Morning Report APAC: Asian shares on ice, USD barely budges
- USD at its lowest in almost two year as investors assess US Trump investigation
- The AUD traded at 79.23 US cents after reaching 79.89 overnight
- The JPY traded at 112.01 per dollar, a second week of gains for Japan’s currency
- In early Asian trade, the EUR stood at $1.1630 maintaining its 1% gain
- ECB left its existing program unchanged, but traders defy Draghi
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches
10:40: AU – RBA’s Debelle speech in Adelaide
2:15: AU – RBA’s Bullock speech in Melbourne
Overnight news
US: Special counsel Robert Mueller confirmed overnight that he is expanding his investigation into Trumps business dealings with the Russians. Specifically, FBI investigators are looking into Russian purchases of apartments in Trump's buildings, 2013 Miss universe pageant in Moscow and a sale of a mansion in 2008.
Paul Ryan commented that at 20% corporate tax rate was very realistic, paving the way for strong support for Trumps adjusted tax plans.
Philadelphia Fed data was a disappointing 19.5 versus 23.0 expected.
Europe: ECB left their existing program unchanged. There was no change to the forward guidance and markets would have seen this initially as a very dovish ECB chief, Mario Draghi.
However, in the subsequent press conference, Draghi seemed unconcerned about recent EUR strength which the market took as a green light to push EUR high.
EURUSD ended up over 1% higher to end the day at its highest level since May 2016.
Greece was approved for $1.8b conditional loan from the IMF.
UK retail sales data surprised to the upside, up 3.0% year-on-year versus an expected 2.5% ex-autos.
The Times reported that the UK will look to offer EU citizens free movement for up to two years, this news can be viewed as a move towards a softer Brexit.
Foreign exchange
USD: broadly weaker on the day as the news of the expanded investigation by Special Counsel Mueller on Trump weighed on the USD.
EURUSD: Draghi failing to push back on EUR strength in the ECB press conference saw EUR trade up 1% on the day to its strongest level in over a year. EUR-crosses all extended higher.
GBPUSD: Continued selling of GBP post the weaker than expected inflation data pressed GBP lower on the day. The market is removing some of the Bank of England risk premium built into the currency. Strong retail sales data did little to lift the currency.
Emerging Markets: CEE currencies enjoyed a strong day tracking the move higher in EURUSD. The SARB surprised the market with a 25bp cut, contrary to economists projections. The move sent the ZAR tumbling 0.88% on the day.
Foreign exchange movements
AUDUSD: Market remains short gamma despite the move higher, some supply yesterday was taken out yesterday.
USDJPY: Short dated downside strikes below 111 remains a popular trade.
EUR volatility curve remains largely the same in terms of shape post ECB. Price action exceeded yesterday's expected breakeven move.
Rates
Bund yields were slightly lower, while peripherals outperformed with yields dived after Draghi’s dovish speech on bond tapering.
Commodities
Equities
US stocks traded in a range near record levels, with Home Depot weighed on the Dow, while Nasdaq extended its best win streak since February 2015 and closed at a record.
Home Depot fell 4.1%, its worst trading day since January 2016, on news that Sears Holdings (+10.60%) will sell Kenmore-branded appliances through Amazon.com (+0.18%).
Travelers dropped 1.9% after the insurer posted a profit of $1.92/share, missing estimates of $2.11/share, although revenue beat forecasts amid higher catastrophe and weather-related losses.
Qualcomm slumped 5% after the chip maker’s quarterly earnings met forecasts late Wednesday, but its forecast made no mention of sales related to Apple Inc. (-0.45%) products.
European stocks reversed course and ended lower as euro leapt to the highest on possibility of ECB moving closer to reducing monetary stimulus that has helped pushed equities to record highs.
Unilever rose 1.7% first-half net profit rose to 3.11 billion euros and that margins should be better than previously expected over the full year, making good on its vow to improve performance after rebuffing a Kraft Heinz Co.(+0.25%) bid.
Nordea Bank slid 5.2% after the Swedish bank’s second-quarter profit of 743 million euros ($855.7 million) missed expectations.
