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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 06 December 2017 at 1:31 GMT

Morning Report APAC: Asian markets retreat, copper loses its shine

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 
  • Industrial metals came under huge selling pressure; copper tumbled by over 4%
  • China concerns and stockpiles weighed on the outlook for the red metal
  • GBP weakened on the fallout from a stumble in Brexit talks
  • The US dollar strengthen againsted most of the major trading partners of the US
  • Oil inched up on Opec's output decline and expectations of a lower US inventories

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)nnn









Speeches

  • 0930 – Japan: Bank of Japan board member Takako Masai makes a speech.
  • 1700 – India: Reserve Bank of India governor I G Patel gives press conference.
  • 1830 – EU: ECB executive board member Yves Mersch speaks in Frankfurt.


Overnight news, US

  • US stocks traded weaker as the excitement of the US tax reform begins to fade. Tech stocks were again under pressure as a rotation away from growth to value seems to be taking place.
  • Industrial metals came under huge selling pressure, with copper having its worst day in years down over 4%. Concerns over the China outlook and a significant stockpile weighed on the outlook.
  • ISM non-manufacturing composite retreated from the highs of last month and missed expectations coming in at 57.4 versus 59 expected and 60.1 previously. The data still points to a very strong soft data outlook in the US.

 
Overnight news, Europe

  • European retail sales missed estimates wildly throwing some concern on the outlook of the European consumer. Retail sales were a tiny 0.4% for the year, versus 1.6% expected and 4% prior.
  • European services PMIs continue to show strength, particularly in France, with the services PMI heading into the 60s again.
  • Brexit fallout from the Jean-Claude Juncker-Theresa May lunch and the fact that the key to May’s coalition in the form of Northern Ireland's DUP may scuttle any progress. GBP weakened on the fallout.

 

Foreign exchange

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  • USD strengthened against most of its major trading partners, with the euro suffering the most on a generally event-free day for forex.
  • NOK and SEK: The Scandinavian currencies rallied hard after what’s been a very rough ride for them. The price action was not triggered by anything in particular and likely points to a dead cat bounce rather than a structural shift.
  • Emerging Markets: A divergent day with the fragile few (TRY and ZAR) once again rallying. Stronger than expected South African GDP boosted the ZAR. On the other side of the spectrum, MXN and central European currencies block lost ground.; the central European weakness was driven by weakness in the euro.

Foreign exchange movements

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  • It was a quiet day mirroring the previous day's dull spot market. The general themes continue.
  • Buying of USDJPY topside persisted.
  • Euro vol sellers are emerging
  • GBP front end vol remains bid, thanks to Brexit talks

Rates

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  • The US yield curve flattened further with spreads at multi-year low, as near term yields start to factor in rate hike next year while markets are still buying duration.
  • European bonds were generally higher led by Germany, after the services PMI came in below expectations. Greek yields falls below 5% for the first time since 2009, after the successful completion of a bond swap program.


Commodities 

 nnn

 


US equities

  • Snap Inc rose more than $10 after the social media operator got positive comments from Barclays which has raised hope that Snap might finally have hit bottom and give a target price of $18. Investment interest from a Chinese industry peer, and redesigned app platforms could be catalysts for a rebound. Snap closed 10.1% higher and closed at $14.94.
  • Cineworld Group PLC has agreed to buy American counterpart Regal Entertainment Group for $3.6 billion, creating the world’s second-largest cinema operator. Regal Entertainment jumped 9.41%.

European equities 

  • The retail chain Tesco was one of the top performers on Tuesday after the company was given a double upgrade from Goldman Sachs from sell to buy. The upgrade was due to the easing margin pressure in the UK grocery market. Tesco closed 3% higher.
  • Provident Financial Group tumbled nearly 10% on investigation into its car and manufacturing unit. The financier has lost almost 75% of its market capitalization since the start of the year.

Asian equities

  •  The Hang Seng was down 295 points yesterday with Tencent the biggest loser, down 3% as global tech stocks took a hit as of late and contribute almost 30% of the fall in HIS yesterday. AIA Group was the second biggest loser with a loss of 1.57% and contribute 38 points of the change yesterday.

 nnn

 Industrial metals are under selling pressure, and copper has tumbled by more than 4% on the back of weaker China demand for the red metal. Photo: Shutterstock

 

– Edited by Robert Ryan


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. Follow us on @SaxoStrats on Twitter

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