Article / 01 November 2017 at 1:41 GMT

Morning Report APAC: Asian stocks buoyant on upbeat month for Wall St

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • The three main US indices had their biggest monthly percentage rises since February
  • The Nasdaq ended at a record as quarterly results kept equities near all-time highs
  • In Europe, the Stoxx Europe 600 index closed at five-month high on Tuesday
  • WTI crude gained on reports of a sharp fall in US crude stockpiles
  • Gold is down for the month of October on USD strength, receding geopolitical risk

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8 hours)

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Speeches

  • 1300 – Japan: Bank of Japan deputy governor Hiroshi Nakaso speaks at Fintech Forum
  • 1800 – UK: Bank of England’s Jon Cunliffe speaks at House of Lords
  • 0415 – Canada: Bank of Canada governor Stephen Poloz and senior deputy governor Carolyn Wilkins testify in the Senate


Overnight news, US

  • The Employment Cost Index, a measure of wages and benefits for civilian workers, rose 0.7% in July through September. Wages and salaries, which reflect more than two-thirds of the index, rose 0.7%. Benefits increased 0.8%, despite a slowdown in the growth of health-care costs, which decelerated to 1.1%, from 2.7% a year earlier. The rise in overall costs marked one of the best quarterly gains in recent years and suggests the tight labor market is exerting pressure on employers to raise salaries to recruit and retain workers
  • Top Trump administration officials are nearing a decision on the federal deduction for state and local taxes in a tax overhaul, they told New York’s nine GOP House members late Monday. Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn promised in a phone call with the lawmakers they would work on the issue throughout the day Tuesday, said Rep. Dan Donovan (R-N.Y.).
  • President Donald Trump and his allies fought back Tuesday against special counsel Robert Mueller’s wave of indictments against former campaign aides, dismissing George Papadopoulos who cut a plea deal with prosecutors as a “liar” and nothing more than the “coffee boy.”
  • A motorist has struck and killed at least eight people in New York. Federal authorities are treating the incident as a terrorist attack.


Overnight news, Canada

  • GDP contracted at -0.1% from 0.0% (Exp. 0.1%) month on month, and dropped to 3.5% from 3.9% (Exp.3.6%) year on year. Oil and gas sector sees third consecutive decline. Goods-producing sector fell 0.7% m/m in August. Service-producing sector rose 0.1% m/m in August. Largest upside contributor was real estate, at 0.03%. Largest downside contributor was manufacturing, at -0.10%. Chemical manufacturing fell 7.3% m/m, its largest decline in 20 years.

Overnight news, New Zealand

  • Employment came in much better than expected at +2.2% quarter on quarter (Exp. +0.8%) and 4.2% year on year (Exp. 2.5%) with a lower unemployment rate at 4.6% from 4.8%. Wages remains an issue.

Overnight news, Europe

  • GDP grew better than expected 0.6% quarter on quarter (Exp. 0.5%) and 2.5% year on year (Exp. 2.4%), but Inflation dropped 1.4% from 1.5% YoY and Core to 0.9% from 1.1% (Exp. 1.1%).

 

Foreign exchange

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  • USD was mixed waiting for the tax reforms and the announcement of the Fed chair added to Inflation data in Europe. Month end rebalancing dominated market attention yesterday where net flows showed strong EUR and CHF buying and net selling of USD. Given this month’s Japanese equity outperformance, JPY depreciated for most of the London trading day, with a spike around 2400 New York time, and the reversion pattern we sometimes observe after the window ends. 
  • DXY has broken the inverted the head & shoulders pattern that started on August 1. The target would now be 96.90 if confirmed. The first support to watch is the important 94.00 level. Talking to few funds, they are happy to keep short USD a bit longer and long carry until things become clearer that the USD will go higher for the long run.
  • EURUSD has broken the head & shoulders pattern that started at the end of July at 1.1687. From a technical standpoint, EURUSD could fall down to 1.1249.
  • USDJPY rallied on tax reforms but the momentum might fade very soon. ¥115 remains a big level to break and we are on our way to the strong support at the 200 day moving average at ¥111.74.
  • Emerging Markets: USDAsia still has very good offers onshore, especially USDKRW from exporters and we are trading close again to the year lows. USDBRL is extremely volatile these days but managed to close lower -0.25%.

Foreign exchange movements

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  • There is a strong interest to sell CrossJPY vols, but the market wants long USD Gamma.
  • There is demand for GBP gamma, because the Brexit talks will be extended until next week.


Rates

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  • US yields were a higher driven by better than expected October Chicago PMI and consumer confidence. However the move is still relatively muted at month end.
  • European yields were slightly lower with CPI data missed. The political risk premiums continue to dissipate from market with peripheral spreads continue to tighten.


