neel Kashkari speaks in Bloomington, Minnesota
- Nonfarm payrolls was much better than expected at 209,000 from an upward revision of 231,000 (Exp. 180,000; Prev. 222,000). Employment in the automobile sector rose by 1,600 despite slowing sales and bloated inventories that have forced manufacturers to cut back on production.
- The labour force participation rate rose 0.1% to 62.9%. Average hourly earnings increased 9c, or 0.3% (Bloomberg consensus 0.3%), in July after rising 0.2% in June. That was the biggest rise in 5 months. On a year-on-year basis, wages increased 2.5% for the fourth straight month.
Overnight news, North Korea
- The United Nations Security Council unanimously agreed to ratchet up sanctions against North Korea in response to the nation's two most recent ballistic missile tests, the US mission to the UN announced on Saturday. The resolution passed after the US and its allies managed to get the Chinese on board.
- This comes in wake of President Donald Trump's repeated criticism of China for not doing enough to stop North Korea's nuclear progress. The Council approved Resolution 2371, which builds on previous UN sanctions against North Korea, and reiterated its call for the increasingly isolated East Asian nation give up its ambitions of nuclear proliferation.
- The USD rallied strongly following the strong nonfarm jobs data; 94.00 in the DXY should be a first resistance. USD should continue to rally for 1 or 2 days but usually, we quickly see sellers re-emerging back. It will be the opportunity that many waited for to sell USD
- EURUSD remains on the upward trend and 1.1750 is the intraday support. The market should continue to buy EUR crosses like EURAUD, EURNZD and EURGBP.
- Talking about EURGBP, we confirmed the break above 0.9000 and it should remain supported above; 0.8925 will be the first big support.
- Emerging Markets: US dollar was bid against EM following the release of the nonfarm jobs numbers but if the equity market continues to be bid, equity inflows into emerging market currencies will re-emerge, and there will be sellers of USDEM like Korea and Brazil, Taiwan.
Foreign exchange movements
- The only buying interest is around the next Jackson Hole Fed meeting (August 24 to 26) for USD Gamma.
- There are still buyers of downside in AUD and NZD. The risk reward of being short AUD through options as long as we remain below 0.8000 is very good.
- US yields were higher across the curve with long end outperformed, on the back of solid payroll data and unemployment rate lower.
- European yields were dragged up by US job data surprised the market to the good side.
- US stocks closed higher on Friday with all three indexes dipped into slightly negative territory within the first hour of trading, highlighting that Dow ended at a record for an eighth straight session following a read on the labor market that came in above expectations.
- GoPro Inc. surged 19.3% after the wearable video-camera maker reported a second-quarter loss of $30.5 million, or 22cts a share, compared to a loss of $91.8 million, or $0.66 a share, in the year-ago period, better than analyst’s estimated loss of $0.25 a share on revenue of $269.1 mln. Friday’s gain marked the biggest one-day percentage performance for the company since July 2014 and price went straight above its 200 day moving average, showing months of consolidation may have come to an end.
- Yelp jumped 27.6% on Friday after the company announced the sale of its Eat24 business to Grubhub (+9.1%), and a 9cps quarterly profit contrasted to an expected loss.
- European stocks rallied on rally in bank shares on the prospect of a rate hike by the Fed overcome losses in shares of Swiss Re AG and British home builders.
- Swiss Re AG fell 3.1% after the Zurich-based reinsurance company reporting profits took a $360 million hit from claims in the wake of Cyclone Debbie, which ran through the Australian region in late March, dragging its first-half net earnings down to $1.21 billion from $1.87 billion in the year ago period.
Asian equities preview
Hong Kong analyst views
- CK Hutchison (1 HK): Cut to Hold at Morningstar.
- DJE (002672 CH): A Shares Raised to Neutral at UBS, price target 16.66 Yuan.
- Livzon Pharma (000513 CH): A Shares New Buy at UBS, PT 56 Yuan.
Hong Kong stocks, banking sector
- Commercial Bank Assets in China Set to Grow 10% a Year: Xinhua
- China’s Central Bank to Increase Oversight of Fintech Industry
- China Postal Bank Wins Approval for Offshore Preference Shares
Hong Kong stocks, property sector
- Agile Group July Pre-Sales Value 4.66b Yuan.
- BJ Capital Land Reports July Contracted Sales 2.06 bn Yuan.
- Central China Real Estate July Contracted Sales 1.3bn Yuan.
- Future Land July Contracted Sales 6.1B Yuan: Exchange Statement.
- Gemdale (600383 CH): Gemdale July Contract Sales Fall 2.59% Y/y to 7.9b Yuan.
- Hong Kong Government to Sell Site in Tai Po by Public Tender.
- Hong Kong Existing Home Prices Rise 0.26% on Week: Centaline.
- Sunac China July Contracted Sales Rise 144% Y/Y to 22bn Yuan.
- Yanlord Gets Rights to Redevelopment Site in Shanghai for $1.6bn.
Hong Kong stocks, energy and commodities sector:
- Aramco Is Said in Talks to Buy PetroChina Refinery Stake: WSJ.
- China to Raise Gasoline, Diesel Prices Saturday.
- China Shenhua (1088 HK): Shenhua’s Asset Trading Targets Power Business; Remain Suspended.
- China Shenhua Rivals Surge as Coal Giant Flags Lower Output.
Other Hong Kong stocks
- Aier Eye Hospital Group (300015 CH): Aier Europe Bid for Clinica Baviera Accepted by 14.2 mln Shrs.
