Oil has hit a 15-month high on the back of optimism over the Opec deal which needs to be sorted out by November 30. But, with a record long position building across the combined benchmarks, a disappointment could leave some exposed. Full report to come within the hour....
Article / 04 October 2016 at 1:57 GMT

Morning Report APAC: Asian markets open mixed ahead of rate decisions

APAC Sales Trading Desk / Saxo Capital Markets


  • Asian markets opened mixed ahead of two rate decisions
  • The ASX200 was down 0.4% at the start while the Nikkei was up 0.6%
  • US ISM Manufacturing was better than expected, rising to 51.5 from 49.4
  • UK's Prime Minister is planning no favours for the City of London over Brexit

By Saxo APAC Sales Trading

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



  • 0930 – NZD: RBNZ Governor Graeme Wheeler speaks in Whangarei (not public)
  • 1545 – EUR: Bank of Spain Governor Luis Maria Linde speaks in Madrid
  • 2005 – USD: Federal Reserve's Jeffery Lacker speaks at West Virginia economic outlook meeting

Overnight news

United States

  • ISM Manufacturing was better than expected and rose to 51.5 from 49.4 (Exp. 50.4). Of the 18 manufacturing industries, seven reported growth led by: Non-metallic Mineral Products; Furniture & Related Products; Textile Mills; Food, Beverage & Tobacco Products; Computer & Electronic Products; Miscellaneous Manufacturing; and Paper Products.
  • The Markit US Manufacturing PMI came in slightly above expectation at 51.5 from 51.4 and Construction spending dropped to 0.7% (Exp. +0.3%), its lowest level in eight months.
  • Auto Sales September’s seasonally adjusted rate of 17.8 million topped estimates of 17.5 million cars sold. That's down from last year's 18.1 million, but strong enough to leave investors wagering the industry’s six-year growth streak could continue. The strong sales were fuelled by incentives that reached a record $3,923 a vehicle, with Nissan and GM beating. Toyota and Honda missed. (Bloomberg) 


  • UK Prime Minister Theresa May is planning no favours for the City of London over Brexit. The PM won't prioritise protecting the UK's financial sector after leaving the European Union, people familiar said, and her team dismissed a key business demand for an interim deal to help ease the transition.  

Foreign exchange



  • The GBP was the main mover following Theresa May's comments regarding Brexit (see above). This was despite the very good Markit PMI Manufacturing that came in at 55.4 (Exp. 52.1). The GBP is now just above the post Brexit lows at 1.2798 and funds are happy to sell on any rallies like last night following the strong data expecting a hard landing for the UK.  
  • In Emerging Markets, USDBRL dropped 1.6% as the results of city elections fuelled optimism that the government can win the support it needs to pass measures aimed at restoring growth. Temer’s PMDB and its main ally, PSDB, were the biggest winners of this weekend’s municipal elections as they will manage a combined 33% of the country’s cities starting in 2017. 
  • The Workers’ Party of ousted Brazilian President Dilma Rousseff suffered heavy losses, losing control of Sao Paulo, the country’s largest city, to the PSDB. Investors see results as supportive of bets on the recovery of Latin America’s biggest economy.

Foreign exchange volatilities


  • Volatilities in the GBP spiked around the next Bank of England meeting (1 Month date) and following the move lower in Spot yesterday.
  • We are seeing a lot of buyers of Risk Reversals in the EUR for the downside as a hedge against financials and the next European Central Bank meeting but there is good support in the spot market.


  • UST declined and the two-year note yield touched its highest level in more than in a week, as better-than-expected September ISM Manufacturing led the market to price in higher odds of a Fed rate increase to 60.9% by year-end.
  • Italy’s 10-year bond-yield spread to Spanish rose to the highest in two years, at 33.1 basis points and close to the 2014 peak of 41.2bps, after the latest poll showed 25% of Italian voters would reject overhauling the constitution, while 23% would support and the Prime Minister may have to step down in the December 4 vote.







  • US stocks registered modest losses as construction spending report was weak and data on auto sales and manufacturing mixed. The S&P 500 declined 7.07 points to 2,161.20, led by REITs which dropped 1.8%.
  • Tesla Motors surged 4.7% after it announced Sunday that the company had delivered the best sales quarter ever, an increase of over 70% from Q2.
  • AstraZeneca signed a deal through its global biologics research and development unit with Allergan (+1.1%) that Allergen will have the global rights to an antibody for Crohn's disease and will pay up to $1.52bln depending on how good the sales of the antibody are.
  • European stocks edged higher as German manufacturing growth accelerated to a three-month high during September and Eurozone manufacturing activity met expectations. However, volumes were lacklustre as it was a holiday in Germany. The Stoxx 600 index inched up 0.1 point to 343.23.
  • ING Group fell 1% as investors reacted to the company's latest announcement that it is slashing about 7,000 jobs in the coming years in an effort to save €900mln per year by 2021.
  • FTSE 100 jumped 1.2%, to 6,983.52, which was a16-month high, boosted by a sharp drop in sterling and a subsequent rally in exporters.

