Article / 04 December 2017 at 1:51 GMT

Morning Report APAC: Asian stocks retreat, base metals and oil rebound

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • The US Senate narrowly passed a massive tax overhaul early on Saturday
  • A news report in the US prompted a dramatic reaction in financial markets
  • Solid Manufacturing PMI data helped drive a partial rebound in base metals
  • Safe haven buying helped prevent gold from being sold off on tax cut optimism 
  • Crude prices rose as markets digested Opec's production cut agreement
  • Watch for a big move in USDJPY at the end of the year

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

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Speeches (Singapore time)
  • 1200 – Japan: Bank of Japan governor Haruhiko Kuroda gives speech at EUROPLACE with Banque de France governor François Villeroy de Galhau


Overnight news, US

  • The Senate narrowly passed a massive tax overhaul early on Saturday morning, putting Republicans on the cusp of revamping the US tax system for the first time in more than three decades. The 51 to 49 vote came after Senate Republicans frantically rewrote the multi-trillion dollar legislation behind closed doors to win over several final holdouts, and left congressional Republicans just a few steps away from sending legislation to President Donald Trump’s desk. The House passed its own plan in November.
  • Michael Flynn's plea on December 1 to a single count of lying to the FBI is a seismic event in the special counsel investigation. For starters, it portends the likelihood of impeachable charges being brought against the President. Flynn, a former national security adviser, acknowledged that he was cooperating with the investigation. His testimony could bring into the light a scandal of historic proportions in which the not-yet-installed Trump administration, including Mr Donald Trump personally, sought to subvert American foreign policy before taking office. (New York Times)
  • President Donald Trump said Sunday in a tweet that he never asked former FBI director James Comey to stop investigating his ex-national security adviser Michael Flynn, issuing a fresh denial amid a shifting timeline on when he may have known that Flynn had lied to the FBI.
  • It’s unclear why Trump would cite lying to the FBI as a reason for firing Flynn. Doing so suggests the president knew at the time that Flynn had done something that is against the law, and therefore the investigation could not be as frivolous as he’s been portraying.  (Time)
  • ABC News on Friday evening corrected an explosive special report that aired in the morning saying that Donald Trump, as a candidate for president, had asked Michael Flynn to make contact with Russians.
  • During "World News Tonight," ABC News investigative reporter Brian Ross said the source who had provided the initial information for his story later told him that it was as president-elect, not as a candidate, that Trump asked Flynn to contact the Russians.
  • The initial report, based on one anonymous source, prompted a dramatic reaction in the financial markets, and the Dow fell more than 350 points.

Foreign exchange

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  • USD was well offered before the New York open, until ABC corrected its story on Flynn and it rallied. There was also some positive news surrounding the tax reforms which helped give support to the USD. At the end of the day, DXY was volatile but ended up stable on the day. Friday was not an easy trading day
  • USDJPY remains well bid at the end of the year and we expect a big move in December as it is always the case when most funds close the books. We will most probably break the year highs with no one having the position on.
  • Emerging Markets: USD was fairly quiet against EM with the USD Selling intact during year end and still fight for carry. The US equity futures open up this morning so expect some more USD selling against EM this morning.


Foreign exchange movements

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  • The curve is flattening in USDJPY vols, selling the back end and buying the front end. IT seems the market is short for this month and USDJPY spot is close to breaking new highs
  • We are seeing good buying interests in EUR and GBP topside strikes in the two weeks area.

Rates
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  • US treasuries surged on safety running after ex-national security adviser Michael Flynn Flynn made the headline by pleading guilty on Russia-related offences, shying away the impact from possibility of Senate passing the tax cut bill.
  • European bonds joined the flight to safety party on Friday, with headline news on Flynn. There was some local spice as well, such as Europe region core CPI missing expectations and concerns about Brexit continuing to build up.


Commodities 

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US equities

  • Shares in Nutantix rose 11% as the company reported its quarterly results that exceed analysts' expectations. The software company intend to be more of just a software vendor as the company highlighted that its revenue from hardware will be scaled down to only 9% from 26%.
  • Drugmaker Mylan rose 4.35% as it is currently holding talks with Amazon as the retail giant plans to gain entry to the pharmacy spectrum.
  • Ambarella rose 14.3% yesterday as the stock rose on a good beat on the bottom line. Top line revenue was within expectations as revenue weakened slightly due to poorer sales of GoPro but bottom line came in $0.75 per share, against the estimate for $0.67 per share. The debt free chip processing company also  repurchased 269,540 shares during the quarter for $12.8 million, leaving $35 mln remaining under its repurchase program.      

European equities

  • Online food-delivery service Just Eat will join Britain's FTSE 100 leading share index in December after rapid growth since its listing in 2014 at 260 pence. Just Eat rose 3.33 pence on Friday, to close 0.42% higher.
  • Lufthansa was one of the best performing Germany stock as it rose 1.35%. Lufthansa is in talks to buy Air Berlin assets and is trying to avert a collapse of the deal that could unravel the insolvent carrier's carve-up.

Hong Kong equities

  • In Hong Kong on Friday, Blue chips were broadly sold led heavy weights such as Tencent and Financial sector. Tencent looks particularly interesting as it is now trading close to its 50 day moving averate $HK370 which Tencent has been respecting and bouncing from it since early this year.

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Tax cut optimism would normally drive a risk-off shift by investors, but safe haven buying has helped prevent gold from being sold off.  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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