Morning Report APAC: Crude bounces back on improved fundamentals
- Gold pushed higher on the back of stronger demand from China
- Crude prices rebounded on the back of more balanced fundamentals
- Signs of high consumption and large drawdowns point to healthier oil demand
- Copper has eased slightly; support from China is crucial to the red metal
- Dry US weather is helping to support grain prices
By Saxo APAC Sales Trading
Speeches (Singapore Time)
- No key speeches scheduled today
Overnight news, US
- GDP expanded 2.6% QoQ (Exp. 2.7%). Friday’s GDP report showed that consumer spending rose at a 2.8% pace (Exp. 2.8%), an improvement from the first quarter’s 1.9% rate.
- Core PCE, which exclude volatile food and energy costs, increased 0.9% at an annual rate during the quarter
Overnight news, Washington
- President Donald Trump replaced White House chief of staff Reince Priebus on Friday with Homeland Security Secretary John Kelly, a retired Marine Corps general.
- The shift at the top of the White House hierarchy is aimed at bringing order to an administration that has been beset by infighting, as Trump seeks to notch up the sort of sweeping legislative victories that he promised during his election campaign but that have eluded him to this point, advisers to the president said.
- The USD continued the downtrend that started in May. DXY broke the September low of 2016 and there is no major support below the current level.
- EURUSD continued to rally after the major break above 1.1500 in the middle of the month which will be a support now. There is no major resistance above. The 200 day moving average is at 1.1789, which will be the first resistance.
- USDJPY has confirmed the break below the 200 day moving average. We should have some intraday support at ¥110.50, then ¥109.
- Emerging Markets: USDEM followed the G10 market with good selling interest in USDBRL back almost at the year lows after the political issues seen in May. In Asia, USDCNH trades at the lows of the year. There is no support before 6.7000.
Foreign exchange movements
- US yields were slightly lower amid weaker than expected GDP data in US.
- Portugal bonds rallied as yield between Portuguese 10 years and German 10 year bunds hit its lowest since January 2016. Yields on 10-year Portugal bonds declined steadily from a one-year high of 4.33% in March. Portugal 10 year yields dipped 6.9 basis points.
- Amazon’s market capitalization fell by $10 billion but was actually the smallest one-day post earnings decline in 7 years. Shares closed 2.5% lower but has rallied 36% year to date.
- Starbucks revenue came in below expectations as the coffee chain retailed slumped 9.2% on cautious forecasts for the current quarter. Stock fell to $54, its support this year where we saw Starbucks rebounded from.
- Wells Fargo was involved in an auto insurance scandal as the banks said it may have costs about 20,000 people their cars. The bank said that it has enrolled roughly 570,000 auto loan borrowers for what's known as collateral production insurance on their vehicles when the customers already had appropriate insurance. It will pay $80 million in refunds and account adjustments to those people. Stock fell 2.58% on Friday’s session.
- U.S. Food and Drug Administriation said that it plans to reduce nicotine levels in cigarettes. This saw British American Tobacco and Imperial Brands retreated 6.8% and 3.8% lower. The measures included finding ways to reduce nicotine in cigarettes, seeking input on flavoured tobacco and finding ways to encourage the development of "innovative tobacco products" that are less dangerous than cigarettes.
Asian equities preview
Hong Kong analyst views
- Bright Dairy & Food (600597 CH): Raised to Buy at DBS Vickers, price target 14.20 yuan
- China Comm Cons (1800 HK): A Shares Cut to Underweight at JPMorgan
- Hang Lung Prop (101 HK): Raised to Buy at DBS Vickers, PT $HK21.50
- Henan Pinggao Electric (600312 CH): Cut to Sell at UBS, PT 12.16 yuan
- Sinosteel Engineering & Technology (000928 CH): New Buy at Sinolink
- Sinotrans (598 HK): H Shares Raised to Buy at Daiwa, PT $HK5
Hong Kong stocks
- Avic Jonhon (002179 CH): Prelim. H1 Net 441.8m Yuan vs 396.6mln Yuan Year Ago.
- Beijing Capital (600376 CH): Sells Unit in Shenzhen to Vanke for 1.17bn Yuan.
