Morning Report APAC: Stocks bounce back, USD up as debate continues
- Futures on the S&P 500 index gained 0.3%, while shares in Asia pared losses
- Mid debate, the USD edged up to 100.74 yen from a low of around 100.08
- Japan's Nikkei rose mid debate, halving early losses to remain down 0.4%
- Crude oil falls in early trade before Opec talks in Algiers on Wednesday
- Moody’s downgraded Turkey’s debt from Baa3 to Ba1
By Saxo APAC Sales Trading
Economic data of the day
15:00 – KRW – Bank of Korea policy meeting minutes
Fed Speech: Dallas Federal Reserve President Robert Kaplan said "I would like to see some removal of accommodation. I would have been comfortable seeing that accommodation removed in September."
Kaplan said he was not that worried about the US economy overheating but was concerned that low interest rates could create "distortions" in the US economy.
Governor Daniel Tarullo said the Fed wants to make things tougher on big banks. In a proposed stress-test overhaul, lenders would need billions of dollars more in capital to pass.
US: New home sales dropped 7.6% (expected -8.3%). Even with the decline in purchases last month, builder backlogs increased as the number of homes sold but not yet started climbed to a nine-year high.
The pace of demand will help support further construction, ensuring the residential real estate industry remains a help to the economy.
Purchases fell in three of four regions, including a 12.3% slump in the south, the area that makes up the bulk of nationwide sales. Purchases declined 2.4% in the Midwest, and climbed 8% in the West to the highest level since September 2007.
Turkey: Moody’s downgraded Turkey’s debt from Baa3 to Ba1 (junk status) following a review that began after the failed coup attempt in July.
Moody’s said “Moody’s expects growth will slow over the coming years, as constraints on the externally-funded, consumption-fueled economy emerge, the reform agenda slows further and the investment climate remains weak.”
Following the risk off triggered by the European banking sector in the equity market, USDJPY dropped 0.7% to trade close to the 100 level again.
With the Bank of Japan and the Federal Open Market Committee meetings now passed, there is no strong reason to be long USDJPY and we should see offers on any rally in USDJPY.
Despite the oil price higher, USDCAD is breaking a very important resistance at the 200 Day Moving Average. We should see some model funds buying very soon once the break is confirmed for an initial target at 1.3500.
In emerging markets, USDTRY had a very volatile day following the Moody’s downgrade but failed to break the 3.0000 level for now. USDMXN continues to find very strong bids just below 20.0000.
Foreign exchange movements
USDMXN Vols trade at 95 Vol for the US elections day which represents a 4% move for that day.
Flight to quality for safety assets was the main theme yesterday on worries on European banks. US 10-year yield broke its key support at 1.60% for the first time in two week, down 3.5 basis points to 1.58%.
The US 10-year had since retrace more than 10bps from its pre-FOMC high where it briefly traded above 1.70%.
German 10-year yield declined as much as 3.7bps at one time and closed 3.5bps at session close.
Credit: CDS indices start to rally globally following the risk off seen in the European banking sector and the drop in equities.
US stocks closed broadly lower, led by financials, as concerns spread from Deutsche Bank, who seems difficult to get state aid.
Risk off mood looms in the market ahead of first US presidential debate. The S&P 500 slid 0.9% to 2,146.10 led by losses in financials, which dropped by 1.5%.
The Walt Disney fell 1.4% after Bloomberg reported that it is one of the bidders for Twitter Inc, which hiked another 3.3% after receiving interest in discussing a deal, Twitter has started a process to evaluate a potential sale.
CBOE Holdings will acquire Bats Global Markets with $32.50 a share in cash and stock, a 23% premium over Bats's latest closing price. Both stock dropped after the announcement, by 5.3% for CBOE Holdings and 4.6% for Bats Global Markets.
European stocks logged their worst session since early July as Deutsche Bank plunged to new all-time lows. The STOXX 600 index gave away 1.6% to 340.00 led by its banking index which dived 2.3%. In London the FTSE 100 dropped 1.3% to 6,818.04.
Deutsche Bank slumped 7.1% to an all-time closing low after a German news magazine reported that the Chancellor ruled out state assistance for the bank and rejected any interference in the legal case where the US Department of Justice has proposed a $14 billion settlement linked to mortgage-backed securities.
Lloyds slid 3.1% after Goldman Sachs lowered its recommendation to "sell" from "neutral". GS stated in the review that Lloyds faced incremental competition from HSBC.
Asia Pacific stocks
- BNP Paribas: Guangzhou Tinci Material raised to “hold”
- China Pacific Insurance (2601 HK): Raised to hold at HSBC
- China Vanke (000002 CH): Raised to buy at GF Securities
- Tencent (700 HK): Rated new buy at Cantor Fitzgerald
- AIA (1299 HK): Ratings outlook raised to positive at Moody’s
- China Chengtong (217 HK): Considers spinning off travel investment
- China Datang (991 HK): Co. together with China General Nuclear Power and China Guodian, said to consider bids for Origin Energy
- HSBC (5 HK): Legal chief says banks must swap more details to stop crime; bought back 3.02m shrs at avg 570.99 pence each September 26
- Hysan (14 HK): Welcomes court ruling on zoning restrictions
- Lenovo (992 HK): Cuts less than 2% of jobs, mostly in moto unit: Verge
- Liangmianzhen (600249 CH): Says unit’s assets forzen due to contract dispute
- TBEA (600089 CH): To raise up to 3.63b yuan via rights offer
- Tianqi Lithium (002466 CH): Plans to buy 2% of Chile’s SQM for $210m
- Kakaku.com (2371 JP): Raised to overweight at Mitsubishi UFJ Morgan Stanley
- T&D Holdings (8795 JP): Raised to outperform at Tokai Tokyo Securities
- Toshiba (6502 JP): Raised to outperform at SMBC Nikko Securities
- Seiko PMC (4963 JP): Rated new outperform at Mito Securities
- Aizawa Securities (8708 JP): Plans interim dividend of 10 yen/share vs 15 yen year ago
- Asahi Co. (3333 JP): 1H oper. profit 3.39b yen vs co. forecast 3.61b yen
- Ichibanya (7630 JP): 1Q oper. profit +4.2% to 1.33b yen
- Kansai Electric (9503 JP): Won’t pay interim dividend; last payout was in 2012
- Matsuya (8237 JP): Prelim. 1H oper. profit 250m yen vs co. forecast 1.1b yen; cuts full-year forecast 59%
- Newcrest Mining (NCM AU) raised to buy from neutral at Goldman Sachs
- Fortescue Metals (FMG AU) cut to underweight from equalweight at Morgan Stanley
- Ashley Services (ASH AU) cut to hold from buy at Canaccord Genuity
- Cover-More (CVO AU) buys insurance services business from Travelex for $105m
- Rio Tinto (RIO AU) starts new debt reduction program for up to $3b
- Hellaby (HBY NZ) gets takeover from Australia’s Bapcor (BAP AU) at NZ$3.30/shr
- Pumpkin Patch (PPL NZ) FY result
Information sources: CIMB / Bloomberg
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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