Article / 09 March 2018 at 2:05 GMT

Morning Report APAC: Asian markets gain ground despite trade war fears

APAC Sales Trading Desk / Saxo Capital Markets


  • Trump went ahead with his threat to impose hefty tariffs on metals imports
  • NAFTA partners Canada and Mexico are exempted from the tariffs, for now
  • Base metals were generally lower on the back of stronger USD
  • Copper has tumbled to a three week low amid the tariffs news
  • WTI is hovering around $60/b, but momentum points to the downside

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT plus 8 hours)



  • 1000 – China: People's Bank of China governor Zhou Xiaochuan gives press briefing at National People's Congress in Beijing.
  • 2140 – US: Chicago Federal Reserve Bank President Charles Evans gives live TV interview.
  • 0140, Saturday – US: Boston Federal Reserve President Eric Rosengren speaks on outlook.
  • 0145, Saturday – US: Fed’s Charles Evans speaks on monetary policy.

Overnight news, tariffs and trade

  • President Donald Trump imposed tariffs of 25% on imported steel and 10% on aluminum while excluding Canada and Mexico, citing national security in defiance of criticism from home and abroad. Some countries such as Australia may be exempted from the levies, which will take effect in 15 days.
  • Trump also warned that there would be more tariffs coming as "reciprocal taxes". on imports from other countries.
  • China has urged the US to withdraw the the tariffs.
  • China's Commerce Ministry says Beijing firmly opposes Trump's tariff move.
  • China says the US measures seriously hurt the international trade order.

Overnight news, the European Central Bank

  • The European Central Bank decided to keep interest rates unchanged and to continue its asset purchase program until September. "[The ECB] governing council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases"
  • The ECB removed the statement saying it will increase the level of bond purchases in case economic outlook deteriorates.  He said that the solid economic recovery in the region supported the decision to remove the so-called easing bias.
  • "Incoming information... confirms the strong and broad-based growth momentum in the euro area economy, which is projected to expand in the near-term at a somewhat faster pace than previously expected."
  • The ECB now expects real GDP growth in the Eurozone to hit 2.4% in 2018, 1.9% in 2019 and 1.7% in 2020.

Foreign exchange


  • USD rallied after the imposition of tariffs but also on short USD profit taking before the release of nonfarm payrolls data later today. The only currencies that managed to rally against the USD were those of two exempt countries  exempted from the onerous tariffs; that is, Canada and Mexico.
  • We recommended selling EURJPY yesterday when it was close to ¥132 in the FX Technicals report; it performed well overall. Hard to see a strong move lower from here before the release of NFP data.
  • Emerging Markets: Trump said that he will meet North Korean president Kim Jong Un in May; the news triggered some short term selling against the USD. USDMXN managed to selloff slightly after the new tariff proposal to exempt Mexico. USDMXN trades in the same range since January though 18.50/19.00

Foreign exchange movements


  • There are big expiries in USDJPY today at ¥106.5 for $1bn and ¥107 for $44bn.
  • The March Fed date for USDJPY is quite bid; but despite that, all the vols are selling off.
  • USDCAD is the one pair that is benefiting from the vol selloff after the tariff talks.



  • Bunds sharply paired early losses after Mario Draghi's press conference, it seemed that the slightly hawkish tone was not up to market expectations, pointing to short covering.
  • US treasuries moved higher, supporting the bunds rise. They edged lower into the close as some selling emerged in futures after reports that steel tariffs will take effect in 15 days.







US equities

  • The Dow Jones Industrial Average (up 93 points) and S&P 500 (up 12 points) closed off higher after President Donald Trump implemented steel and aluminium import tariffs that excluded Canada and Mexico, two key U.S. trade partners.
  • Shares in the grocer Kroger (KR) tumbled 12.4% and closed at $22.98 after the company released fourth-quarter 2017 results that met expectations but gave profit guidance for 2018 that was significantly below the analyst consensus. Total sales grew 12.4% to $31 billion, beating estimates of $30.8 bn.
  • In health care and insurance sector, U.S. health insurance giant Cigna Corp (CI) said it planned to pay $67 bn to buy out benefits management group Express Scripts Holding Co (ESRX) . The news sent Express Scripts shares higher 8.58% to $79.72, while Cigna stock slumped 11.46% to $172.00 at the market close. Both traded on significantly heavy volume throughout the session. The CI and ESRX deal is the latest in a string of consolidation in the healthcare and drug distributor space.
  • Biotech player, Ligand Pharmaceuticals (LGND) is worth $4 bn, but it doesn't market a single drug — yet in 2018 it's expected to approach $200 mln in sales and its stock is breaking out, up 3.95% to $174.70. The reason is LGND operates under a unique business model in which it acquires early-stage technologies necessary for drug development. Shares have been on a run since last week, jumping at least 2% per day during a stretch of three straight trading sessions. Meanwhile, the biotech group has been in the red for four of the past seven sessions.

European equities

  • The main European stock markets closed higher, as European Central Bank (ECB) kept its interest rates unchanged at a meeting on Thursday but dropped its easing bias, fuelling expectations that it will normalize monetary policy in the euro area. U.K.'s FTSE gained 45 points and Germany's Dax gained 110 points.
  • Miners stocks were down, being the worst performers, not only due to a threat of higher tariffs on metals but also following data showing that China imported 16% less iron ore in February than in the previous month. BHP Billiton (BLT) fell 2.7% to GBp 1,403.80.

Hong Kong equities

  • The Hang Seng Index (HSI) jumped 457 points / 1.52% to 30,654 points. It once shot up 481 points at most. At midday, the index jumped 434 points or 1.4% to 30,631. Blue chips were almost broadly in good shape. Tencent (700.HK) and HKEX (388.HK) rose 1.8% to 443.00 and 1.7% to 283.00. Words spread that Tencent's concept stock "Kuaishou" will float on Hong Kong stock market this year.
  • Chinese power stocks rebounded remarkably on a further decline in coal prices. China Res Power (836.HK) soared 5.6% to $HK13.98 being the top gainer among blue chips. Huaneng Power (902.HK) mounted 6.3% to $HK5.25 at the close. Citigroup said spot coal price plunged rapidly after winter, lead to China Res Power and Huaneng Power were rated buy.
  • There was an upsurge in Macau gaming stocks. Galaxy Ent (27.HK) and Sands China (1928.HK) rallied 3.6% and 5.6%. Wynn Macau (1128.HK) shot up 6.6%. Deutsche Bank said Wynn Macau showed strong operation in the first two months this year.


 Donald Trump's decision to accept an invitation to meet with North Korean president Kim Jong-Un could reasssure jittery investors in Asia and elsewhere; the news has already impacted FX markets. Photo: Shutterstock

– Edited by Robert Ryan

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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