Commodities 

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Equities

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  • All three US major indices posted their biggest monthly percentage rise since February, with the Nasdaq ending at a record as quarterly results kept equities drifting near all-time highs.
  • Mondelez International Inc. jumped 5.42% after the maker of Oreo biscuits said it earned $992 million, in the third quarter, compared with $548 million, in the year-ago period, an 81% jump, with earnings and revenue beating expectations. Among other food companies such as, J.M. Smucker Co. rose 4.1%, Hormel Foods was up 3.4%, Kraft Heinz Co. added 2.7% and General Mills Inc. ended up 2.5%.
  • Qualcomm Inc dropped 6.7% on a report that in The Wall Street Journal that Apple may drop chip maker’s components upcoming iPads and iPhones as Qualcomm is accused of using its market dominance to charge unfair royalties and block competitors.
  • The Stoxx Europe 600 index closed at 5-month high, ending October with 1.9% gain, as traders welcomed positive earnings reports. Despite the lingering fears over a Spanish breakup through October, the benchmark managed to rise 1.4% for the month.
  • BP PLC gained 1.7% to closed at their highest since January 2017 reporting third-quarter underlying replacement cost profit was $1.87 billion vs mkt est $1.58bn  and said it would restart its share buyback program, supported by strong cash generation so far this year.

Asia-Pacific equities preview

Hong Kong analyst views

  • BAIC Motor (1958 HK): BAIC Motor H Shares Upgraded to Buy at HSBC; price target $HK11.10.
  • Beijing Capital (600008 CH): Beijing Capital Downgraded to Underweight at Morgan Stanley.
  • Kunlun Energy (135 HK): Kunlun Energy Cut to Neutral at Haitong Intl, PT $HK7.15.
  • Li & Fung (494 HK): Li & Fung Upgraded to Buy at Morningstar.
  • Link REIT (823 HK): Link REIT Downgraded to Neutral at JPMorgan; PT $HK61.80.
  • Shanghai Oriental Pearl Media (600637 CH): Shanghai Oriental Pearl Media Downgraded to Outperform at SWS.
  • Xinjiang Goldwind (002202 CH): Xinjiang Goldwind A Shares Cut to Neutral at UBS; PT 15.24 Yuan.
  • Yili Industrial (600887 CH): Yili Industrial Cut to Neutral at Credit Suisse; PT 32.10 Yuan.

Hong Kong stocks

  • Beijing Capital Land (2868 HK) Proposes to Sell 3B Yuan of Non-public Debt.
  • BYD (1211 HK): BYD Unit, Faurecia to Set up JV for Auto Parts in Shenzhen.
  • BYD (1211 HK): Faurecia In Joint Venture With BYD For Seating Solutions.
  • Chalco (2600 HK): Aluminum Corp of China to Sell 60% Stk in Shandong to Chalieco.
  • China Hongqiao (1378 HK): China Hongqiao Chairman Bought 18.65mlnShares October 31.
  • China Mer Port (144 HK): China Merchants has Brazil Cade’s approval to buy TCP/Paranaguá.
  • China Power (2380 HK): Pakistan’s Hub Power Gets $1.5B Finance in China Coal Plant joint venture.
  • China Railway Const. (1186 HK): China Railway Construction Wins 3.46bn Yuan Projects.
  • China Zhongwang (1333 HK): China Zhongwang Nine Month Net Income 2.09bn Yuan.
  • CICC (3908 HK): Brent Crude May Average $58/b, Peak at $65/b in 2018, CICC Says.
  • Geely Auto (175 HK): Geely Auto to Redeem $300mln Senior Notes Due 2019 on November 30.
  • Glencore (GLEN LN): Rio Tinto Is Said to Add Australia Refineries to Unit Sale: Reuters.
  • Guangzhou R&F (2777 HK) Amends Hotel Assets Related to Wanda Acquisition.
  • Midea CEO Says Co. Interested to Look at Whirlpool, Electrolux.
  • Midea, Guangzhou Pharma Plan to Set Up Automated Pharmacies.
  • Prada (1913 HK): Apple’s Valuation is Cheap Relative to 'Luxury Stocks': HSBC.
  • SJM Holdings (880 HK): SJM Holdings Third Quarter Adjusted Ebitda $HK726 mln.
  • Standard Chartered (STAN LN): Standard Chartered Retail Banking Chief Karen Fawcett to Retire.
  • Standard Chartered (STAN LN): Buy GBP/USD One-Month Forward Before BOE Meeting, Says StanChart.
  • ZhengTong Auto (1728 HK): China ZhengTong Auto Services Markets $300mln 3Y Loan.

Japan analyst views

  • Ezaki Glico (2206): Cut to neutral from overweight at JPMorgan.
  • Konami (9766): Raised to neutral from underperform at Macquarie.
  • Lasertec (6920): Cut to neutral from buy at Ichiyoshi Research.
  • Line Corp. (3938): Raised to neutral from sell at UBS.
  • Oriental Land (4661): Raised to outperform from neutral plus at Iwai Cosmo.
  • SCSK (9719): Cut to outperform from buy at Daiwa.

