Article / 10 August 2017 at 1:43 GMT

Morning Report APAC: Calm returns after fiery Trump sparks jitters

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Rex Tillerson restored calm after Trump's talk of fire and fury over North Korea
  • James Bullard says persistently missing inflation targets risks the Fed's credibility
  • Gold hit a high on safe haven demand amid the rise in tensions
  • Copper had its first drop in four days after equities slumped

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
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Speeches (Singapore Time)

Overnight news

  • Risk off tone abated somewhat into the US close as Secretary of State Rex Tillerson sought to cool Trumps comments of fire and fury. The S&P500 rallied from -0.5% to close almost flat. Yields rallied off their lows and JPY weakened.
  • The Fed's James Bullard in a Bloomberg radio interview continued his recent trend of calling for no further hikes until inflation data improves.
  • Bullard questioned the Philips curve, as the relationship between low unemployment has not caused wage price pressure as expected.
  • Bullard also said persistently missing inflation targets risks the Fed's credibility.
Overnight news, Europe

  • Italian Industrial production soared in June to 5.4% versus and expectation of 3.4%. Italian data has been surprising to the upside as the European growth outlook picks up steam.
  • European stocks had a very poor day tumbling on the increased geopolitical risks. 10 year German Bunds now yield just 0.28% after briefly touching 0.50% last month.

 

Foreign exchange

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  • USD: mixed day as initial USD buying on safe haven flows against some risky currencies was offset by USD selling as investors bought safe haven currencies.
  • CHF: Biggest mover in the G10 space as investor ran for cover  with the ratchetting up of Geopolitical tensions. CHF was up 1% over the course of the day.
  • AUD: The worst performing currency on risk off moves.
  • NZD: Slightly higher after RBNZ left rates on hold and brought forward their expected timeframe for achieving their 2% target inflation.
  • Emerging Markets: USDCNH breaks the key 6.70 support level and trades lower, CNH was the best performing EM currency yesterday, a rare event. CNH strength has been driven by higher fixings onshore. KRW performed poorly, naturally. As tensions on the Korean peninsula flared and the won sagged, -0.9%.


Foreign exchange movements


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  • Vols higher as risk sentiment paid up Vols within the safe haven pairs like JPY and CHF. This temperedt rading in late in the New York session as geopolitical risks retreated.
  • CNH Vols have crept higher, based on the spot break lower.

Rates

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  • US 10 year Treasuries saw its weakest demand in 10 years with its lowest bid-to-cover ratio of 2.23, lowest since November and the second weakest in the last 8 years. The poor demand in auction saw the curve steepens.
  • 10 year German Bunds yield also fell 4.9 basis points as tensions with North Korea escalated.

Commodities 

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Equities

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  • Despite heighten tension between North Korea and US as of late, the Dow Jones Index still manage to trade above the 22,000 level. While a pullback in the equity market is healthy, but market seems to be complacent though VIX rose 2.5%.
  • Nvidia will be reporting its earning after market later today which they have only missed once in the last 5 years. Shares were up 1.06% in yesterday's session. Snap also rose 4% yesterday the release of its result later and will also be reporting earnings after market close later.
  • Disney shares traded lower on Wednesday, following the release of third-quarter results and the announcement of a new push into streaming-video services. Earnings per share came in slightly above expectations but revenue failed to beat consensus. Disney also announced that it would launch a sports-themed ESPN streaming service next year followed by a similar offering with Disney and Pixar movies and television shows in 2019 but the execution risk saw share price fell 3.8% to $102.83. Netflix also fell 1.45% on the news.

Asian equities preview

Hong Kong analyst views

  • Anta Sports (2020 HK): Upgraded to Buy at Jefferies; PT Raised to $HK32.60.
  • China Life (2628 HK): A Shares Cut to Market Perform at Bernstein.
  • China Pacific Insurance (601601 CH): A shares Cut to Underperform at Bernstein.
  • Hang Seng Bank (11 HK): Raised to Overweight at JPMorgan, PT $HK200.
  • New China Life (601336 CH): A Shares Cut to Market Perform at Bernstein.
  • Ping An Insurance (2318 HK): A Shares Cut to Underperform at Bernstein.
  • Semiconductor Manufacturing (981 HK): Cut to Reduce at BNP Paribas.
  • Semiconductor Manufacturing (981 HK): Cut to Sell at CL Securities Taiwan.
  • Semiconductor Manufacturing (981 HK): Cut to Underperform at Bernstein.
  • Wanhua Chem Group (600309 CH): Raised to Overweight at Morgan Stanley.