Asia-Pacific stocks

Hong Kong

Analyst ratings

- China Energy Eng (3996 HK): Wins approval for stock incentive program
- CSPC (1093 HK), Sino Biopharm (1177 HK): Stocks rise as updated drugs list expected at end-2016
- Evergrande (3333 HK): Unit to sell asset; become holder of Shenzhen Real. Deal subject to SASAC approval
- Glorious Property (845 HK): Coupon being sent to noteholders


- Evergrande (3333) proposed a backdoor listing of its property assets on A-shares market. The deal is still subject to various regulatory approvals. Share price likely to react positively. It will resume trading today. Full note:
- Henderson Land (12)’s “Park One” to release price list this week, to start selling next week.
- HSBC (5) 3rd div $0.1/shares Hang Seng BK (11) 3rd div $HK1.1/shs
- British Banks: BoE said will introduce more comprehensive stress tests to banks in 2017 using UK and global downturn scenarios
- Galaxy (27) said their hotels see “over-demand” during Golden Week. Visitor consumption is better than expected.
- Jingrui (1862) Sep contracted sales RMB2.09bn, area 187.3k square metres. The figures for Jan-Sep were RMB11.93bn and 989k sq.m.
- FIH Mobile (2038) expects 2016 consolidated profit substantially drop at least 52% yoy to less than $110mln. The company made 1H16 NP $21.4mln, that implies 2H will be a big recovery.
- Fosun Intl (656)’s unit sold entire stake in Jiashili Group.
- CH Energy Eng (3996) got approval from state council for stock incentive programme under which 553 employees would get 288.3mln shares.


 Analyst ratings

- Chugai Pharmaceutical (4519 JP): Rated new neutral at Mitsubishi UFJ Morgan Stanley
- Honda (7267 JP): Raised to buy at Haitong
- Nomura Real Estate (3231 JP): Cut to neutral at Credit Suisse
- Sumitomo Realty (8830 JP): Cut to underperform at Credit Suisse
- Tokyu Fudosan (3289 JP): Cut to Neutral at Credit Suisse


- Create SD (3148 JP): 1Q oper. profit down 3.8% to 3.58bn yen
- Dai-ichi Life (8750 JP): Janus Capital plans to merge with Henderson Global; Dai-ichi to vote in favour of merger, sees added investment of up to $500mln
- Daiseki (9793 JP): 1H oper. profit down 12% to 3.68bn yen vs co. forecast 3.93bn yen
- Fuji Co. (8278 JP): 1H oper. profit up 3.5% to 3.48bn yen vs co. forecast 3.6bn yen
- GS Yuasa (6674 JP): Acquires 85.1% stake in lead battery ops of Panasonic (6752 JP) in previously announced deal
- Hitachi Kokusai (6756 JP): Parent Hitachi (6501 JP) said to weigh selling stake
- Hitachi Construction Machinery (6305 JP): To acquire Bradken for ~$A689mln, premium of 34%
- Kewpie (2809 JP): Reports nine-month results; 3Q oper. profit up19% to 9.27bn yen
- Nachi-Fujikoshi (6474 JP): Reports nine-month results; 3Q oper. profit down 54% to 2.28bn yen
- Oriental Land (4661 JP): Tokyo Disney visitors down 0.3% in 1H
- Shimamura (8227 JP): 1H oper. profit up 41% to 25.2bn yen vs co. forecast 22.6bn yen
- Zojirushi (7965 JP): Reports nine-month results; 3Q oper. profit flat at 1.25bn yen; trims full-year net income target


Analyst ratings

- Henderson Group (HGG AU) raised to outperform at RBC


- NZX (NZX NZ) CEO Tim Bennett to step down at year-end; co. sees FY ebitda at low end of $NZ22.5mln-$NZ26.5mln
- Airwork (AWK NZ) received partial takeover offer from Zhejiang Rifa at $NZ5.40/share
- Bradken (BKN AU) board recommends offer from Hitachi Construction at $A3.25/share
- Henderson Group (HGG AU) in recommended merger pact with Janus Capital

Source: CIMB / Bloomberg


 Investors are likely to keep a watch on oil prices, which made
strong gains overnight. Photo: iStock

– Edited by Gayle Bryant

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