Asia Pacific stocks
Hong Kong
Analyst ratings
- Angel Yeast (600298 CH): New Buy at Capital Securities Corp, PT 30 Yuan
- China Comm Cons (601800 CH): Raised to Equal-weight at Morgan Stanley
- CK Infra (1038 HK): Raised to Overweight at JPMorgan, PT HK$75
- Guangzhou Baiyun (600004 CH): Raised to Outperform at Credit Suisse
- Sanan Optoelectronics (600703 CH): Raised to Buy at Citic Securities
- Shanghai Shyndec Pharma (600420 CH): New Buy at Sealand Securities
Preview
- BYD Electronic (285 HK) Sees ‘Substantial’ Rise in 1H Profit vs Year Ago
- BAIC Motor (1958 HK) to Subscribe 223.6m BJEV Shares for 1.19b Yuan
- CK Infra (1038 HK) First Half Net Income HK$5.66 Bln
- Great Wall Motor (2333 HK) to Start Sale of New SUV Haval M6 July 21
- Haitong Securities (600837 CH) First Half Preliminary Net 4.03 Bln Yuan
- Pacific Andes Trustee Can Probe HSBC-HK (5 HK) Over Fishery Loans
- China’s Lenovo (992 HK) Remains in Talks With Fujitsu Over a PC Deal
- Lenovo’s CEO Vows to Hit Online Sales Target -- or Quit
- Lufax Says Operating Normally After Reports on Regulatory Risk (2318 HK)
- Power Assets (6 HK) First Half Net Income HK$4.02 Bln
- Power Assets (6 HK) Proposes Special Dividend HK$7.5 Per Share
- R&F’s (2777 HK) $2.9 Billion Hotel Bet Echoes Rivals’ Debt-Laden Expansion
- StanChart (2888 HK) Names Arora Asia Commercial Bank Head, Paul Steps Down
- Zijin Mining (2899 HK) First Half Preliminary Net 1.50 Bln Yuan
Japan
Analyst ratings
- NOF (4403 JP): Rated new Buy at Daiwa
- Shochiku (9601 JP): Cut to neutral at Okasan Securities
- Tokyotokeiba (9672): Rated new buy at Mitsubishi UFJ Morgan Stanley
- Tosei (8923): Rated new buy at Mitsubishi UFJ Morgan Stanley
- Toyo Denki Seizo (6505 JP): Rated new buy at Toyo Securities
Preview:
- Ajinomoto (2802): To acquire France’s Labeyrie Traiteur Surgeles
- Enplas (6961): 1Q operating profit +36% y/y to 1.3b yen; maintains full-year forecast at 4b yen
- Fujitsu (6702): Remains in talks with Lenovo on PC deal
- JXTG Holdings (5020): Hires banks for sale of bonds in July
- Mitsubishi Tanabe (4508): Co. and J&J sue to block generic version of Invokana tablets
- Mixi (2121): Chinese version of Monster Strike to be released in mainland China
- PIA (4337): To build concert hall in Yokohama, with initial investment of 10b yen
- Retail: June convenience store sales fall 0.1% y/y on same-store basis
- S-Pool (2471): To conduct secondary share sale, offering at least 287,000 shares
- Tokio Marine (8766): Said to have appointed bank to advise on optionsfor cutting stake in Malaysia unit, which could raise ~1b ringgit ($233m)
- Toyo Denki Seizo (6505): Rated new buy at Toyo Securities
- U-Next (9418): Forecasts 5.5b yen in operating profit for the year ending December vs. 396 million loss a year ago
- Yaskawa Electric (6506): 1Q operating profit 13.2b yen vs analyst est. 8.9b yen; raises full-year target to 45b yen from 37b yen
Australia
Analyst ratings
- Australian Pharma Industries (API AU): Australian Pharma Industries Raised to Buy at Morningstar
- Credit Corp (CCP AU): Credit Corp Cut to Hold at Morgans Financial, PT A$19.35
- Fletcher Building (FBU NZ): Fletcher Building Cut to Neutral at JPMorgan, PT NZ$8.05
- OceanaGold (OGC CN): OceanaGold Cut to Hold at Haywood, PT C$4.40
- South32 (S32 AU): South32 Falls in South Africa; Avoir Downgrades to Underperform
- South32 (S32 AU): South32 Cut to Neutral at Citi, PT A$1.70
- Westpac (WBC AU): Westpac Cut to Hold at Morningstar
- Woodside (WPL AU): Woodside Cut to Underperform at RBC, PT A$26
Preview
- Regis Resources (RRL AU) 4Q production
- Vector (VCT NZ) New electricity connections up 7.2% in full-year
- BHP (BHP AU) Elliott Joins Skeptics on BHP’s $13 Billion Potash Proposal
– Edited by Adam Courtenay
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