Morning Report APAC: Asian markets feel the pressure on firmer USD
- Asian markets opened weaker on the back of a stronger USD
- The Dow once again had a record close as it flirted around the 21,800 level
- The Republican plan to introduce a border adjustment tax was abandoned
- There was huge selling in the CHF overnight and a massive move for the currency
- The Aussie dollar retreated below the US80¢ mark overnight as the USD recovered
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8)
Speeches
- 0120 - US - Federal Reserve's Neel Kashkari Speaks at Town Hall event
Overnight news
United States
- Strong durable goods numbers at 6.5% versus 3.9% expected.
- Wholesale inventories also beat expectations. +0.6% vs +0.3%.
- Atlanta GDPnowcast revised up for Q2 from 2.5% to 2.8%.
- Paul Ryan announced that his planned Border Adjustment Tax would not be included in plans for US tax reform, effectively making the BAT dead.
- Steve Mnuchin said currency manipulators should face more than just talk.
- Amazon shares fell after market as earnings missed estimates and disappointed analyst expectations.
- Oil continued higher by near 1%, up over 7% on the week.
- Tech stocks had a mid-session melt down on a JP Morgan report that showed concern about the equity market outlook and low volatility. Nasdaq down over 2% recovered to close minus 0.6%.
Europe
- German consumer confidence exceeded expectations at 10.8. This is a further extension on the already record highs for this index.
- The UK’s Financial Conduct Authority announced it will abandon the Libor benchmark rate by the end of 2012. There is no indication as to what will replace this at the present time.
Foreign exchange
- USD: Rebounds on firm US durable goods data and the market taking time to reassess its initial interpretation of the Fed's minutes from Wednesday. Technical indicators still point to the USD being at oversold levels.
- CHF: Huge selling in the CHF overnight and a massive move for the currency. The options market appears to have completely broken down with prices widening significantly and limited liquidity. The market is struggling to price the new European Central Bank's regime and EUR price actions impact on CHF.
- CAD: Significant CAD selling as a news story that one of Prime Minister Trudeau’s aides expressed concern that the Bank of Canada was raising rates too fast and this could stifle Canadian growth.
- Emerging Markets: General weakness in the EM space as the USD rebounds.
Foreign exchange volatilities
- The CHF options market has gone crazy, with spreads widening out significantly and liquidity drying up. Traders want to be long volatilities, but are unwilling to pay the spread as limited sellers around.
- AUD: more supply in volatilities coming to the market, despite the huge move in the spot market as exotic structures around the 0.80 level come off.
Rates
- European government bonds rallied as they tracked gains in US treasuries after the Fed kept its interest rates steady citing inflation is below its target. 10-year German bonds fell 2.5 basis points to 0.531% as the 0.500% yield remains a key support.
- The Fed's Kashkari, the dissenter for both rate increases this year will be the first Fed speaker post-Federal Open Market Committee meeting speaking today.
Commodities
Equities
- The Dow Jones industrial Index once again had a record close as it flirted around the 21,800 level and could likely make a close above 22,000 before earnings season ends.
- Verizon met Q2 earnings forecasts as it barely met analysts’ consensus. However, the company added 614,000 wireless postpaid subscriptions vs a 307,000 decline last quarter saw share price rebounded 7.7% to $47.81.
- Twitter released its earnings in early Thursday that topped forecasts but the stock plunged by double digits as Twitter showed no growth in monthly active users, following late Wednesday's strong Facebook (FB) results. Twitter fell 14% and close at $16.84.
- Meanwhile, Facebook hit a new record high in trading on Thursday after posting better-than-expected results for its second quarter. Analysts also lifted the Facebook price target to $200 and beyond as they expect more revenue to be generated from its Instagram platform.
- US tech giant Amazon fell 3% in after-hours trading in the wake of the news. Revenue for the three months to June was $38bn (£29.1bn) up by a quarter on the same period last year and ahead of analyst expectations compiled by Reuters of $37.2bn.