Hong Kong stocks

  • AIA Group (1299 HK): CBA Accepted Several Indicative Bids for Life Business: AFR.
  • Bank of China (3988 HK): Wanda Internet Completes Stake Sale to UnionPay, BOC venture.
  • Chalco (2600 HK): Chalco Says Main Product Prices Rise; Power May Drive Up Costs.
  • China Cinda (1359 HK): China Cinda Plans to Sell up to 52mln Shares of China Nuclear Eng.
  • China Overseas Land (688 HK) July Property Contract Sales $HK16.9bn.
  • China Zhongwang (1333 HK): Aleris, Zhongwang USA Withdraw Notice to CFIUS for Merger.
  • CK Infra (1038 HK): CKI Raising ~EU1.99bn Loan For Germany’s Ista Purchase.
  • Glencore (805 HK): Preview Glencore H1: Watch for Asset Sale Plans, Guidance.
  • Guangdong Wens (300498 CH): Top China Pig Breeder Buys Stake in Cofco Capital.
  • HKT Trust (6823 HK): HKT Trust First Half Net Income $HK2.39 bn.
  • HSBC (5 HK): HSBC Bought Back 2.09mln Shares at Average 762.10 Pence Each on Augus 9.
  • Iflytek (002230 CH): Iflytek H1 Net 107.3mln Yuan vs 256.1mln Yuan Year Ago.
  • Meitu (1357 HK): Hon Hai Unit Bright Ease Sells 8.34mln Meitu Shares For $HK98.4mln.
  • PAX Global (327 HK): PAX Global First Half Net Income Falls 14.7% Y/y to $HK264.9mln .
  • Sun Art Retail (6808 HK): Sun Art Retail First Half Net Income 1.76bn yuan.
  • Sunny Optical (2382 HK): Sunny Optical July Handset Lens Sets Shipments Climb 59% Y/y.
  • Youngor Group (600177 CH): Youngor, Others Plan Financial Asset Management Venture in Hebei.

Japan analyst views

  • Benefit One (2412): Cut to neutral from buy at Ichiyoshi.
  • Denso (6902): Raised to overweight from neutral at MUFJ-MS.
  • Fancl (4921): Raised to overweight from neutral at MUFJ-MS.
  • Renesas Electronics (6723): Raised to neutral from underweight at MUFJ- MS.
  • Taiyo Holdings (4626): Cut to hold from buy at MUFJ-MS.
  • Tokuyama (4043): Raised to overweight from neutral at MUFJ-MS.
  • Valor (9956): Cut to outperform from buy at Daiwa.