- Beijing SPC (002573 CH): Prelim. 1H Net 315.7m Yuan vs 268.8m Yuan Year Ago.
- BYD (1211 HK): Wins $45m Electric-Bus Order in the U.S.: Xinhua.
- China Eastern (670 HK): AF-KLM, Delta, Virgin Agreed On Option In Case of Hard Brexit.
- China Telecom (728 HK): China Top 3 Carriers to Scrap Domestic Roaming Fees From September 1.
- Cifi (884 HK): To Sell 135m New Shares in Top-Up Placement at 5% Discount.
- Coolpad (2369 HK): Says Borrowers Fully Repaid Shenzhen Yulong Loans.
- Fiberhome Telecom (600498 CH): 1H Net 449.7m Yuan vs 387.4mln Yuan Year Ago.
- Fosun Int’l (656 HK): Fosun Units, Beijing Sanyuan to Buy St Hubert for €625mln.
- Guosen Securities (002736 CH): First Half Preliminary Net 1.99bn yuan.
- Hanergy TFP (566 HK): Publishes New Solar Panel Product Amid Stock Suspension.
- Hutchtel (215 HK): Agrees to Sell Fixed-Line Unit to I Squared for $1.9bn.
- NARI Technology (600406 CH): H1 Net 349.6m Yuan vs 280.4m Yuan Year Ago.
- Orient Overseas (316 HK): 2Q Avg Revenue Per TEU Rises 16% on Year.
- Ping An Bank (000001 CH): Plans to Sell up to 26bn Yuan of Convertible Bonds.
- Powerlong Real Estate (1238 HK): Sells $100mln Additional 2020 Senior Notes.
- Shanghai Lujiazui 1H Net 1.15b Yuan vs 974.4m Yuan Year Ago.
- Standard Chartered (STAN LN): Five Banks Reach $111.2mln Total Pact Over FX case, Law Firm Says.
- Suning Commerce (002024 CH): First Half Preliminary Net 291.7 Mln Yuan.
- Yonghui Superstores (601933 CH): H1 Net 1.06b Yuan vs 669.7m Yuan Year Ago.
- Zhejiang Huace (300133 CH): China Jianyin Investment Sets Up 2b Yuan Tech, Media Fund: SCMP.
- ZTE (000063 CH): Completes 48% Stake Acquisition in Turkey’s Netas.
Japan analyst views
- ISID (4827): Downgraded to outperform from buy at Daiwa.
- Nikon (7731): Upgraded to buy from sell at Haitong Intl.
- Park24 (4666): Rated new positive at Storm Research.
- TDK (6762): Raised to buy from neutral at Mizuho
Japan stocks
- 77 Bank (8341): Q1 net income +13% y/y to ¥6.8b yen
- Acom (8572): Q1 operating profit slips 2.5% y/y to ¥18.0bn.
- Advan (7463): Seeks ¥7.29bn in public sale of treasury shares.
- Amano (6436): Q1 operating profit +16% y/y to ¥1.8bn.
- Asahi Holdings (5857): Q1 operating profit +32% y/y to ¥3.5bn.
- Capcom (9697): Swings to Q1 operating profit of ¥784mln from loss of ¥726mln a year earlier.
- Chubu Electric (9502): Q1 operating profit falls 67% y/y to ¥32.0bn.
- Fanuc (6954): Q1 operating profit +21% y/y to ¥50.5bn, lifts full-year forecast.
- Fujikura (5803): Q1 operating profit +23% to ¥7bn.
- GungHo Online (3765): Half-year operating profit slides 27% y/y to ¥19.4bn.
- Hino Motors (7205): Q1 operating profit +7.9% y/y to ¥16.1bn.
- Hirose Electric (6806): Q1 operating profit -1% to ¥7.04bn.
- Hitachi (6501): Q1 operating profit +44% y/y to ¥131.8bn.
- Hitachi Transport (9086): Q1 operating profit -2.4% y/y to ¥6.6bn.
- Hokuriku Electric (9505): Q1 operating profit +19% y/y to ¥5.3bn.
