Morning Report APAC: Asian markets up on overseas leads
- Asian markets were higher ahead of key central bank meetings next week
- The Bank of England kept rates at 0.25% and asset purchases at £435bn
- USDKRW dropped 1% on very poor liquidity due to holidays
- Apple rose 3.4%, extending its gains to 12% for this week
Economic data of the day (Singapore Time: GMT plus 8 hours)
- Retail sales dropped 0.3% MoM (Exp. -0.1%) from +0.1% in July. Ex autos, retail sales dropped to 0.1% (Exp. +0.2%). Ex autos and gasoline, sales also dropped 0.1% (Exp: +0.3%). Import prices declined 0.2% (Exp. -0.1%) led by industrial prices and auto prices. After charging through the second quarter, consumer spending is showing signs of exhaustion at the start of the second half of 2016. Core sales, which are used to calculate GDP figures, unexpectedly fell for a second month. A further slowing in consumer spending, which makes up the biggest part of the economy, could make for a smaller rebound this quarter.
- Industrial output dropped 0.4% (Exp. -0.2%). Output at factories alone, which makes up about 75% of total production, declined 0.4%, the biggest drop since March
- Jobless claims rose 1000 to 260,000 (Exp. 265,000) and the four-week average remains close to the lows at 261,000. This is one part of the economy that continues to show good numbers
- PPI increased as expected 0.1% MoM
- The Bank of England kept the rates at 0.25% and the asset purchases at £435 bn. The BoE indicated that there is still a chance of another rate cut this year as it assesses the potential longer-term fallout from Britain’s decision to leave the European Union. While the nine-member Monetary Policy Committee noted that recent near-term data had been stronger than anticipated since the Brexit vote, it couldn’t draw inferences for its longer-term forecasts.
Bank of Japan
- The Wall Street Journal is saying that the BoJ board is split over the Monetary Easing Program. Three still favour current policy of bond purchases with negative rate. Others no longer confident in bond purchases. Some suggest changing bond purchase target of annual 80 trillon yen to range of perhaps 70tln-90tln. Two sides differ on whether bond supply is large enough for purchases. Those favouring range say supply limit could be reached in a year or two and believe alternatives should be sought. One alternative is long-term rate target and pledge to buy on.
- It was a very quiet day in FX overnight despite the BoE, which was a non-event and we saw some USD selling especially against commodities currencies due to the rally of base metals that continues.
- In Emerging Markets, the market benefited from the quiet market and was able to rally with the US equities. USDKRW dropped 1% on very poor liquidity due to holidays. USDBRL dropped 1.26% but USDMXN continues to trade close to the record high at 19.35.
Foreign exchange volatilities
- The interest from funds has been seen in buyers of Vega in AUD from six months to one-year maturity.
- There are strong interests in USDMXN topside 2M to 3M around the US elections for a break above the record high that we reached earlier this year. It also explains why the spot remains bid.
- Short-term US Treasuries after mixed data reduced the possibility of a rate hike next week. The 2-year bond yield shed 3 basis points to 0.730%, while 30-year was up 1 bps at 2.463%, steepening curve for the 10th consecutive day.
- With less likelihood of a Fed rate increase in September, more focus may be turned towards the BoJ decision in the coming week.
- US stocks closed broadly higher, boosted by lacklustre retail sales and industrial production data and stabilisation in oil prices. Both the Dow Jones Industrial Average and S&P 500 gained 1%. All 11 sectors closed higher led by technology (+1.7%) and VIX plunged 10.1%, to 16.30.
- Nasdaq (+1.47%) enjoyed the sharpest rise among its peers, closing 1.5%, higher at 5,249.69 as Apple rose 3.4%, extend its gains to 12% for this week after disclosing that its iPhone 7 Plus have sold out globally.
- Aerie Pharmaceuticals spiked 45% after the drug discovery company’s treatment for lowering fluid pressure inside the eyeball yielded promising results.
- European markets were mostly higher as the Stoxx 600 index rose 0.6%, to 340.34 after the Bank of England held interest rates as expected on Thursday.
- Hennes & Mauritz dipped 4.3% after the Swedish clothing company said sales rose 7%, but were negatively affected in the second half of the month by exceptionally hot weather in most of the group’s markets.
- Aozora Bank (8304 JP): Cut to neutral at Daiwa
- Ateam (3662 JP): Rated new neutral plus at Mito
- Japan Display (6740 JP): Raised to neutral at Macquarie
- Kameda Seika (2220 JP): Rated new outperform at Tokai Tokyo
- Mani (7730 JP): Rated new neutral plus at Mito
- TIS (3626 JP): Cut to neutral at Daiwa
- Artnature (7823 JP): Cuts 1H oper. profit forecast 32% to 1.22b yen, lowers full-year target 8.9% to 3.5b yen
- Hokuhoku Financial (8377 JP): To cancel treasury stock equal to 2.21% of shares on September 30
- Money Partners (8732 JP): Plans to pay 1H dividend of 4 yen/share vs 5.5 yen year ago
- Nichiha (7943 JP): Raises 1H oper. profit forecast 33% to 5.6b yen, lifts full-year target 22% to 11.2b yen; boosts planned interim and FY dividends by 5 yen/share each
- Pasco (9232 JP): 1Q oper. loss 785m yen vs 876m yen year ago; widens 1H oper. loss forecast to 600m yen from 500m yen
- REA Group (REA@AU) raised to add vs hold at Morgans
- Commonwealth Bank (CBA AU), Westpac (WBC AU), National Australia (NAB AU), ANZ (ANZ AU) to face lawmakers October 4-6
- APN News & Media (APN AU) shareholder vote on proposed sale of Australian regional media business to News Corp
- Macquarie (MQG AU) said to be preparing German metering group Techem for sale, Reuters reports
- PSivida (PVA AU) names Nancy Lurker as President and CEO
Source: CIMB / Bloomberg
– Edited by Gayle Bryant
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