Morning Report APAC: Brexit fades as GBP, global shares rally
- In early Asian trade, stocks rallied for a second day, while the USD weakened
- FTSE 100 Index erased its post-Brexit slump with a 6.3% surge overnight
- Emerging market shares climbing as the USD falls on bets the Fed won't hike
- GBP extends its advance jumping 0.6% to $1.3429
- The USD was up 0.1% at 102.935 JPY, after sliding to 99 on Friday
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time: GMT plus 8 hours)
- 0700: KRW – Industrial Production SA MoM (Act. 2.5%, Exp. 0.3%), YoY (Act. 4.3%, Exp. 0.3%)
- 0750: JPY – Industrial Production MoM (Exp. -0.2%, Prev. 0.5%), YoY (Exp. 1.9%, Prev. -3.3%)
- 1400: EUR – Germany Retail Sales MoM (Exp. 0.6%, Prev. -0.9%), YoY (Exp. 2.5%, Prev. 2.3%)
- 1445: EUR – France PPI MoM (Prev. -0.5%), YoY (-4.1%)
- 1445pm: EUR – France CPI MoM (Exp. 0.2%, Prev. 0.4%), YoY (Exp. 0.2%, Prev. 0.0%
- 03:55pm: EUR – Germany Unemployment Change (Exp. -5k, Prev. -11k), Claims Rate (Exp. 6.1%, Prev. 6.1%)
- 1630: GBP – GDP QoQ 1Q (Exp. 0.4%, Prev. 0.4%), YoY (Exp. 2.0%, Prev. 2.0%)
- 1700: EUR – Eurozone CPI YoY (Exp. 0.0%, Prev. -0.1%), Core CPI (Exp. 0.8%, Prev. 0.8%)
- 2030: USD – Initial Jobless Claims (Exp. 267k, Prev. 259k), Continuing Claims (Exp. 2151k, Prev. 2142k)
2030: CAD – GDP MoM (Exp. 0.1%, Prev. -0.2%), YoY (Exp. 1.4%, Prev. 1.1%)
2145: USD – Chicago Purchasing Manager (Exp. 51.0, Prev. 49.3)
- 1700: CNY - PBOC Deputy Governor Zhang Tao Speaks in St. Petersburg
- 2300: GBP - BOE Governor Carney Gives Speech in London
- Brexit: A motion of no confidence in Labour Party leader Jeremy Corbyn has been passed by the party’s MPs (172 against 40), with a challenge to his leadership looking to be imminent. However Mr Corbyn has refused to step down. This follows a slew of resignations from the Shadow Cabinet on Sunday.
- The remaining 27 EU leaders reiterated that there would be no negotiations before notification to the EU (Article 50) and indicated that freedom of movement is necessary to access the single market, rejecting preferential treatment for the UK.
- US: PCE Core deflator came in as expected at 0.2% MoM and 1.6% YoY and Personal Spending increased 0.4% as expected which confirms that the economic growth is bouncing back strongly this quarter and that consumers may be capable of driving the rebound over the near to medium term.
The "risk on" mood continued overnight with no new news following the Brexit vote, the market is differentiating more and more the global risks.
The US rates are higher and the rally in equities triggered good buying interest in USDJPY and was positive for risk assets. The main resistance for USDJPY is at 103.50. The DXY was down 0.43%
GBPUSD continued to rally overnight reaching again 1.3500. Technically, the major resistance is still far away at 1.4000. The big beneficiaries of the risk on were the emerging market currencies with COP, ZAR and BRL up more than 2%.
In Asia, all the currencies rallied to pre-Brexit levels: USDMYR 1M NDF trading at 4.0125. USDKRW moved from 1187 to 1155 in the 1M and USDSGD is again below 1.3500.
Foreign exchange movements
After the selling of the vols 2 days ago following the "risk on, volatilities remain stable to slightly lower overnight. The interesting flow was the very strong interest from a US investment bank to buy 2 Month ATM USDJPY.
Bond yields in US kept the pace of modest rise as sentiment in US has been improved and diminished Brexit concern curbs haven demand. Yields in the UK stayed at the low end as consumer confidence dropped to a 2 year low, while yields in peripheral Europe kept dropping and touching new lows, expecting impact of ECB policy intervention.
Yields on the 10Y UK gilt dropped 1.3bps to 0.945% while yields on the 10Y Treasury note rose 4.1bps to 1.507%.
The Fed fund rates are now pricing 0% of chance of interest rise in Sep and only 11.8% in December 2016.
The market is pricing 31.8% of probability of cut in the UK in July meeting, and 51% in Aug meeting.
European Corporate bonds continue to rally despite the Brexit vote since the European Central Bank started its QE program to buy corporate bonds. The average yield on investment-grade corporate bonds dropped to 0.9285% Wednesday, the lowest since 1998.
Since the start of the program, the ECB has bought notes from companies including troubled German carmaker Volkswagen, Siemens, Europe’s biggest engineering company and Anheuser-Busch InBev, the world’s largest brewer.
The CDS market is obviously lower following the rally in Equities with the biggest drop seen in Emerging Market countries and Asia in particular.
The MSCI All-Country World Index posted its steepest two-day gain since August as central banks around the world signaled a readiness to act if required.
The STOXX 600 climbed 3.1%, with all sectors except autos closing sharply higher. UK FTSE rose 3.6% by the close, recovering from losses made after the Brexit.
US stocks rallied overnight lifted by gains in oil prices as global markets recovered for a second day from their post-Brexit plunge and VIX retreated another -11.3% to 16.64.
