Morning Report APAC: Asian stocks buoyant on US lead, crude gains

• WTI leapt above $48/barrel for first time since early June
• Stocks rallied on Wall St, and treasuries were sold off
  
• The copper price hit its highest level in more than two years
  
• Gold retreated slightly but found support at $1250/oz
  

By Saxo APAC Sales Trading

Speeches (Singapore Time)

• 0930 – Japan: Bank of Japan deputy governor Hiroshi Nakaso speaks in Hiroshima.
• 1105 – Australia: RBA's Philip Lowe Speech in Sydney.
• 2330 –European Union: European Central Bank board member Sabine Lautenschlaeger Speaks in Berlin.

Overnight news, US

• Senate GOP agrees to have a debate over Healthcare reform with a  vote of 51:50. Senator McCain came back from a recent diagnosis of brain cancer to cast his vote.
  
• US Conference board Consumer confidence rose to 121.1 beating expectations of just 116.1.
• Richmond Manufacturing Index climbed to 14, well above expectations of a reading of just 7.
• The combination of the Federal Open Market Committee beginning its two day meeting, better than expected data and a positive outcome on the GOP health care vote saw US Treasuries have the biggest daily increase in over a month, climbing nearly 10bps to close (10 year) at 2.33%
  

 Overnight news, Europe

• German IFO data came out at a record level, with business climate at 116 versu 114.9 expected. The data triggered EUR higher to multi year highs of 1.17120.
• European Central Bank governing council member Ewald Nowotny said that he sees no need to set a timetable to end bond buying as yet. He is following very much the party line at the moment.
• Greece tapped capital markets for the first time since 2014 for €3bn at a yield of 4.625%.
• Italian industrial orders saw a large climb month on month, up from -0.7% to 4.3%.
  

• USD: recovered in the US session as yields had their biggest rally in over a month.
• EUR: traded to fresh multi-year highs at 1.1712 after the release of Germany's IFO data. The move was unwound as US yields climbed.
• NOK: The best performing currency as oil has rallied near 6% from Monday's open.
• Emerging Markets: Broadly lower on the day with the exception of PHP, RUB and CLP. ZAR was the worst performer, as the currency broke above the key 13.05 level.
  

Foreign exchange movements

• EUR: The Fed Jackson Hole meeting and the Autumn ECB dates has seen buying. There remains underlying demand to buy topside EURUSD.
• AUD: Markets are generally buying gamma, as there remains a lot of event risk over the coming days.
• JPY vol flows remained quiet, despite the move in the spot yesterday.
  

The equities rally saw Treasuries being sold off. The yield in US10 years climbed 8 basis points and traded above the 2.3 level, in anticipation of the FOMC announcement due out later today as it breached both the 100 and 200 day moving averages.

• Fast-food chain McDonalds, a Dow and S&P component reported its latest quarterly result that met investors expectation which saw share price soar 4.8% as it closed at its all-time high. EPS came in at $1.70/share which was much better than the average estimate of $1.62/share. Mcdonald closed at $159.07 up 4.75%.
• Like McDonalds, Caterpillar also reported a strong set of results, which steered the Dow Jones Index to close in the green yesterday as it closed 5.88%. Adjusted earnings came in at $1.49, which was above the $1.26 per share value. On the chart, Caterpillar invalidated its bearish rising wedge pattern after the rally yesterday.
• Seagate Technology reported its quarterly result yesterday but the result was well below expectations. Both revenue and earnings were below consensus as Seagate plunged 16.5% to just $33.20, erasing its “Trump Trade” gains. Seagate CEO Stephen Luczo will also be stepping down after the earnings miss and the company will be cutting 600 jobs globally to align its manufacturing footprint with macroeconomic conditions.
• After the $2.4bn Coach and Kate Spade deal in May, Michael Kors announced a $1.2 billion deal to acquire Jimmy Choo, the British high fashion house that specialise in shoes, handbags and accessories. The bid saw a 17% jump in Jimmy Choo share price as it closed at £228.25. Michael Kors traded flat; its share price has been on a massive decline since peaking in December last year where share price was trading above $50. The death of retail and the aggressive expansion plan of Michael Kors backfired as its attempt to shed its image as a lower-priced brand.

