Morning Report APAC: Asian markets mixed on Wall St wobbles
- Asian markets opened mixed following Wall St nervousness and European falls
- PBoC Governor warned too much optimism could lead to a collapse of asset prices
- NZDUSD falls after NZ First announced its support of a Labour-led coalition
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8)
- 1435 – JN – Bank of Japan Governor Hirohito Kuroda speaks in Tokyo
- 0200 – US – Federal Reserve Loretta Mester speaks on global regulatory structure
- 0730 – US – Fed chair Janet Yellen gives lecture on monetary policy since financial crisis
- US Secretary of State Rex Tillerson warned China on Thursday that the US has an arsenal of economic weapons to force Beijing to address trade imbalances and a continuing territorial dispute in the South China Sea. “We can do this one of two ways,” Tillerson said during a 35-minute interview in his State Department office, seeming at times to speak directly to his Chinese counterparts. “We can do it cooperatively and collaboratively, or we can do it by taking actions and letting you react to that.”
- The government of Mariano Rajoy will trigger article 155 of the constitution, withdrawing Catalonia's right to govern itself, in a cabinet meeting on Saturday, the Prime Minister's Office said. It came after Catalan president Carles Puigdemont wrote a letter to Rajoy, minutes before a deadline on Thursday morning to clarify Catalonia's position, stating the Catalan parliament could vote on a full declaration of independence from Spain if Madrid did not agree to new talks.
- US President Donald Trump has finished his interviews for the next Fed chair and his closest advisers are steering him toward choosing either Stanford economist John Taylor or Federal Reserve Board Governor Jerome Powell.
- Japan's LDP-led ruling coalition will probably retain its two-thirds parliamentary majority in Sunday's national vote. Polls show the Prime Minister's handling of the North Korea crisis shored up support. A victory would allow him to push constitutional change and a sales tax hike, and help retain the ultra-loose monetary policy that's kept the yen weak.
- Catalonia has more than FC Barcelona to keep the world attentive. Its fight for independence and the control decided by Madrid has pushed equities lower globally, US rates lower and the USD lower.
- DXY remains well anchored in the 93.00/94.00 range. The yearly chart showed strong support at 92.70. We had a failed attempt to break it in September but since then it has been holding well. In terms of risk reward, it makes sense to go long here with a stop just below 92.70.
- USDJPY dropped on the back of lower US yields. 2.40% will be the level to break to see any significant move higher. The support remains at the 200d MA at 111.74 in the short term with the major resistance at 115.00.
- EURUSD didn’t react much on the Catalonia news and reversed with very strong bidding interest from hedge funds below 1.1800. We are trading at the short-term resistance of 1.1845 but the main level to watch remains 1.2000.
- NZDUSD collapsed yesterday after NZ First announced its support of a Labour-led coalition and dropped to 0.7000. There is more to go in the NZD and we should aim for 0.6900.
- AUDNZD has broken the highs of the year at 1.1145 and after talking to several funds yesterday, they were all very keen to go long at this level. We are now at new territories above 1.1200
- Emerging Markets: USDCNH started the day very bid with strong corporate flow but local banks were seen selling at the end of the day. The rest of EM was fairly quiet overnight with some small USD selling interest.
Foreign exchange volatilities
- AUDNZD vega is very well supported because the new government intends to change the mandate of the Reserve Bank of New Zealand to include employment so there is uncertainty regarding their mandate.
- USDJPY risk reversal is changing direction and becoming less negative favouring more USD calls after the elections.
- US yields were lower as the curve steepened after Politico reported that Jerome Powell, who is expected to be neutral is favoured to be the new Fed chair.
- UK yields dropped amid weak retail sales on the back of negative real income growth.
- US stocks finished mixed with most sessions in the red, yet the Dow and S&P 500 managed to secure record finishes at the last minute, a day after the Dow closed above the psychologically important level of 23,000.
- Apple dropped 2.4%, possibly the biggest decline in a month, dragging the Nasdaq down. Another factor pressuring Apple’s price was a report in The Wall Street Journal that the new Apple Watch independent cellular connection feature was abruptly cut off in China, without explanation.
- Gilead Sciences gained 2.0% after receiving FDA approval for its immunotherapy treatment for lymphoma. The treatment had been developed by Kite Pharma, which Gilead acquired earlier this year, and a one-time price tag to each patient will be $373,000.
- Verizon rose 1.15% after the company reported third-quarter profit and revenue above Wall Street's expectations, with strong smartphone segment performance, and so-called "churn" continuing to remain low.
- European stocks were at their lowest close in nearly three weeks, weighed down by the IBEX 35, which dropped 0.7% as the Spanish government said it will move to suspend autonomous rule in the Catalonia region.
- Unilever plunged 5.5% after the consumer products company reported weaker revenue growth of 2.6% in the third quarter, lower than the analyst growth estimate of 3.9%. Sales growth was hurt by poor weather in Europe and natural disasters in the Americas.
