Morning Report APAC: Asian stocks slip following slide on Wall St

• The shortlived USD rally ended when the euro rebounded
  
• The euro rose on optimism on Germany two top parties forming a coalition
  
• Crude markets are cautious ahead of the release of IEA inventory report
• Wheat has hit a four-week low, due to the impact of USDA acreage data
  

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

• 1630: EC – Bank of France’s governor François Villeroy de Galhau speaks in French Senate
• 1945: UK – Bank of England policymaker Michael Saunders  speaks at event in London
• 0400: US – Federal Reserve’s Charles Evans and Robert Kaplan speak on economy and monetary policy
• 0530: US – FED’s Loretta Mester discusses monetary poicy communication
  

Overnight news, markets

• USD was on set for a rebound after declining for four straight sessions, but the rally was halted after the euro bounced back. Treasuries were still on a sideway move.
  
• US stocks surged to a record in earlier session with S&P500 heading above 2800; however the index later pared all the gains and closed lower. Profit taking took place in commodities, especially in metals after recent surges, oil dipped ahead of the release of the EIA inventory report tonight. Bitcoin slumped.
  

Overnight news, US

• January Empire manufacturing index dropped to 17.7 with an upward revision to 19.6 for previous month. Subindices including new orders, shipments, employment and hours worked are all significantly lower, implying a fall in ISM manufacturing. The fall was likely due to severe cold weather.
• A US government shut down on Friday looms in the market as Republicans try to separate the Democrats’ demand to help young undocumented immigrants.
  

Overnight news, Bitcoin

• Bitcoin and ripple tumble, followed by blockchain tied companies, after Seoul’s finance minister said that shutting cryptocurrency exchanges remains an option. Earlier report on further constrain on cryptocurrency trading in China also provides some headwinds.
  

Foreign exchange

• The USD rally didn’t last as the euro rebounded, following optimism about the two biggest parties in Germany forming a coalition and the ECB turning hawkish in tapering its bond purchases.
• Emerging Currencies: most of the emerging nation currencies went sideways, after the dollar didn’t manage to rebound. However EM stocks rose to their highest since 2008. INR fell the most since May 2017, due to selloff of sovereign debt and India's worst trade deficit in three years. 

Foreign exchange movements

• EURUSD vols had a slight correction as the euro dipped on a hiccup in German progress in forming a coalition government. Howevereuro continues to be bid as markets are still willing to sell gamma and buy euro on the top side.
• Dollar crosses correlations are lower, driving vols higher globally, especially now that the euro is in focus.
  

Rates

• US treasuries were mixed; the front end continued to be sold amid rate hike expectations. Long end gained slightly amid low trading volumes. The curve flattened.
• Bunds yields were lower after a report saying the European Central Bank is unlikely to drop its quantitative easing pledge next week; the Bank of France’s governor François Villeroy de Galhau gave some slightly dovish comments.
  

Equities

US equities

• Qualcomm raised its profit forecast on Tuesday and said it might use funds to buy back stock if its $38 billion (£27.6 billion) bid to acquire NXP Semiconductors NV. Qualcomm traded 4.39% higher and just 1.5% away from its high in Nov.
• General Electric announced more than $11bn in charges from its long-term care insurance portfolio and new U.S. tax laws as the CEO once again hinted of possible asset sales. GE closed 2.93% lower yesterday.
• The Dow 30 component UnitedHealth Group was up 1.86% after a beat in earnings which came in at $2.59 eps against estimate of $2.52.

European equities

• BP lost 2.7% after the announcement of the Deepwater Horizon charge of $1.7billion which would impact its 4th quarter profits.

Hong Kong equities

• China banks led the gains yesterday with another strong showing with China Construction Bank. ICBC traded 3% higher yesterday on upgrades from Credit Suisse. China Construction Bank punched through the $8 resistance and traded to its highest in almost seven years.

 
– 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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