Morning Report APAC: Asian markets mixed on Wall St falls
- Asian markets were mixed in early trade after Wall St's soft lead
- The Kospi and Nikkei were higher while the ASX200 was down
- The USD paused after rising against a basket of currencies overnight
- The AUD has fallen sharply against its US counterpart, trading at US78.12¢
- The RBNZ held rates at a record low of 1.75%
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8hrs)
- 0930 – JN – Bank of Japan's Suzuki makes a speech in Wakayama
- 1645 – EC – European Central Bank's Weidmann speaks in Frankfurt
- 17:00 – AU – Reserve Bank of Australia's Governor Lowe gives speech in Sydney
- 1715 – US – Federal Reserve's Kaplan speaks in Frankfurt
- 1815 – EC – ECB’s Villeroy speaks in Frankfurt
- 1830 – EC – ECB’s Mersch speaks in London about cryptocurrencies
- 1845 – EC – ECB’s Praet speaks in Frankfurt
- 2100 – US – Fed’s Harker speaks on Economy
- 2200 – US – Fed’s Kashkari speaks in Moderated Q&A
- 0145 – US – Bank of Canada senior deputy governor Carolyn Wilkins speech
Volatile overnight session
- The S&P was very volatile overnight trading in a 1.8% range to close at the lows after dropping 1% the last hour and finishing down 0.5%. There was a similar move on the 10-year yields, which traded in a 10 basis point range. The 10-year yield moved as high as 2.86% after a $24 billion 10-year sale drew a rate that was the highest in four years.
- Commodities continue to suffer, led by copper, which dropped 2.8% mainly due to long liquidation. WTI slid for a fourth day to the lowest in more than four weeks after US crude output topped 10 million barrels/day for the first time last week.
Federal Reserve speakers
- Charles Evans has downplayed the recent volatility saying that the US economy is firing on all cylinders and could justify three or four rate hikes this year.
- Dudley said that the equity rout “wasn’t that big a bump” and didn’t alter his outlook.
Reserve Bank of New Zealand
- RBNZ held rates at a record low, and Acting Governor Grant Spencer projected they will stay there until mid-2019 amid subdued inflation and slowing growth. The central bank expects inflation will hit its target in the third quarter of 2020, two years later than previously forecast.
- The DXY is finally reacting to the equity selloff and more importantly the increase in volatility. The rise of the USD is more a flight to safety than anything else. The previous consolidation gave a resistance at 89.67 so as a short-term trade, it’s worth attempting a long DXY here with a stop below that level.
- Emerging Markets: Extremely volatile in EM with USDCNH dropping early below 6.2600 to trade above 6.3200 during the NY sessions following the rest of the USD rally globally. The market is not ready yet to go long USD from the price action and still in the sell-on rally mode. It is true that any sign of positives in the US equity market will trigger another big selloff in the USD against EM.
Foreign exchange movements
- Very strong interest in buying USDJPY and CrossJPY downside but due to the fact that the skew is very expensive, the market is selling ATM strikes to finance the downside strikes.
- USDCNH gamma is well supported but the market doesn’t want to be extremely long ahead of the Chinese New Year holidays next week.
- Core European bonds were sold off as global volatilities eased and inflation pressure built up. Peripherals however outperformed amid stronger faith in their bonds due to credit upgrades for Portugal and Spain.
- US treasury yields were higher amid global volatilities easing. Treasuries were further sold off after the disappointing 10-year sale.
- The share price of Snap skyrocketed by 48% after publishing better-than-expected quarterly results on late Tuesday.
- Tesla rose 3.3% as investors anticipated better results on post earnings after the bell. And the good news of the Tesla Roadster that was launched into space as dummy payload carried by SpaceX rocket sent shares 2% higher.
- The Stoxx 600 index closed up 2%, which is the biggest jump in nine months, led by Financials with 3.4%.
- Hong Kong’s Hang Seng Index ended down 0.9% after rising as much as 2.9% earlier, dragged down by the Shanghai Composite Index on concerns over liquidity.
- Wynn Resorts’s stock rose 8.6% on the back of cheering for Steve Wynn’s resignation as chief executive and chairman following allegations of sexual misconduct late Tuesday.
The AUD has fallen sharply against its US counterpart, trading at US78.12¢,
down from US78.77¢ yesterday. 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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