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The current mixture of strong macroeconomic signals and what is expected to be a strong showing from today's nonfarm payrolls report is flashing a "green light" to Federal Reserve hawks. Meanwhile, fear of Sunday's Italian vote seems to be fading.
Article / 13 October 2016 at 2:21 GMT

Morning Report APAC: Asian markets open mixed; Samsung snaps back

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian markets opened mixed with Samsung shares up 2% at the start
  • The US 10-year yield touches 1.8%
  • Thailand's market and currency dropped on concerns over the King’s health  


By Saxo APAC Sales Trading 

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Overnight news

Federal Reserve: At its September 20-21 session, the Federal Open Market Committee voted 7-3 to leave interest rates unchanged. Minutes released Wednesday showed “several” of those who supported the decision to wait on tightening policy said the decision was a “close call.” Several also indicated it would be appropriate to raise rates “relatively soon". 

Thailand: The equity market and the currency dropped on concerns that the King’s health has deteriorated and on the succession plan. The 88-year-old monarch has been a symbol of unity in Thailand, which has had 10 coups during his seven-decade reign.

 

Foreign exchange

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  • The USD remains bid following the FOMC minutes saying that September was a close call for a rate hike. EURUSD continues its break lower on renewed interest from investors to sell the pair. After staying in a range for three months, the EUR will probably continue to test lower. The next target is 1.0850/1.0900.
  • GBPUSD was very offered during European time before finding some kind of support ahead of 1.2000. The uncertainty surrounding the Brexit process will drive the currency. There is good selling interest at 1.2280/1.2300.
  • USDJPY caught up with the rest of the currencies after the large expiry at 104 yesterday and the FOMC minutes. Short term there are a lot of expiries for the next two days between 104 and 104.30 so we should stay range bound but the pair is confirming the break of the 100d MA and when done, the next target will be 107.
  • In Emerging Markets, USDZAR found some short-term resistance at the 100d MA at 14.32 after the head of South Africa’s National Prosecuting Authority said he is willing to reconsider the decision to charge Finance Minister Pravin Gordhan with fraud.
  • USD Asia continues to trade on a very bid tone pushed by USDCNH

Foreign exchange volatilities

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  • USDCNH Risk Reversals came off a lot (favouring USD Calls) and we feel it’s a good time to use that opportunity to buy upside in USDCNH.
  • The market is in demand for Vega in all the G10 currencies and the volatilities will remain supported.

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  • The minutes of the September FOMC meeting were released yesterday and confirmed that the decision to stall rates was close. US 10-year had also climbed massively since then and the chance for a hike by year-end is now at 70% again, an improvement in the expectation from September.
  • The Treasury Department also auctioned $20 billion 10-year notes at a high yield of 1.793%, its highest level since March. US 10-year also broke 1.8% briefly for the first time since June this year.


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US stocks managed to close with minor gains after minutes from the Federal Reserve’s September policy meeting showed support for a rate rise relatively soon, countered the drag from pressured oil price. The S&P 500 rose five points to 2,142, with real estate leading the way higher.

Amazon.com rose 0.7% to $836.83, after it was reported that it pushed deeper into the grocery business and plans to introduce convenience stores and curb-side pickup locations, which make it a direct competitor with Wal-Mart Stores.

Apple shares rose 1.4% to $117.95, amid speculation that the it could sell millions of iPhones on the back of Samsung’s troubles. The stock has registered a seven-day winning streak and the price is up nearly 4% this month.

Stocks in Europe ended lower with technology shares hit hard by Ericsson AB's profit warning, and energy stocks followed a selloff in oil prices. The Stoxx Europe 600 finished down 0.5% to 338.56, its lowest close since September 16. The FTSE 100 fell 0.7% 7,024.01.

Ericsson shares plunged 20% and recorded the biggest loss since October 2007, after the company’s warning on significant lower third-quarter earnings, as sales at its core mobile-network equipment business dropped.

Deutsche Lufthansa AG jumped higher by 4.3% following a ratings upgrade to ‘hold’ from ‘reduce’ at Kepler Cheuvreux, which said it’s “more positive on price developments” in the second half of 2016 for the German air carrier.

