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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 / 28 March 2018 at 1:26 GMT

Morning Report APAC: Asian markets fall on Wall St's tech slide

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian markets fell after technology stocks dragged down Wall Street
  • The Nikkei was down more than 2% in early trading
  • The US dollar index held onto overnight gains
  • Facebook continued to slide on news its CEO is planning to testify before Congress

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8hrs)

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Speeches (Singapore Time)

  • 0000 – US – Federal Reserve's Raphael Bostic speaks at Finance Professionals in Atlanta

Overnight news

FANG stocks

  • The FANG Index representing Facebook, Amazon, Netflix and Google dropped 6.2% overnight pushing the Nasdaq down 2.93% and the rest of the stocks lower as well. The Index is still up 8.9% though compared to the Nasdaq, which is only up 1.53%; the Dow down 3.49% and S&P down 2.28%. At 65 times earnings in mid-March, the group was valued almost three times as richly as the S&P 500 Index. That’s comparable with tech stocks in March 2000.
  • Several news triggered that selloff: Facebook's CEO Mark Zuckerberg is expected to testify before the US House Energy and Commerce Committee. Outside that group, Twitter dropped 12% to $28.07 after short seller Citron Research said it was betting against the company because of potential privacy regulations. Nvidia dropped 4.8% after it said it will temporarily suspend its self-driving vehicle testing. It is providing the technology to Uber.
  • Tesla dropped as much as 5.3% after estimates the company may be making about 975 of the cars a week, well short of the target to build at a 2,500-unit rate by the end of this quarter. On top of that, The NTSB is sending two investigators to examine issues raised by a fatal Tesla crash that occurred Friday in California.
  • Most of the flows were profit-taking than real short selling.
  • The 10-year US yield dropped 7.7 basis points and below 2.80% on risk-off and flight to safety, USD rallied but gold didn’t manage to break the highs of 1360 on that equity selloff

Foreign exchange

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  • The USD is bouncing up and down with the wind and this time rallied with the equity selloff. Not a major move overall with everything within the two-month ranges.
  • Emerging Markets: same story with EM and little to note. USDCNH remains below 6.3000 and the momentum is definitely for a lower move. Risk Reversals are flat from favouring USD calls up to a two-week maturity.

 

Foreign exchange movements

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  • We saw sellers of ATM and topside USDJPY
  • Vega is bid in AUD (6 Months to 1 year) with spot breaking lower


Rates

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  • US treasuries were bought over the equity riots led by the tech stocks sell off. 10-year yields are now below key 2.8%, and 2y10y spread is now reaching 50pips.
  • Core European bonds rose on the back of capital flows from equities market to bonds market, taking the hint from US. Peripherals outperformed led by Portugal, as traders focused on high carries amid month-end flows.


Commodities 

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Equities

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United States

  •  Dow (-344 points) and S&P 500 (-45 points), stocks closed sharply lower, erasing earlier gains, as a decline in the broader tech sector brought the major averages down. Fears about a possible trade war have weighed on markets around the world in March. But such concerns appeared to abate Monday, thanks to reports that Washington and Beijing are negotiating.
  • The technology sector fell sharply, retreating after a massive jump in the previous session. Chip makers were particularly weak, with Nvidia Corp (NVDA) down 7.7% and Advanced Micro Devices AMD was off 4.2%.
  • Facebook Inc (FB), continued to slide amid news that CEO Mark Zuckerberg is planning to testify before Congress. Shares in the social-media giant fell 4.9% and are down 16% this month, driven by a firestorm over how the company handled people’s data.
  • While, General Electric Co (GE), rose 4.3%, it’s biggest one-day jump in about two months. However, this comes after a pronounced period of weakness, which took the Dow component to its lowest level since 2009 on Monday. Thus far this year, it is down more than 23%.
  • On the other hand, shares of Tesla (TSLA) undercut a key support level as it was sideswiped by self-driving-car troubles. The stock tumbled 8.2% to close at 279.18, falling below a key support level of 290-300 that has held up since the spring of 2017. Tesla fell to a one-year low as trading volume doubled.

Europe

  • European stock markets jumped higher as concerns over a global trade war eased. The UK's FTSE was up 111 points and Germany's Dax closed positive 183 points. Technology stocks were the top performers, up around 2%. Investors are also keeping their eye on politics after several European countries decided to expel many Russian diplomats after an alleged nerve attack in U.K. soil on a former Russian spy.
  • Global healthcare giant, GlaxoSmithKline (GSK) ended the day at the top, finishing 4.8% higher to £1,351.00. GlaxoSmithKline is buying Novartis (NOVN) out of its consumer health care partnership for $13 billion, taking over products including Sensodyne toothpaste, Panadol headache tablets, and Nicotinell patches. Analysts believe that the merger will increase shareholder payouts.
  • In negative territory, Swedish retailer H & M Hennes & Mauritz AB (HMB) slumped by 5% to 120.94 after posting a 44% fall in Q1 net profit, due to the weak sales in the Q4 2017 and unusual winter weather led to stock imbalance.

Hong Kong

  • Hang Seng Index (HSI) continued to fare well and settled the day at 30,790, up 242 points or 0.8%. Ahead, a fair number of Hong Kong-listed corporates are due to report full-year results on Wednesday, including developer Sunac China, China Telecom and Wynn Macau.
  • Bluechippers broadly mirrored the uptrend. On the tech space, Tencent (700.HK) jumped 1.3% to $432.2. AAC TECH (2018.HK) and SUNNY OPTICAL (2382.HK) respectively closed up 4.7% to 151.70 and 1.5% to 160.30.
  • China telecommunications outperformed. China Mobile (941.HK) and China Telecom (728.HK) respectively bulged 3.1% and 2.4%. China Unicom (762.HK) was the top gainer among bluechips by surging 5.6% to $9.84 as a broker from Morgan Stanley reported that China Unicom rating was upgraded from underweight to overweight, with the target price lifted to $12 as well. The broker estimated an over 80% probability for the stock price to rise in the next 60 days.


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 Facebook shares continued to slide following news CEO Mark Zuckerberg is
planning to testify before Congress. Photo: Shutterstock

 
– Edited by Gayle Bryant


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. 


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