- Zhejiang Dibay Electric (603320 CH): New Outperform at SWS
- Chow Tai Fook (1929 HK): Chow Tai Fook Cut to Neutral at Haitong Intl, PT HK$8.50
- Luk Fook (590 HK): Luk Fook Downgraded to Neutral at Haitong Intl; PT HK$31.40
- Cathay Pacific (293 HK): Cathay Pacific Sept. Passenger Number Falls 1.2% Y/y to 2.64M
- Changan (200625 CH): Changan to End Sales of Fossil Fuel-Powered Vehicles in 2025
- China Merchants Bank (3968 HK): PRICED: China Merchants Bank $1b Perp NC5 AT1 4.4%
- China Unicom HK (762 HK): China Unicom Expects Jan-Sept Net Income Up 155% at 4.1B Yuan
- China United Network (600050 CH): China United Network Expects 9-Month Net to Rise About 168% Y/y
- Chinese Estates (127 HK): Billionaire Lau’s Chinese Estates Can’t Get Enough of Evergrande
- Citic Bank (998 HK): Jiangsu Nantong $300m 3Y Bond 7.8%
- Citic Bank (998 HK): PRICED: Zhongrong Xinda $500m 3Y Bond at 7.25%
- Glencore (805 HK): Glencore CEO Says No Export, Payment Delays From Kurdistan Now
- GoerTek (002241 CH): Goertek 3Q Net 666.5m Yuan vs 562.2m Yuan Year Ago
- Guanghui Energy (600256 CH): Guanghui Energy 3Q Net 138.3m Yuan vs 96.7m Yuan Year Ago
- HSBC (5 HK): Abu Dhabi’s Adnoc Unit Plans to Raise $3b From Bonds
- HSBC (HSBA LN): HSBC Bought Back 3.16M Shares at Avg 743.32 Pence Each Oct. 19
- Hualan Biological (002007 CH): Hualan Biological 3Q Net 188m Yuan vs 197m Yuan Year Ago
- Kweichow Moutai (600519 CH): Moutai Sales From Government Fall to 0.15% of Total: Official
- Sinopec (386 HK): Air Liquide Enters JV With Sinopec in China
- Wanxiang Qianchao (000559 CH): Wanxiang Qianchao 3Q Net 178.3m Yuan vs 137.9m Yuan Year Ago
- Fast Retailing (9983): Rated new neutral plus at Iwai Cosmo
- GMO Internet (9449): Rated new outperform at SMBC Nikko
- Sumitomo Metal (5713): Raised to outperform at SMBC Nikko
- Yakult Honsha (2267): Raised to overweight at JPMorgan
- JAL (9201): Cut to neutral at Goldman
- ANA Holdings (9202): Cut to neutral at Goldman
- Casio Computer (6952): Cut to hold at Morningstar
- Chubu Steel Plate (5461): Preliminary full-year operating profit at 3.9b yen, beating co. forecast by 18%
- Chugai Pharma (4519): Roche’s top drug stumbles in Europe as biosimilars take hold
- House Foods (2810): Reports preliminary half-year earnings, operating profit beats co. forecast by 35% at 7.4b yen
- Kobe Steel (5406): Central Japan Railway says it may replace Kobe steel parts during planned work; no safety problems seen for Japan bullet trains
- Terumo (4543): Preliminary half-year operating profit at 47b yen, beating co. forecast by 21%
- Toray Industries (3402): To boost output capacity for battery separator films at South Korea units, investing 200b won
- API AU: Australian Pharma Industries Raised to Neutral at Credit Suisse
- CWN AU: Crown Resorts Raised to Buy at Morningstar
- GXY AU: Galaxy Resources Cut to Neutral at Hartleys Ltd, PT A$3.57
- SFR AU: Sandfire Cut to Hold at Canaccord, PT A$6.50; Cut to Hold at Argonaut Securities, PT A$6.10
- STO AU: Santos Cut to Neutral at JPMorgan, PT A$4.25
- AJM AU: Waratah’s Levinsky Pitches Lithium Americas, Altura Mining Long
- AGL AU: Final Fresh Round of Bids Due Today for Loy Yang B: AFR
- Australia Wheat Output Seen Down More Than Forecast: USDA FAS
- BHP AU: BHP Chairman Endorses CEO, Squashing Leadership Speculation
- RIO AU: Rio Tinto, CGI in C$30m in Pacts for Quebec Center Support; AMCI, Riverstone Ready Joint Bid for Rio’s coal assets: AFR
- CVX US: Exxon, Chevron Courted to Revive Legacy Gas Exporter Down Under
- Death of Australian Car-Making Leaves Chasm in Blue-Collar Towns
- TSLA: Tesla and Vestas Partner in $160 Million Australian Project
– Edited by Gayle Bryant
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