Morning Report APAC: Better-than-expected US CPI pushes USD higher
- Australia's market open was delayed by a technical glitch
- It will open at 0930 Singapore time
- Asian sentiment to be dominated by central bank decisions in the US and Japan
- The better-than-expected CPI pushed the USD higher against all the currencies
- China’s total credit reached 255% of GDP at the end of last year
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8)
- CPI rose more than expected at 0.2% MoM and 1.1% YoT (Exp. 0.1% and 0.2%). Core CPI rose 2.3% YoY (2.2%). The gains were mainly due to a sharp increase in medical-care prices, up 1%. YoY food prices were unchanged, the weakest reading on food inflation since February 2010, and energy prices were down 9.2%. Shelter costs rose 3.4% YoY.
- University of Michigan Sentiment dropped to 89.8 (Exp. 90.6) in September
- The Bank for International Settlements warned in its quarterly report that China’s credit to GDP gap has reached 30.1, the highest to date. It is also significantly higher than the scores in East Asia's speculative boom on 1997 or in the US subprime bubble before the Lehman crisis.
- China’s total credit reached 255% of GDP at the end of last year, a jump of 107 percentage points over eight years.
- Outstanding loans have reached $28 trillion, as much as the commercial banking systems of the US and Japan combined. Corporate debt alone has reached 171% of GDP (The Telegraph).
- The better-than-expected CPI pushed the USD much higher against all the currencies. DXY rallied 0.86% to the 200d MA at 96.079. EURUSD dropped to close just above the 200d MA. Expect to see some long stops below 1.1100. Otherwise we will consolidate around 1.1200.
- The biggest mover was GBP, which dropped 1.8% to reach the strong support at 1.3000 just before the Bank of Japan and Federal Open Market Committee meetings this week.
- In Emerging Markets, USDMXN broke the highs of the year and the record highs to reach 19.77 on poor liquidity due to closed markets (Independence Day).
- The only performer within the EM world was USDBRL, which dropped 1.2%, due to positive sentiment generated by President Michel Temer’s veto of a wage increase for some public work.
Foreign exchange movements
- The market has been selling back some gamma last Friday as we are getting closer to the BoJ meeting and the decay starts to be expensive.
- USDMXN curve continues to be well bid following the spot higher.
- Short-term Treasury yields logged their strongest rally in three weeks following a better-than-expected rise in consumer prices. UST 5s30s curve snapped its 10th consecutive day of steepening after hitting resistance around 130 basis points.
- 10-year German bund yield slid back to negative territory after floating above zero for few days after the European Central Bank disappointed investors hoping for signs of further stimulus.
- US stocks ended lower as energy shares were pressured by weaker oil prices and upcoming central-bank meetings weighed on sentiment. VIX Index retreated 5.71% to 15.37.
- Oracle slumped 4.8% as earnings and revenue missed expectations, despite earnings rising 5% in the first quarter on continued growth in its cloud-computing operations.
- Johnson & Johnson (down 0.32%) agreed to buy Abbott Laboratories (up 1.82%) eye-surgery equipment unit for $4.33 billion, moving the healthcare giant toward its goal of boosting its three core businesses.
- Europe’s Stoxx 600 falls 0.7% on above average volume.
- Financial stocks were the worst performing, pushing the Bank Index down 2.1%, dragged down by Deutsche Bank, which tumbled 8.5% after the US Department of Justice asked the bank to pay $14 billion to settle civil claims related to mortgage-backed securities.
- Orange up 2% on confirmation that CEO Stephane Richard told investors last week that preliminary consolidation talks have resumed between SFR, Iliad and Bouygues.
- Air China (753 HK): Cut to neutral from buy at UBS
- Ping An (601318 CH): Raised to buy at HSBC
- HK PPT: latest Centa-City Leading Index down 0.68% WoW to 136.57
- *SHK(16) Grand Yoho has sold more than 1000 units since launched for less than a month, cashing out at around $8.5bn
- StanChart(2888) is considering spin off its private-equity business to the related unit's managers
- China vanguard(8156) issued a profit warning, expecting a significant loss for FY16 vs net profit a year ago, mainly attributable to a decline of over 65% in revenue contributions from the group’s self-service lottery business
- PacificTextiles(1382) issued a profit warning, expecting to record approximately 25% decrease in operating profit for interim vs operating profit of $641mln a year ago
- Fosun(656) and China Gas(384) is said to have been put together to bid for a majority stake in National Grid’s GBP11b gas business
- VP(806) cos’ AUM was $13.8bn until end of August, down 4.17% YoY
- Cosco Ship Port(1199) Jan-Aug total throughput +3.9% YoY to 62.2 mln TEUs
- Singyes Solar(750) proposes separate listing of Singyes New Materials
- COLI(688) announce that it completed the acquisition of CITIC(267)'s property portfolio for RMB31bn; COLI needed to issue 1,096mln shares to CITIC at HK$27.13 per share for a total value of HK$29.7bn, representing approximately 10% of the enlarged share capital of the company
- Sunac(1918) buys property assets from Legend for RMB13.8bn
- Henderson(12) announced a disposal of Golden Centre in HK, at total consideration of $4,368mln; the estimated gain on disposal was ~$1,996mln
- CGN Power(1816) was invited to make a second-round bid for Chevron’s Asian geothermal energy assets, which could value $3bn
- Shanghai Industrial Urban(363) to buy two residential villa projects in Shanghai’s Minhang district
- AGL Energy (AGL AU) raised to buy vs hold at Shaw & Partners
- Santos (STO AU) raised to buy vs neutral at UBS
- Myer (MYR AU) cut to neutral vs buy at UBS
- Synlait Milk (SML NZ) full-year net profit triples to NZ$34.4mln, plans share issue
- Macquarie Group (MQG AU) to use funds from new EUR4bn infrastructure fund in Italy, CEO says in interview with Il Sole 24 Ore
Source: CIMB / Bloomberg
– Edited by Gayle Bryant
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