Morning Report APAC: Asian markets rebound
- Asian shares rebounded Wednesday morning, retracing some of yesterday's losses
- US stocks closed higher on Tuesday after broadly slumping in the last two sessions
- Safety currencies such as JPY and CHF are lower as the equity market recovers
By Saxo APAC Sales Trading
Speeches (Singapore time)
- 1700 – UK - European Central Bank's Nouy and Lautenschlaeger speak in Frankfurt.
- 1900 – US - Federal Reserve's Kaplan speaks in Frankfurt.
- 2130 – US - Fed's Dudley speaks in moderated Q&A
- 2315 – US - Fed's Evans speaks on Economic and Policy Outlook
- US stocks just went through a roller-coaster ride with two days of crashing and recovering while things got less bumpy in yesterday's late US session. S&P had the biggest gain since November 2016. Focus is back on treasuries, which dipped with yields back to 2.8%. The dollar traded sideways, safety currencies JPY and CHF weakened. Yuan climbed on speculation of higher forex reserve. Oil paired gains on EIA’s prospect on higher US production.
- US trade deficit disappointed in December and widened to the biggest levels since last recession. It came in at $53.1 billion (exp 52.1b, pre 50.4b). Imports were up 2.5%, with exports up 1.8%. Consumer goods and autos drove imports, and exports rose due to industrial supplies. This could add fuel to Trump’s tough talk over NAFTA and trade wars.
- Fed’s Bullard maintained his view on the Fed doesn’t need to do much on rates and added that the recent equity selloff was “most predicted” as asset valuations were high compared to historical norms.
- Taiwan's eastern coast had a magnitude 6.4 earthquake yesterday and caused at least two deaths as buildings collapsed. However, it seems all nuclear plants and TSMC fabs were not affected.
- Safety currencies such as JPY and CHF are lower as the equity market recovers and global volatilities are lower.
- The NZD is the best performer out of G10 as job data beat expectations
- Emerging Markets: with the dollar moving sideways and equity markets recovering, most emerging currencies rebounded. CNH rose to the highest level since 2015 on the back of a better China outlook and due partly to attractive interest returns. The rand surged on headline news on South Africa delaying the State of Nation speech amid Zuma exit talks.
Foreign exchange movements
- FX volatilities in general waned during the late session as stocks recovered and VIX retreated.
- JPY crosses saw the biggest retreat in vols especially AUDJPY, which tracks well with stock market.
- CNY vols picked up after the People's Bank of China said it will let the currency float more. However it is not expected to go up further approaching Chinese New Year.
- US treasuries were sold off heavily as VIX waned and stock markets were back in favour. Yields picked up over 8pips across the curve.
- Bunds were following US treasuries moves in the late session on the previous day, and moved higher. Peripherals also climbed, but less.
- US stocks rebounded. Dow Jones showed volatile movements and showed a widened decline to 567 points after starting lower 260 points. The index once soared 600 points in the later session with full day volatility of 1,167 points, marking the biggest single day rise since January 2016. Dow closed up 567 points or 2.3% at 24,912.
- Shares of Micron Technology (MU), were up 11% closing at 43.88. MU boosted guidance for sales and profits in its fiscal Q2. Revenue is now forecast to come in between $7.20 billion to $7.35 billion, about 4% above the guidance. This positive news uplifted the outlook for Micron’s business, which prompted a series of upgrades from analysts.
- Utilities being the worst-performing sector continued its losing trend. NextEra Energy (NEE) fell 3.5% to 149.56, the biggest move since Novenber 2016. Shares were once traded below its 200DMA at 147.83 and total traded volume hit 4.23 million shares.
- Similarly, a sea of red on European markets, with the Dax down 294 points or 2.3% to 12392. Financials were among the most impacted by the selloff. On earnings, BNP Paribas (BNP) posted a worse-than-expected net profit for its Q4 2017, falling 1.1% to 1.43 billion euros ($1.77 billion) and missing market expectations. The stocks closed at $63.25, down 3% below the 50DMA ($64.76).
- On a brighter note, AMS AG (AMS) a technology manufacturer that supplies sensor components to Apple, was up 13%. Company reported that investment partner agreed to fund 25% of its $600 million spending.
- Hang Seng Index was down 1649 points or 5.12%, with very heavy selling pressure in Chinese financials and Chinese developers. Heavily weighted CCB (939.HK) and ICBC (1398.HK) faced selloffs, dived 7.7% and 7.35 respectively. Furthermore, being the worst performing blue chip, Country Garden (2007.HK) dived 11% as well. Technology stock Tencent (700.HK) fell below 50DMA ($423.30), last close at $410.00.
Bounce back. Asian shares retraced their losses from yesterday's session
in early trade. 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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