Asia-Pacific stocks
Hong Kong
Analyst ratings
- NagaCorp (3918 HK): Downgraded to Sell at Goldman; PT Lowered to HK$4.20
- Air China (601111 CH): Air China H Shares Raised to Outperform at Macquarie; PT HK$7.90
- Bank of Ningbo (002142 CH): Bank of Ningbo Cut to Neutral at UBS; PT Raised to 16.30 Yuan
- China Eastern (670 HK): China Eastern A Shares Raised to Neutral at Macquarie
- China Galaxy Sec. (6881 HK): China Galaxy Sec. H Shares Cut to Neutral at JPMorgan
- China Southern (1055 HK): China Southern H Shares Raised to Neutral at Macquarie
- CITIC Securities (600030 CH): CITIC Securities H Shares Raised to Overweight at JPMorgan
- Hang Lung Prop (101 HK): Hang Lung Prop Raised to Outperform at Credit Suisse
- IGG Inc (799 HK): IGG Inc Initiated at ICBCI with Buy; PT HK$16
- Link REIT (823 HK): Link REIT Upgraded to Hold at CIMB; PT Raised to HK$65
- Merchants Shekou (001979 CH): Merchants Shekou Rated New Buy at Haitong Intl; PT 27.80 Yuan
- Sands China (1928 HK): Sands China Upgraded to Buy at Maybank; PT Raised to HK$40.25
Preview
- China Eastern (670 HK): France Says Backs Air France-KLM Strategic Announcements
- China Railway (390 HK): Signs 100b Yuan Cooperation Pact With Shanxi Govt
- Cifi (884 HK): To Sell 545m New Shares to Ping An Life at Discount
- CK Property (1113 HK): Cheung Kong Companies to Acquire ISTA for EU4.5B
- FIH Mobile (2038 HK): China Says Foxconn Keeps Expanding Investment in China This Year
- ICBC (601398 CH): Pakistan Said to Raise $275 Million Loan With Citi, ICBC
- Kangde Xin (002450 CH): Kangde Xin Says Controlling Holder Bought 4.56m Shares Thursday
- Kweichow Moutai (600519 CH): Kweichow Moutai 1H Net Income 11.3B Yuan, Est. 11B Yuan
- Leshi Internet (300104 CH): Leshi Internet Says More Shrs Held by Jia, Leshi Holding Frozen
- Xinjiang Goldwind (002202 CH): Turkey Gets 8 Bids From Wind Turbine Makers in Tender: Ministry
- Zhongshan Broad Ocean Motor (002249 CH): Zhongshan Broad Prelim. 1H Net 143.2m Yuan
Japan
Analyst ratings
- Advantest (6857): Rated new neutral plus at Iwai Cosmo
- CyberAgent (4751): Raised to overweight from neutral at Cantor Fitzgerald
- Dip (2379): Raised to positive from neutral at Storm Research
- Mitsubishi Chemical (4188): Cut to underperform from hold at Jefferies
- Yaskawa Electric (6506): Raised to buy from hold at Jefferies
Preview
- Aisan Industry (7283): 1Q operating profit +28% y/y to 2.4b yen
- Alps Electric (6770): To buy out Alpine Electronics (6816) through share swap; lifts full-year profit targets
- Alpine posts 1Q OP +0.8% to 385m yen
- Anritsu (6754): Swings to 1Q operating loss of 162m yen from 727m yen profit a year ago
- Canon (7751): Lifts full-year operating profit forecast 22% to 330b yen vs analyst est. 295.4b yen
- Chugai Pharma (4519): 2Q operating profit misses analyst estimates, keeps forecasts unchanged
- CyberAgent (4751): 3Q operating profit misses analyst estimates amid expansion of AbemaTV spending
- Daido Steel (5471): 1Q operating profit more than doubles to 9.0b yen
- Daiwa Securities (8601): 1Q net income falls 21% as trading income declines
- Dexerials (4980): Boosts full-year profit forecasts as it reports 1Q operating profit of 1.96b yen, more than tripling from a year ago
- DMG Mori (6141): DMG Mori AG reports 1H results
- Exedy (7278): 1Q operating profit +13% y/y to 6.1b yen
- Fancl (4921): Swings to 1Q operating profit of 1.2b yen from loss of 114m yen a year earlier
- Fuji Electric (6504): 1Q operating profit +23% y/y to 2.8b yen
- Fujitsu (6702): 1Q operating profit beats analyst estimates, while net income misses expectations
- Futaba Industrial (7241): Lifts full-year operating profit forecast by 30% to 11.7b yen
- Goldcrest (8871): 1Q operating profit surges to 8.5b yen from 998m yen a year earlier
- H2O Retailing (8242): 1Q operating profit +20% y/y to 3.6b yen
- Hitachi Chemical (4217): 1Q operating profit +13% y/y to 13.6b yen
- Hitachi Construction (6305): Returns to 1Q profit, keeps outlook unchanged
- Hitachi High-Tech (8036): 1Q operating profit slips 1.2% y/y to 15.7b yen
- Hitachi Metals (5486): 1Q operating profit +12% y/y to 17.1b yen
- Jafco (8595): To buy back up to 31.6% of shares as Nomura, NRI sell holdings