Asian equities preview

Hong Kong analyst views

• China National Materials (1893 HK): Raised to Overweight at Morgan Stanley.
• AAC Technologies (2018 HK): Cut to Hold at Maybank; PT Raised to $HK115.
• AgBank (601288 CH): H Shares Raised to Neutral at UBS, PT $HK3.90.
• Bank of China (3988 HK): H Shares Cut to Neutral at UBS; PT Cut to $HK3.90.
• Beijing Tongrentang (600085 CH): Initiated at UBS with Buy; PT 40.24 Yuan.
• China Merchants Bank (600036 CH): H Shares Cut to Neutral at UBS, PT $HK26.40.
• Chongqing Rural Bank (3618 HK): H Shares Upgraded to Buy at UBS; PT $HK7.
• Evergrande (3333 HK): Upgraded to Strong Buy at BOC Intl; PT $HK22.94.
• GCL-Poly Energy (3800 HK): Raised to Buy at Everbright.
• Goodbaby Intl (1086 HK): Upgraded to Outperform at KGI Securities; PT $HK4.
• New Oriental Education (EDU): Cut to Outperform at CLSA.
• Samsonite (1910 HK): Cut to Neutral at Haitong Intl; PT Raised to $HK36.90.
• Sun Art Retail (6808 HK): Upgraded to Buy at HSBC; PT Lowered to $HK7.70.
• Tangshan Jidong Cement (000401 CH): Cut to Equalweight at Morgan Stanley.

Hong Kong stocks

• Anhui Conch (914 HK): Conch Cement Expects six-Month Net to Jump About 90%-110% Y/y.
• Beijing Enterprises (392 HK): Beijing Enterprise Medical Entered into Subscription Shr Pact.
• Beingmate Baby & Child Food (002570 CH): Says Asset Sale to Reduce Operating Pressure.
• China Merchants Port (144 HK): To Invest $1.12B in Sri Lanka Port.
• China Resources Phoenix (1515 HK): Expects 1H Profit to Rise Over 125% Y/y.
• CK Infrastructure (1038 HK): Is Said to be in the Lead to Buy ISTA: Reuters.
• GCL-Poly Energy (3800 HK): China Solar Module Makers Retreat as India Probe Clouds Outlook.
• Hangzhou Century (300078 CH): Jumps After Saying It May Team Up With Alibaba.
• Jiangling Motors (200550 CH): Prelim. 1H Net 552.9mln yuan.
• Kangde Xin (002450 CH): Says Parent to Buy Shares of at Least 500mln yuan.
• L’Occitane (973 HK): 3-Month Net Sales Rise 2.7% at Constant Rates.
• MTR (66 HK): China Checkpoint Proposed at H.K. High-Speed Rail Terminus.
• Tencent (700 HK): Tencent Funds Indian Edtech Startup BYJU’S.

Japan analyst views

• SoftBank (9984): Rated new outperform at Credit Suisse; said to have taken stake in IRobot; seeks multi-billion dollar stake in Uber, WSJ says; potential bidder for Equis, Reuters reports; mulling taking stake in Bharti Airtel, CNBC says.
• Start Today (3092): Upgraded to overweight from neutral at JPMorgan.
• Brother Industries (6448): Cut to neutral from overweight at MUFJ-MS.
• Nippon Shinyaku (4516): Rated new overweight at MUFJ-MS.
• Hitachi Capital (8586): Cut to neutral from outperform at SMBC Nikko.
• Fanuc (6954 JP): Raised to buy at Citi.
• Bic Camera (3048 JP): Rated new buy at Nomura.
• Renesas (6723 JP): Raised to overweight at JPMorgan; previously rated neutral.

