Morning Report APAC: Asian markets tumble after US rout
- Asian markets were all lower following overnight losses in the US
- The Dow closed more than 1,000 points lower
- The BoE hawkishly upgraded its guidance on rates and growth
- US Treasuries and crude oil both sold off again
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
0830 – AU – Rererve Bank of Australia quarterly statement on monetary policy
1000 – US – Federal Reserve’s Esther George speaks on the economy policy
0045 – UK – Bank of England’s Jon Cunliffe speaks in California
Another equity rout: The Dow Jones dropped 700 points over the last two hours of the session to finish the day below 24000, at 23860. The S&P had a similar move and had its lowest close since November. We are hearing many reasons for it: the risk of inflation picking up, US rates higher and the 10-year Treasury yield touching 2.86%. A 30-year bond auction went poorly, with a yield of 3.121%.
Bank of England: BoE hawkishly upgraded its guidance by saying that it needs to hike rates earlier and faster than it anticipated at its November meeting, and the inflation forecast for 2.2% by Q1 of 2020 suggests a need to play catch-up. GDP forecasts were slightly raised for 2018 and 2019 as well. GBP was up 0.9% on that but went all the way back down after the global equity rout.
Reserve Bank of Australia: The RBA released its statement on monetary policy: the bank forecasts underlying inflation at 2.25% by June 2020, 'some time' before inflation returns to midpoint of target; RBA lowers jobless estimate to 5.25% from 5.5% through June 2019; RBA says quarterly inflation, growth forecasts little changed; will be 'some time' before economy reaches full employment.
Foreign exchange movements
The market seems very short gamma for upside strikes and hedge funds are struggling to buy back ahead of Chinese New Year. The market has been taken off-guard before the holidays and lack of liquidity.
US: Once again, the Dow entered into a wild ride, closing 1,032 points lower. A rise in yields and sharp moves in volatility are reasons for the market's recent pullback. VIX traded 20%, to 33.46.
Twitter Inc (TWTR) shares closed 12% higher, ending at 30.18 after hitting a high of 35.00. TWTR reported its first quarterly profit and an unexpected return to revenue growth helped by expansion in the US, pushing shares in the social network to more than 2-year highs.
Shares of GrubHub Inc (GRUB) shot up more than 27% to 89.04 after the company announced a partnership with Yum Brands Inc (YUM) under which Yum will acquire $200 million in GrubHub shares.
Tesla Inc (TSLA) took a hit as it reported a quarterly loss of $3.04 a share on an adjusted basis, narrower than analysts' expectations. Shares price slipped 2.8% to 315.23, below its 50-day moving average.
Europe: The DAX (down 330 points) and FTSE (down 108 points) ended lower as volatile trading continued across markets and earnings continued to disrupt market sentiment. Additionally, the Bank of England's monetary policy committee voted to keep interest rates unchanged.
Societe Generale SA (GLE) posted an 82% drop in quarterly net income, impacted by restructuring costs and tax-related charges. Despite this, the results topped expectations and shares closed nearly 2% higher at 45.13.
TDC A/S (TDC), a Denmark-based communication provider, saw shares its spike almost 18%, closing at 44.15, after the telecoms operator confirmed that it had received and rejected a takeover approach from Australia's Macquarie and three Danish pension funds.
Hong Kong: The Hang Seng Index (HSI) was strong, ending up 128 points to 30451 points. HKEX (388.HK) and Tencent (700.HK) jumped 1.2% and 1.3% respectively, supporting the market. Sunny Opt and AAC tech, being the best performers of blue chips, rallied 2.6% to 107.00 and 3.5% to 143.90. Wynn Macau (1128.HK) jumped up to 6%, closing at 27.00, after trade resumed after chairman Steve Wynn resigned from all his positions.
On Friday, Asian markets took their lead from Wall St. Photo: Shutterstock
– Edited by Susan McDonald
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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