- JCR Pharma (4552): 1Q operating profit +68% y/y to 609m yen
- Kao (4452): 1H operating profit +7.7% y/y to 87.4b yen, beating company forecast by 6.5%
- Keyence (6861): 1Q operating profit at 64.5b yen, beating analyst estimate for 58.3b yen
- Koito Mfg (7276): 1Q operating profit +35% to 23.3b yen, lifts FY target 5.5%
- Komori (6349): 1Q operating loss narrows to 894m yen from loss of 2.0b yen a year ago
- Mitsubishi Steel (5632): 1Q operating profit +61% y/y to 1.2b yen
- Nihon Trim (6788): 1Q operating profit falls 28% y/y to 687m yen
- Nippon Gas (8174): 1Q operating profit slumps 52% y/y to 2.1b yen
- Nissan (7201): 1Q operating profit misses analyst estimates, keeps full-year forecasts unchanged
- Nisshin Seifun (2002): 1Q operating profit +19% y/y to 6.2b yen
- Nomura Research Institute (4307): 1Q operating profit -4.2%; raises net income targets
- NTT Docomo (9437): 1Q operating profit misses analyst estimates, keeps forecasts unchanged
- Nuflare Tech (6256): 1Q operating profit drops 33% y/y to 2.1b yen
- Omron (6645): 1Q operating profit more than doubles to 22.6b yen; plans to buy back as much as 2.34% of shares for 20b yen
- Osaka Gas (9532): 1Q operating profit declines 38% y/y to 23.7b yen
- Otsuka Holdings (4578): To acquire Daiya Foods for C$405m in cash
- Pacific Industrial (7250): 1Q operating profit -5.2% y/y to 1.9b yen
- Pharma: AstraZeneca and Bristol-Myers shares fell after former’s drug combo fails to show improved survival for lung cancer patients in Mystic trial
- Pola Orbis (4927): Prelim. 1H operating profit 20.9b yen vs earlier forecast 17b yen, lifts full-year target 9%
- Saibu Gas (9536): 1Q operating profit -33% y/y to 2.9b yen
- Seiko Epson (6724): Raises full-year operating profit forecast to 76b yen from 64b yen
- Shinko Electric (6967): 1Q operating profit slides 40% y/y to 507m yen
- Sumitomo Corp (8053): To acquire 51% of Belle Maison Logisco
- Sumitomo Mitsui Trust (8309): To buy back as much as 0.52% of shares for 9b yen; reports 24% y/y increase in 1Q net income to 40.1b yen
- Suzuki (7269): Maruti 1Q profit misses analyst est.
- Systena (2317): 1Q operating profit +21% y/y to 895m yen
- Takara Bio (4974): 1Q operating profit drops 59% y/y to 262m yen
- Takara Holdings (2531): 1Q operating profit +27% y/y to 2.1b yen
- Tech: Intel gives upbeat sales forecast; Corning falls after results
- Toho Titanium (5727): 1Q operating profit +40% y/y to 900m yen
- Tokyo Electron (8035): 1Q operating profit beats analyst estimates on demand for data center servers
- Torii Pharm (4551): Lowers full-year revenue forecast by 2.2% to 63.1b yen after reporting half-year operating profit increase of 6.9% y/y to 2.4b yen
- TS Tech (7313): 1Q operating profit +53% y/y to 13.0b yen
- Zenrin (9474): 1Q operating loss narrows to 210m yen from loss of 557m yen a year earlier
Australia
Analyst ratings
- Collins Foods (CKF): Raised to buy at APP Securities, PT A$6.45
- Fortescue (FMG): Raised to Buy at APP Securities, PT A$7.03; Cut to hold at Argonaut Securities, PT A$5.23,
- Virtus Health (VRT): Cut to hold at Morningstar
Preview
- AWE (AWE): 4Q output report expected
- National Australia Bank (NAB): NAB is said to revamp CIB business that will cost about 50 jobs
- Origin Energy (ORG): Proposed IPO unit Lattice said to seek A$500m debt package from lenders: AFR
- Resolute Mining (RSG): Mali Union to embark on five -day strike at Resolute Gold Mine
- Sandfire Resources (SFR): 4Q production report expected
- Ten Network (TEN): Oaktree enlists Credit Suisse as it prepares indicative bid for TV network: AFR
- Westpac (WBC): Scheduled to host business update call
- Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil surges above $49 as supply draw shows market in better shape
- Bank of New York Australia ADR Index -0.4%
- BHP Billiton ADR +0.1% to A$25.60 equivalent, 0.2% discount to last Sydney close
- Rio Tinto ADR -0.3% to A$57.57 equivalent, ~11% discount to last Sydney close
- Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: A2M, ISD
- Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: None among screened stocks
Photo: Shutterstock
– Edited by Gayle Bryant
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