Japan stocks

• Aomori Bank (8342): Q1 net income -14% y/y to ¥1.5bn, maintains full-year forecast.
• Asahi Group (2502): Prelim. 1H operating profit ¥70.7bn vs co. forecast ¥52.8bn.
• Chori (8014): Q1 operating profit +12% y/y to ¥1.5bn.
• Fujitsu General (6755): Q1 operating profit -27% y/y to 6.8b yen, net income +35% y/y to 5.6b yen; lifts 1H OP target 17%.
• Fukuoka Financial (8354), Eighteenth Bank (8396): Delay merger indefinitely
• GMO CLICK (7177): Q1 operating profit -28% y/y to ¥2.4bn.
• Koa (6999): Q1 operating profit +69% y/y to ¥1.2bn.
• Komeri (8218): Q1 net income +13% y/y to ¥4.7bn, maintains full-year forecast at ¥11.1bn.
• Kusuri no Aoki Holdings (3549): July same-store sales +5% y/y.
• Machinery: Caterpillar shares climb after co. lifts 2017 sales and earnings outlook.
• Maruwa (5344): Q1 operating profit +52% y/y to ¥1.7bn.
• Mitsubishi Motors (7211): Returns to Q1 net profit as Japan sales recover from fuel efficiency scandal.
• Mizuho (8411): Bank unit to form tourism creation tie-up with Blue Lab, Airbnb.
• Nippon Sharyo (7102): Q1 operating profit ¥695mln vs loss of ¥308mln a year ago.
• Nissin Electric (6641): Q1 operating profit +48% y/y to ¥3.8bn.
• Obic (4684): Q1operating profit +22% y/y to ¥7.5bn.
• Oriental Land (4661): Q1 operating profit +10% to ¥25bn, Nikkei says; Bloomberg est. ¥22.5bn
• Remixpoint (3825): To move listing from Mothers to TSE2
• Sharp (6753): To post Q1 net profit of 15b yen, Nikkei says; Bloomberg est. ¥6.3bn.
• Shimano (7309): 1H operating profit -9.8% y/y to ¥30.8bn vs company forecast for ¥30.4bn; trims full-year OP forecast 4.5%
• Shin-Etsu Chemical (4063): Q1 operating profit ¥74.1bn vs analyst est. ¥66.9bn; targets FY OP of ¥268bn vs est. ¥286.4bn
• Showa Denko (4004): Cut to hold from buy at Jefferies.
• Sogo Medical (4775): Q1 operating profit +23% y/y to ¥1.4bn.
• Sony (6758): PlayStation Vue had 450,000 subscribers as of early April.

Australia analyst views

• Carsales (CAR): Cut to neutral at Credit Suisse, price target $A12.60.
• Super Retail (SUL): Cut to underperform at Credit Suisse, PT $A7.50.
• Sky Network TV (SKT): Raised to buy at Morningstar.
• Challenger (CGF): Cut to underweight at Morgan Stanley, PT $A11.50.

• Ardent Leisure (AAD): Activist holders say can save co. $A1bn over 3 years if directors named to board: AFR.
• Bapcor (BAP): Scheduled to host business update call; NOTE: Co. in Feb. forecast FY17 NPAT ex-Hellaby $A57m-$A59m.
• BHP Billiton (BHP), Fortescue (FMG), Rio Tinto (RIO): Iron ore rises 2.4%, according to price index compiled by Metals Bulletin.
• Downer EDI (DOW): Likely to tap $A1.1b bridge loan after taking control of Spotless: AFR.
• Independence Group (IGO): Q4 production report expected.
• SkyCity (SKC): To write-off Darwin casino goodwill.
• St Barbara (SBM): Q4 production report expected; NOTE: Co. in July reported consolidated FY17 gold output 381.1k oz.
• Suncorp (SUN): To review NZ regulator ruling on Tower.
• Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil jumps as Saudis plan export cut, U.S. supplies seen lower.

The surge in oil prices has impacted forex market, and given support to the Norwegian krone in particular. 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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