- China Int’l Travel (601888 CH): China International Travel 1H Preliminary Net 1.31b Yuan
- China Life Ends Plan to Buy Shenwan Hongyuan Shares: Sec. Times.
- China Modern Dairy (1117 HK): Mengniu to Sell HK$41.4m Modern Dairy Shares to Cofco, Danone.
- China Resources Cement (1313 HK): China Resources Cement First Half Net Income HK$1.64 bn.
- China United Network (600050 CH): China United Network, ICBC Sign Strategic Cooperation Pact.
- Cosco Ship Port (1199 HK): Cosco Shipping Units Agree to Merge With PSA China, Others
- Fuyao Glass (600660 CH): Fuyao Glass First Half Revenue 8.71bnYuan.
- GD Power Development (600795 CH): GD Power to Remain Suspended in Shanghai Until September 4.
- Geely Auto (175 HK): Geely Auto, Volvo, Geely Holding Set up 7.5b Yuan Lynk & Co JV
- Guangzhou Auto (2238 HK): Guangzhou Auto July Sales 158,283 Units versus 131,154 Year Earlier.
- HSBC (5 HK): HSBC Bought Back 1.24m Shares August 4.
- Zhejiang Dahua Tech (002236 CH): Zhejiang Dahua Tech 1H Net 983m Yuan vs 709.7m Yuan Year Ago.
- NOK (7240): Raised to neutral from underperform at SMBC Nikko.
- Renesas Electronics (6723): Raised to buy from neutral at Nomura.
- Terumo (4543): Raised to buy from outperform at Daiwa.
- Akebono Brake (7238): Turns Q1 operating profit of ¥1.9bn vs ¥1bn loss year ago.
- Aoki Holdings (8214): Q1 operating profit -45% to ¥914mln.
- Asahi Diamond (6140): Q1 operating profit -3.8% y/y to ¥795mln; lifts H1 forecast to 1.3b yen from 110m yen.
- Asics (7936): H1 operating profit 16.1b yen vs co. forecast ¥14bn.
- Bandai Namco (7832): Q1 operating profit -33% to ¥15.6bn; lifts H1 forecast 20% to ¥27bn.
- Brother Industries (6448): Q1 operating profit -40% to ¥12.6bn; lifts full-year forecast 4.2% to ¥62.5bn.
- Hakuhodo DY (2433): Q1 operating profit +35% to ¥7.82bn.
- Horiba (6856): H1 operating profit ¥9.7bn vs co. forecast ¥10bn; lifts full-year forecast 4.8% to ¥22bn.
- Inpex (1605): Q1 operating profit +23% to ¥87.2bn; raises full-year forecast 2% to ¥309bn.
- Isuzu Motors (7202): Q1 operating profit ¥39.6bn vs analyst est. ¥32.3bn.
- Japan Tobacco (2914): To buy Karyadibya Mahardhika in deal valued at $1b.
- JINS (3046): July same-store sales +0.2% y/y.
- Keihin Corp. (7251): Q1 operating profit -8.8% to ¥5.8bn; boosts full-year forecast 8.1% to ¥20bn.
- McDonald’s (2702): July same-store sales +10.9% y/y.
- Minebea Mitsumi (6479): Q1 operating profit 67b yen vs analyst est. ¥61.3bn.
- Mitsubishi Estate (8802): Q1 operating profit -24% to ¥35.8bn.
- Nichiden (9902): Q1 operating profit +43% to ¥1.2bn; to split shares 2-for-1 on October 1.
- Nippon Sheet Glass (5202): Q1 operating profit +23% to ¥8.76bn.
- Nissan Chemical (4021): Q1 operating profit +5.6% to ¥10bn.
- NTT (9432): Q1 operating profit +0.9% to ¥491.6bn.
- Okamoto Industries (5122): Q1 operating profit -6.9% to ¥2.83bn; lifts H1 forecast 4.1% to ¥3.8bn.
- Pacific Metals (5541): More than doubles size of losses expected for H1; also widens FY loss forecasts.
- Showa Shell (5002): Prelim. H1 operating profit ¥23bn vs earlier forecast ¥35bn.
- Square Enix (9684): Q1 operating profit +44% y/y to ¥12.9bn.
- Sysmex (6869): Q1 operating profit -10% to ¥12.4bn.
- Toyota (7203): Q1 operating profit 574.3b yen vs analyst est. ¥548.2bn; raises FY forecast 16% to ¥1.85trillion; confirms capital tie-up with Mazda.
- United Arrows (7606): Q1 operating profit +16% to ¥2.44bn.
- W-Scope (6619): Prelim. H1 operating profit 355m yen vs earlier target ¥1bn; cuts FY forecast 58%.
Australasian analyst views
- BSL AU: Bluescope Raised to Overweight at JPMorgan, price target $A15.
- DXS AU: Revenue for Dexus Could Rise on Higher Office Rents, New Assets.
- SGM AU: Sims Metal Cut to Neutral at JPMorgan, PT $A13.60.
- TME NZ: Trade Me Raised to Hold at Morningstar.
- CBA AU: Commonwealth Bank’s Narev Intends to Stay as CEO: Australian;CBA Says Error in Its Deposit Machines Acknowledged and Fixed.
- NZX NZ: NZX Says It Needed to Restart X-Stream Trading Platform.
- ORG AU: Origin Energy Is Said to Weigh Sale of Smart Meter Business: AFR.
– Edited by Robert Ryan
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