- JR Central (9022): Q1 operating profit +9.6% y/y to ¥182.1bn.
- JR East (9020): Q1 operating profit +4.3% y/y to ¥138.6bn.
- JR West (9021): Q1 operating profit +21% y/y to ¥54.8bn.
- Kansai Electric (9503): Q1 operating profit slips 21% y/y to ¥47.3bn.
- Kobe Steel (5406): Lifts full-year operating profit forecast 6.7% to ¥80bn.
- Komatsu (6301): Q1 operating profit +76% y/y to ¥52.4bn.
- Konica Minolta (4902): Q1 operating profit slips 2.2% y/y to ¥8.7bn.
- Kyocera (6971): Q1 operating profit more than doubles to ¥31.2bn.
- Kyowa Kirin (4151): 1H operating profit +57% to ¥24.1bn, raises FY forecast.
- Misumi Group (9962): Q1 operating profit +34% to ¥10bn.
- Mitsui Engineering & Shipbuilding (7003): Cuts H1 and FY profit forecasts.
- MonotaRO (3064): Half-year operating profit +23.5% y/y to ¥5.6bn.
- NGK Insulators (5333): Q1 operating profit slips 1.8% y/y to ¥18.8bn.
- Nihon M&A (2127): Q1 operating profit +59% y/y to ¥3.6bn.
- Nippon Television Holdings (9404): Q1 operating profit falls 15.5% y/y to ¥12.2bn.
- Nomura Holdings (8604): Q1 net income +21% y/y to 56.9b yen as stock rally boosts profits.
- Nomura Real Estate (3231): Q1 operating profit +86% y/y to ¥16.4bn.
- NSSMC (5401): Swings to Q1 operating profit of ¥66.5bn from loss of ¥7.4bn a year earlier.
- Onkyo (6628): Seeks ¥2.77bn in private sale of equity warrants.
- Oriental Land (4661): Q1 operating profit +10% to ¥25.1bn.
- Otsuka Holdings (4578): U.S. FDA approves Abilify Maintena for maintenance monotherapy treatment of bipolar I disorder in adults.
- Renesas (6723): Half-year operating profit +34% y/y to ¥44.3bn.
- Ricoh (7752): Q1 net income more than doubles y/y to ¥10.8bn.
- Sharp (6753): Swings to Q1 operating profit of ¥17.1bn from loss of ¥2.5bn a year earlier.
- Sumitomo Dainippon Pharma (4506): Lifts operating profit outlook 18% to ¥65bn.
- Takeda Pharma (4502) Q1 operating profit +27.5% y/y to ¥194.96bn.
- TDK (6762): Lifts full-year revenue forecast by 7.2% to ¥1.19trillion as it reports 5.2% y/y drop in Q1 operating profit to ¥15.6bn.
- Tepco (9501): Q1 operating profit -53% to ¥67.6bn, net income ¥148.1bn vs ¥1.14bn year ago.
- Topcon (7732): Lifts full-year revenue forecast 1.5% to ¥133bn.
- Toshiba (6502): JPX CEO expresses concern as deadline for annual securities report approaches.
- Yahoo Japan (4689): Q1 operating profit +2.6% y/y to ¥52.2bn.
Australia analyst views
- AWE AU: AWE Cut to Neutral at UBS, price target $A0.56.
- SFR AU: Sandfire Cut to Neutral at JPMorgan, PT $A6.30; Lowered to Hold at Morgans Financial, PT $A6.44.
- SCG AU: Scentre Group Cut to Hold at Morningstar.
Australian and New Zealand stocks
- CWY: Tomra-Cleanaway JV Gets Waste-Management Job in Australia
- FSF in New Zealand: Fonterra in Talks for Argentina’s SanCor: Herald
- ORG AU: Origin Energy to report 4Q output
- SYR: Syrah to release 2Q production figures
- TEN: Lone Star Funds May Bid for Australia’s Network Ten: AFR
Crude has rebounded as a result of the improving outlook for supply and demand fundamentals, and signs of healthy fuel consumption levels in the US. Photo: Shutterstock
– Edited by Robert Ryan
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