Asia-Pacific stocks

Hong Kong

Analyst ratings

  • Cathay Pacific (293 HK): Cut to underperform at Jefferies
  • Hualan Biological Engine (002007 CH): Rated new buy at Haitong

Preview

  • Sino Land (83) and Empire Group jointly win business land parcel at Wong Chuk Hang with HK$2.53b
  • COLI (688) Sep contracted property sales up 1.81x YoY to RMB42.8b… co adds 1 land lot in Ningbo in Sep, involving RMB4.48b
  • China Longyuan(916) partners with controlling company to form JV of wind farms and will contribute RMB48.96m
  • Gemdale Ppt (535) Sep contracted sales up 3.92x YoY to RMB4.05b
  • COGO (81) Sep contracted sales +7.06%Yoy to HK$2.3b...co to buy property portfolio from COLI(688) at intial consid of RMB3.52b
  • Shenzhen Invest (604) Jan - Sep total contracted sales +30.1% YoY to RMB17.96b, the group has achieved 97.08% of the contracted sales target for the year.
  • China South Air(1055) agreed to buy Dreamliners at $3.2b from Boeing Co to expands its fleet to meet a surge in travel demand.
  • China Res Power(836) Sep total net generation of subsidiary power plants +25.8% YoY
  • Anhui Conch(914) sold 12.1m shares of Anhui Xinli and cut stake to 11.28% and said further cut is possible
  • MCC(1618) Jan-Sep new contracted sales +15.2% YoY to RMB323.06b
  • BWI Intl (2339) proposes share consolidation whereby every ten shares be consolidated into one share
  • HSBC(HSBA) bought back 3.05m Shares at avg 616.64 pence each on Oct. 12, +0.02% vs Wed close
  • China Railway Cons(1186) wins RMB3.43b PPP project in Jiangxi
  • Banks: Chinese banks are stepping up lending to midsize metals traders in Singapore (Reuters)
  • CX(293) is undertaking a "critical review" of its business and co. no longer expects that 2H results will exceed HK$353 mln earnings reported in 1H
  • Prosperity REIT(808) Plan to buy a commercial building in Kwun Tong for HK$1.88b was rejected by a 61.33% vote at shareholder meeting; CKP(1113) which holds 18.98% of Prosperity REIT, said earlier it wouldn’t vote for the acquisition

Japan 

Analyst ratings

  • Daifuku (6383 JP) lowered to neutral from buy at UBS
  • J-REIT rating changes at Mitsubishi UFJ Morgan Stanley
    – Invincible Investment (8963 JP), Japan Hotel REIT (8985 JP) raised to overweight from neutral
    – Orix JREIT (8954 JP) cut to neutral from overweight
    – Tokyu REIT Inc (8957 JP) cut to underweight from overweight

Preview

  • Bell System24 (6183 JP): 1H oper. profit -7.7% to 4.29b yen
  • Cosmos Pharmaceutical (3349 JP): 1Q oper. profit +36% to 6.8b yen
  • Hoya (7741 JP): To acquire Minnesota-based Performance Optics for $476m
  • Kirin (2503 JP): Confirms plan to buy ~25% of Brooklyn Brewery via new share issue
  • Japan Wool Textile (3201 JP): 9-month oper. profit +13% to 5.77b yen
  • Lawson (2651 JP): 1H oper. profit 39.9b yen vs co. forecast 39.5b yen, Nikkei preview 40b yen; CEO signals co. may enter banking
  • Marubeni (8002 JP): Says offices searched by FTC
  • Murata (6981 JP): To acquire French silicon capacitor maker IPDiA; no terms
  • Nexon (3659 JP): Acquires 49% stake in Thai game publisher IDCC; to buy rest on approval
  • S Foods (2292 JP): 1H oper. profit 4.71b yen vs co. forecast 4.3b yen
  • Saizeriya (7581 JP): Forecasts oper. profit 9.3b yen for current FY vs analyst est. 9.14b yen
  • Suzuki (7269 JP), Toyota (7203 JP): To explore partnership in environment, safety and IT fields
  • Tepco (9501 JP): Says power outage hits wide area of Tokyo after fire
  • Usen (4842 JP): Forecasts oper. profit +5.8% to 10.8b yen for current FY

Australia

Analyst ratings

  • BHP Billiton (BHP AU), Rio Tinto (RIO AU) downgraded to sell at Citi
  • Village Roadshow (VRL AU) raised to overweight from neutral at JPMorgan
  • REA Group (REA AU) raised to outperform from neutral at Credit Suisse
  • Medibank Private (MPL AU) raised to neutral from underperform at Credit Suisse

Preview

  • Iluka Resources (ILU AU) September qtr production reports
  • Transurban (TCL AU) annual meeting, Sept. quarter traffic and revenue update
  • Magellan Financial (MFG AU) annual meeting
  • Orora (Orora AU) annual meeting
  • Air NZ (AIR NZ) to offer NZ$75m fixed rate retail bond
  • Wynyward Group (WYN NZ) interim CFO Phil Eustace’s contract to conclude in Nov.
  • Bradken (BKN AU) gets conversion notices from Champ, Sigdo Koppers on RPS, will result in issue of 35m shares at A$2/shr

Source: CIMB / Bloomberg


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 The FOMC minutes confirmed that the decision to stall rates in
September was close. Photo: iStock

 
– Edited by Gayle Bryant

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