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Morning Report APAC: Asian markets mixed following US tech rout

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian markets opened mixed following the tech rout in the US
  • US indices closed lower as tech stocks continued to come under pressurise 
  • The Nasdaq logged its biggest two-day slide since December
  • USDCAD was by far the main mover with the rest of G10 mostly side-lined
  • US Treasuries are higher before the Federal Open Market Committee meeting
     

By Saxo APAC Sales Trading
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Speeches

  • 1510 – EC – European Central Bank's Jens Weidmann speaks in Berlin
  • 2220 – UK – Bank of England's Victoria Cleland speaks at conference in London


Overnight news

United Kingdom

  • UK Prime Minister Theresa May apologised to her fellows for the mess she led them into, however she also said that she will get them out, and signalled to broaden her Brexit approach. On the other hand, a meeting in Brussels between UK and European Union officials failed to agree on a start date for Brexit negotiations over election uncertainties in UK.

United States

  • It was reported that the US government had a deficit in May worth $88 billion, higher than expectation of $86.5 billion and the previous year’s $53 billion.
  • The latest NY Fed survey of consumer expectations indicated a decline in inflation expectations, reflected in house inflation expectations, which declined both at one-year ahead and three-year ahead horizons. Spending growth expectations remained low and future financial situation expiation worsened.
  • Attorney General Jeff Sessions is under pressure to explain the firing of ex-FBI director James Comey as it was reported that the US Secret Service has no audio copies or transcripts of any tapes recorded within the White House.

 
Canada

  • Bank of Canada’s Carolyn Wilkins published a hawkish comment that the bank is looking at the possibility of raising rates as Canada’s economy is picking up steam.



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  • USDCAD was by far the main mover with the rest of G10 mostly side-lined.
  • USDCAD was down 125 pips after BoC Deputy Governor Wilkins turned hawkish. Wilkins was one of the most dovish BoC members in 2016. She said that the “Governing Council will be assessing whether all of the considerable monetary policy stimulus presently in place is still required” at the July 12 meeting. “At present, there is significant monetary policy stimulus in the system.” 
  • The short-term interest rates market is now pricing a 50% chance of a hike through the end of the year.

Foreign exchange volatilities

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  • The northern hemisphere summer will dampen demand for gamma and most G10 curve would expect to steepen.
  • USDCAD gamma is immediately paid on the move lower in spot as the market was caught off guard. Expect skew to be bid in the coming weeks and the ATM curve to be supported.
  • EURUSD: the market is pricing out the Italian elections with risk premium collapsing. One-month is on 6 handle which is just below actuals.


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  • US Treasuries are higher before the Federal Open Market Committee meeting, with the odds to hike the rate remaining steady at 92%. It is partially driven down by BoC’s Wilkins' hawkish comment on a possible rate hike for Canada.
  • Bund yields were driven as demand for German treasuries was higher amid continued weakness in European stocks. Italian bonds outperformed on the back of easing political pressures.   

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  • US stocks closed lower overnight as technology stocks continued to be pressurised after last Friday’s heavy selloff. Investors are cautious ahead of the FOMC meeting. The Nasdaq fell 0.52% to 6,175.46 and logged its biggest two-day slide since December.
  • Apple fell 2.39% after the stock was downgraded from buy to neutral by Mizuho Securities, with the Analyst Abhey Lamba saying the best-case scenario is priced into the shares.
  • European markets closed lower amid weakness in the tech sector. However, the FTSE is supported by pound weakness.


Asia-Pacific stocks

Hong Kong

Analyst ratings 

- Beijing Airport (694 HK): Rated new sell at Haitong Intl, PT HK$9.20

- Baoxin Auto (1293 HK): Rated new buy at Hua Tai Securities, PT HK$4.80

- China Yongda (3669 HK): Rated new buy at Hua Tai Securities

- Minth Group (425 HK): Rated new add at Fubon, PT HK$37

- United Lab (3933 HK): Raised to equal-weight at Morgan Stanley, PT HK$5.60

- Weichai Power (000338 CH): Cut to reduce at Nomura

- ZhengTong Auto (1728 HK): Rated new buy at Hua Tai Securities, PT HK$6.50

- Zhongsheng Group (881 HK): Rated new buy at Hua Tai Securities, PT HK$16.80

Preview

- Autos: China to strictly control new capacity of fossil-fuel vehicles, sets up govt-backed alliance to develop autonomous cars

- Steel: US to release steel-import findings as soon as this week

- Baosight (900926 CH): plans to work with Aliyun on cloud computing, big data

- China Vanke (2202 HK): May adjust salary policy as “golden era” ends: The Paper