Japan stocks

  • Asahi Glass (5201): Q3 OP ¥31.9bn vs analyst est. ¥29.8bn; maintains forecasts; to buy back as much as 2.2% of shares for ¥15bn.
  • Chiba Kogyo Bank (8337): Preliminary H1 operating profit at ¥4.9bn, beating co. forecast by 17%
  • EPS (4282): Preliminary full-year operating profit at ¥7.6bn, beating co. forecast by 17%.
  • Ezaki Glico (2206): Cuts FY OP target 12% to ¥22bn.
  • Fujifilm (4901): Q2 operating profit 40b yen vs est. ¥45bn.
  • Fuso Chem (4368): H1 operating profit +19% y/y to ¥5.4bn, 6.4% higher than co. forecast.
  • Hirose Electric (6806): Boosts full-year operating income view, 2.0% below est.
  • H2O Retailing (8242): Lifts FY OP forecast 8.1% to ¥22.7bn.
  • HIS (9603): To sell 25b yen of CBs, buy back as much as 2.29% of shares for ¥5bn.
  • JAL (9201): Boosts full-year operating income view, beats highest est.
  • Kuroda Electric (7517): MBK Partners offers ¥2,720/share to take co. private; 35% premium to Tues. close; Kuroda’s H1 sales, profits fell y/y
  • KYB (7242): H1 operating profit +61% y/y to ¥11bn, 4.2% higher than co. forecast.
  • Kagome (2811): 9-month operating profit +19% y/y to ¥9.9b yen.
  • Kirin (2503): Boosts full-year net forecast, Amgen buys stake in joint venture.
  • Konami (9766): Q2 OP 12.8b yen vs est. ¥11.5bn.
  • Kose (4922): Raises FY OP target 11% to ¥46bn.
  • Murata (6981): Cuts FY OP forecast 25% to ¥170bn.
  • NEC (6701): H1 OP 7.27b yen vs est. ¥8.03bn.
  • NGK Insulators (5333): Boosts FY OP forecast 4.5% to ¥70bn vs analyst est. ¥73.6bn.
  • Nitto Denko (6988): Boosts full-year operating income view, beats highest est.
  • NTN (6472): Boosts full-year operating income view, 2.1% below est.
  • Nabtesco (6268): 9-month operating profit +7.8% y/y to ¥21.6bn.
  • Nitto Denko (6988): Boosts full-year operating income view, beats highest est.
  • NTN (6472): Lifts FY OP forecast 8.3% to ¥39bn
  • NTT Docomo (9437): Receives ¥144.9bn arbitration award from Tata Sons after court ruling that ended dispute over Docomo stake in Tata Teleservices.
  • Oki Electric Industry (6703): H1 losses smaller than co. forecast; to pay 3% premium to buy out Oki Electric Cable (5815).
  • Omron (6645): Boosts FY OP target 25% to ¥85bn.
  • Pacific Metals (5541): Prelim. H1 losses smaller than co. expected
  • Panasonic (6752): Q2 operating profit ¥112.6bn vs analyst est. ¥96.6bn.
  • Resona (8308): Preliminary H1 net income at ¥94bn, beating co. forecast by 29%.
  • Screen Holdings (7735): Boosts full-year operating income view, beats est.; to buy back as much as 0.6% of shares.
  • Sony (6758): Boosts full-year operating profit target 26% to ¥630bn; Q2 OP ¥204.2bn vs analyst est. ¥139.2bn; ADRs jump 12%
  • Sumitomo Heavy (6302): Lifts FY OP forecast 18% to ¥60bn.
  • TKC (9746): Preliminary full-year operating profit at ¥8.6bn, beating co. forecast by 21%.
  • Tokyo Electric (9501): H1 operating profit falls 19% y/y to ¥237.7bn.
  • Tokyo Electron (8035): Lifts FY OP forecast 26% to ¥271bn; lifts FY dividend to ¥605 from ¥497.
  • Tokyo Gas (9531): Japan’s Sept. natural gas sales fell 8% y/y to 2.6b tonnes.
  • Toshiba (6502): Reaches agreement to sell its 70% stake in Mangiarotti to Westinghouse.
  • Totoku Electric (5807): H1 operating profit +37% to ¥1.4bn.
  • Toyo Seikan (5901): H1 operating profit slips 2.8% y/y to ¥23.6bn, beating co. forecast by 24%.

Australia analyst views

  • ASR CN: Alacer Gold Cut to Sector Perform at Scotiabank, price target $C3.75.
  • SIG: Sigma Healthcare Raised to Buy at Morningstar.
  • TPM: TPG Telecom Cut to Hold at Morningstar.
  • WOW: Woolworths Ltd. Raised to Neutral at Credit Suisse, PT $A25.31.

Australia stocks

  • CSR: CSR expected to release half-year earnings.
  • FMG: Fortescue in Middle East, Europe Talks for Premium Iron Ore Mine.
  • MYR: Myer to hold strategy day with possible Q1 update.
  • NHF: Annual meeting.
  • RIO: Rio Tinto Is Said to Add Australia Refineries to Unit Sale: Reuters.


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Reports of a sharp fall in US crude stockpiles has helped lift oil prices. Photo: Shutterstock

 

– Edited by Robert Ryan


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