The Dow gained 1.6% and S&P 500 rallied 1.7%, erasing losses for the year, as energy stocks led the advance with Chevron Corp. rising 1.8%.
Deutsche Bank AG and Banco Santander SA were the only two of the 33 banks to have their capital plans rejected by the Fed, citing qualitative concerns.
Several other banks that passed the annual stress test, including JPMorgan Chase & Co, Bank of America, Citigroup, Goldman Sachs Group Inc and Wells Fargo & Co, said they would buy back more stock or increase dividends.
- China Everbright Intl (257 HK): Raised to outperform at Daiwa.
- ·Zhejiang Expressway (576 HK): Raised to buy at HSBC.
- Food: China 2016 winter wheat output seen near record.
- New energy: China to reduce idle renewable power capacity.
- Pharma: China to step up antitrust effort against drugmakers: Sec. Times.
- Rail: China approves medium, long-term railway network plan.
- BBMG (2009 HK): To buy Jidong Cement shares with 13b yuan of cement assets.
- China Railway Const. (601186 CH): Consortium wins 16.2b yuan traffic project.
- China Vanke (2202 HK): Sees rating downgrade pressure if board axed.
- Country Garden (2007 HK): Units to issue asset-backed securities.
- Jinan Diesel (000617 CH): Signs deal with CNPC on asset buy.
- Kam Hing (2307 HK): Says CEO helping in Wuhan Iron probe.
- Minsheng Bank (600016 CH): Orient Group, Huaxia Life to increase influence on co.
- Orient Securities (600958 CH): Said to price $1 billion offer below midpoint.
- Tencent (700 HK): In partnership with WPP for social media marketing.
- Tokyo Ohka (4186 JP): Cut to hold from buy at Deutsche Bank
- Amada Holdings (6113 JP): Cut to sell from neutral at Citi
- Tokyo Electron (8035 JP): Raised to outperform from vs neutral by Credit Suisse
- ANA Holdings (9202 JP): To buy 3 Bombardier planes with 11.5b yen catalog price; to start route between Tokyo Haneda and Kuala Lumpur.
- Halows (2742 JP): 1Q parent oper. profit increased 5.8% y/y to 1.05b yen, and net income climbed 13.4% y/y to 679m yen.
- Milbon (4919 JP): 1H oper. profit rose 2.2% y/y to 2.42b yen, and net income gained 1.4% y/y to 1.46b yen.
- Mitsubishi Chemical Holdings (4188 JP): To delay restart of Kashima ethylene plant by two weeks.
- Nagaileben (7447 JP): 9-mo. cumulative quarterly oper. profit rose 1.5% y/y to 3.9b yen while net income fell 0.7% y/y to 2.6b yen.
- Weathernews (4825 JP): Oper. profit for year ended May 31 advanced 2.5% y/y to 3.39b yen; forecast oper. profit of 3.4b yen for this fiscal year
- Seven Group raised to buy vs neutral at Goldman Sachs.
- Mayne Pharma raised to buy vs neutral at UBS.
- National Storage REIT cut to hold vs buy at Wilson HTM.
- Spark Infrastructure cut to sector perform vs outperform at RBC.
- Transurban Group raised to outperform at RBC Capital.
- Stride Property (STR@NZ) - Shareholders vote on Investore spin-off.
- Metcash/Woolworths (MTS@AU, WOW@AU) - Provisional date for ACCC’s decision on Metcash’s proposal to buy Woolworths’ Home Timber and Hardware Group.
– Edited by Adam Courtenay
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
Please Contact us for any market updates: Global Sales Trading: +65 6303 7818
- Christopher Moltke-Leth - email@example.com
- Tareck Horchani - firstname.lastname@example.org
- Edmund Liu - email@example.com
Global Macro Strategist: +65 6303 7622
- Kay Van-Petersen - firstname.lastname@example.org
All material contained herein is provided for your general information. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets Pte. Ltd. (“SCM SG”). Any expression of opinion (which may be subject to change without notice) is personal to the presenter and/or author; they do not reflect the view or opinion of SCM SG or its affiliates, neither do they constitute an endorsement of SCM SG’s view or analysis of the same.
None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. SCM SG does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment based on any commentaries or information provided here.
For further information, please click here.
Saxo Capital Markets Pte Ltd ("Saxo Capital Markets") is a licensed subsidiary of Saxo Bank A/S, an online trading and investment specialist. Saxo Capital Markets serves as the APAC headquarters and holds a capital markets services licence under the Monetary Authority of Singapore; and a commodity broker licence issued by the International Enterprise Singapore. Clients can trade Forex, CFDs, Stocks, Futures, Options and other derivatives via SaxoWebTrader and SaxoTrader, the leading multi-asset online trading platforms.
Trading risks are magnified by leverage - losses can exceed your deposits. Trade only after you have acknowledged and accepted the risks. You should carefully consider whether trading in leveraged products is appropriate for you based on your financial circumstances. Please consider our Risk Warning and General Business Terms before trading with us. Please see full General Disclaimer.
Thousands of serious traders receive free news and analysis from Saxo Capital Markets each day. Saxo Capital Markets never sends these emails unsolicited; they are sent following acceptance of your membership and subscription request by Saxo Capital Markets at saxomarkets.com.sg. If you do not wish to receive any emails from Saxo Capital Markets in the future, please reply to this email with the word "UNSUBSCRIBE" in the subject header.
Samsung Hub | 3 Church Street | # 30-01 | Singapore 049483
Company No. 200601141M