- Cosco Shipping (601919 CH): To buy stake in Spain’s Noatum Port for EU203.5m;

- Dongyue Group (189 HK): Prelim. net profit for 5 months ended May 31 up 130% on year

- Evergrande (3333 HK): Sale of Vanke stake approved by Shenzhen regulator

- Glencore (805 HK): Forgery fears at unit spur nickel financing lawsuit

- Huayi Brothers (300027 CH): To sell 25.9% stake in Yinhan Tech for 647m yuan

- Humanwell (600079 CH): Co. to sell stake in unit to CSL for $351.8m

- IMAX China (1970 HK): Imax to cut 14% of workers including some at China unit

- Kingboard Chemical (148 HK): Bought 3.01m Cathay Pacific shares June 8, boosts stake to 8.06%

- L’Occitane (973 HK): FY net income beats highest est.

- Mengniu Dairy (2319 HK), Mingfa Group (846 HK), China Water Affairs (855 HK): Among cos. failing to register foreign debt sales: NDRC

- Ping An Insurance (2318 HK): Unit among cos. failing to register foreign debt sales: NDRC

- Shanghai Port (600018 CH): Cosco Shipping to buy 15% stake from Tongsheng; shares to resume trading Tuesday

- SHK PPT (16 HK): Confirms it’s stopped sales at luxury development on Shanghai curbs’’

- Tencent (700 HK): SoftBank to own 20% stake in merged Flipkart-Snapdeal: Nikkei

- Yanzhou Coal (1171 HK): Says HVOR accepted tag-along offer Monday

 

Japan 

Analyst ratings

 - Electric Power Development (9513): Cut to neutral at MUFJ-MS

- Ezaki Glico (2206): Initiated neutral at Okasan

- Fuji Oil (2607): Initiated neutral at Okasan

- Japan Logistics (8967): Cut to neutral at Nomura

- Kubota (6326): Upgraded to buy at Mizuho

- Murata Manufacturing (6981): Raised to neutral at SMBC Nikko; PT raised to 17,800 yen

- Nippon Paint Holdings (4612): Cut to underweight at Morgan Stanley

- Resona Holdings (8308): Downgraded to neutral at Daiwa; PT 630 yen

- Shin-Etsu Chemical (4063): Raised to outperform at SMBC Nikko

- Square Enix (9684): Raised to buy at Goldman

- Sumco (3436): Raised to outperform at SMBC Nikko; PT raised to 2,260 yen

- Sumitomo Mitsui Financial Group (8316): Initiated at Iwai Cosmo with outperform

- Taiyo Yuden (6976): Raised to outperform at SMBC Nikko, PT 2,100 yen

- TDK (6762): Upgraded to outperform at SMBC Nikko; PT raised to 11,000 yen

- United Urban Investment (8960): Raised to buy at Nomura

Preview

- Bridgestone (5108): To raise price for quake rubber

- Ci:z Holdings (4924): nine-month net income +56% y/y to 4.4b yen, keeps full-year outlook unchanged

- Fujifilm Holdings (4901): Accounting irregularity found in New Zealand unit from FY2010 to FY2015; to reshuffle Fuji Xerox management following probe of accounting practices in NZ and Australia

- Japan Post Holdings (6178): Gets approval to spend 102.9b yen on dividends

- Kobe Bussan (3038): Half-year net income more than quadruples to 4.5b yen from 1.0b yen a year ago, beats co. forecast by 48.5%

- PeptiDream (4587): Signs non-exclusive license pact on PDPS with Shionogi & Co., making co. eligible for one-time fee

- Renesas Electronics (6723): Prices secondary offering at 825 yen/share in deal for selling 422m shares

- RS Technologies (3445): To conduct 2-for-1 stock split on July 1

- Shoei Foods (8079): Half-year net income +34% y/y to 2.3b yen, beats company forecast by 29%

- Strike (6196): To raise 724.1m yen in public share sale


Australia

Analyst ratings

- Ansell (ANN): Upgraded to overweight from equalweight at Morgan Stanley

Preview

- BHP Billiton (BHP): AMP (AMP) seeks independent review of Elliott plan

- Charter Hall (CHC): In early talks to buy Westpac’s (WBC) Hastings, AFR says

- Rio Tinto (RIO): Board said to discuss Glencore coal bid in meeting this week; China coal giant awaits Rio response to Glencore’s rival bid

- Vocus (VOC): Board “likely” to reject KKR bid, according to AFT

- Ten Network (TEN): Faces possible administration on troubled loans, the Australian newspaper reports


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Nasdaq posted its biggest two-day fall since December, with large technology stocks
such as Apple declining. Photo: Shutterstock
 


– Edited by Gayle Bryant


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