Japan stocks

  • Amada Holdings (6113): Q1 operating profit -19% to ¥2.99bn.
  • Bridgestone (5108): Raises full-year net income target 3.2% to ¥289bn.
  • Cookpad (2193): H1 operating profit -9.7% to ¥3.7bn.
  • Credit Saison (8253): Q1 net income +93% y/y to ¥21.6bn.
  • Dai Nippon Printing (7912): Q1 operating profit +39% y/y to ¥8.2bn.
  • Dai-Ichi Life HD (8750): Q1 net income +48.5% y/y to ¥71.9bn.
  • DeNA (2432): Forecasts ¥7.8bn operating profit for Q2, trailing analyst estimate for 8.8bn yen
  • Dentsu (4324): Cuts full- year operating profit outlook 9.9% to ¥136.5bn.
  • Dowa (5714): Q1 operating profit +8.0% y/y to ¥8.2bn.
  • en-japan (4849): Lifts half-year operating profit forecast 33% to ¥4.05bn.
  • Fuji Oil (5017): Swings to Q1 operating loss of ¥4.0bn yen from ¥3.4bn in profit a year earlier.
  • Haseko (1808): Q1 operating profit +22% to ¥17.8bn.
  • Hitachi Kokusai (6756): KKR is reviewing its tender offer for co.
  • Iida (3291): Q1 operating profit slips 7.8% y/y to ¥25.9bn.
  • Japan Airport (9706): Q1 operating profit +62% y/y to ¥2.8bn.
  • Japan Display (6740): To book ¥170bn writedown for restructuring costs, cut 3,700 jobs; Q1 operating loss ¥14.4bn.
  • Kansai Paint (4613): Q1 operating profit +3.2% to ¥8.8bn.
  • McDonald’s Japan (2702): Raises full-year operating profit outlook to ¥16.5bn from ¥15bn.
  • Matsumotokiyoshi Holdings (3088): Q1 operating profit +15% to ¥8.2bn.
  • Mitsui Mining (5706): Q1 operating profit +4.8% y/y to ¥7.4bn.
  • Morinaga (2201): Lifts full-year operating profit 7.2% to ¥19.3bn as Q1 OP +16% y/y to ¥6.1bn.
  • MS&AD Insurance (8725): Q1 net income more than doubles y/y to ¥91.7bn.
  • Nippon Shinyaku (4516): Q1 operating profit +13% y/y to ¥5.0bn.
  • Nissin Food (2897): Q1 net income +92% y/y to ¥5.8bn.
  • PeptiDream (4587): Full-year operating profit slips 2.3% y/y to ¥2.5bn, while net profit +19.5% to ¥1.9bn.
  • Pilot (7846): Lifts full-year operating profit 5.6% to ¥19bn.
  • Rizap Group (2928): To conduct 2-for-1 stock split as of October 1; Q1 operating profit -28% to ¥2.7bn.
  • Sapporo (2501): H1 operating profit -1% to ¥3.02bn.
  • Shiseido (4911): Raises full-year operating profit outlook 23% to ¥56.0bn.
  • Skylark (3197): H1 operating profit -5.8% to ¥12.9bn; July same-store sales +0.6% y/y.
  • SoftBank (9984): Vision Fund leads $1.1bn in funding for biotech firm Roivant Sciences.
  • Sony Financial (8729): Q1 net income slides 29% y/y to ¥12.6bn.
  • Sumitomo Realty (8830): Q1 operating profit +18% to ¥63.2bn.
  • Sundrug (9989): Q1 operating profit +6.5% y/y to ¥8.9bn.
  • T&D (8795): Q1 net income slips 22% y/y to ¥19.5bn.
  • Taiheiyo Cement (5233): Q1 operating profit +69% y/y to ¥8.8bn.
  • Toei (9605): Lifts half-year operating profit forecast 31% to ¥9.1bn.
  • Tokyo TY Financial (7173): Q1 net income -89% to ¥2.55bn.
  • Toppan Printing (7911): Q1 operating profit +17% y/y to ¥5.6bn.
  • Trend Micro (4704): Half-year operating profit +1.9% y/y to ¥16.3bn.
  • Ulvac (6728): Full-year operating profit +65% y/y to ¥29.5bn; forecasts ¥31bn for current FY.

Australia analyst views

  • ASX (ASX): Raised to neutral at JPMorgan, price targe $A52.79
  • Carsales.com (CAR): Raised to add at Morgans Financial, PT $A13.97
Australasian outlook, stocks
  • RBNZ keeps key rate at record low on weak inflation outlook.
  • AGL Energy (AGL): FY results expected; NOTE: FY17 adj. net income est. $A787.6mln (12 analysts).
  • AMP (AMP): H1 underlying profit $A533m, net $A445m; NOTE: H1 adj. net income est. $A501m (3 analysts).
  • BHP Billiton (BHP): In talks with battery makers to supply nickel for EV boom.
  • Commonwealth Bank (CBA): Accepted several indicative bids for life business: AFR
  • Elders (ELD): Refinances $A75mln multi-option facility.
  • Liquefied Natural Gas (LNG): Gas sellers warn hard- bargaining buyers: market is turning
  • Magellan Financial (MFG): FY results expected; NOTE: FY17 adj. net income est. $A199.9mln (8 analysts).
  • Newcrest (NCM), Northern Star (NST), Evolution (EVN), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), OZ Minerals (OZL): Gold jumps to 8-wk high as nuclear spat fuels haven demand.
  • Orora (ORA): FY results expected; NOTE: FY adj. net income est. $A180.5mln (11 analysts).
  • Rio Tinto (RIO): Iron ore chief says sees robust China steel demand; Cut to sell at Morningstar; Trades ex-div.
  • Red River Resources (RVR): Trafigura secures zinc offtake and offers financing to Red River.
  • Virgin Australia (VAH): FY results expected; NOTE: FY17 adj. net income loss est. $A34.4mln (5 analysts).
  • Bank of New York Australia ADR Index +0.1%.
  • BHP Billiton ADR -0.3% to $A26.22 equivalent, little changed from last Sydney close
  • Rio Tinto ADR -0.1% to $A58.53 equivalent, ~12% discount to last Sydney close.
  • Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: MIN, IFL, SWM.
  • Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: JHX, TME, SKC, MYX.


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Jittery investors hope the North Korean threat to attack the island of Guam, above, and Donald Trump's talk of retaliatory fire and fury is no more that strong language. Photo: Shutterstock

 
– Edited by Robert Ryan


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