Article / 17 October 2017 at 1:45 GMT

Morning Report APAC: Crude climbs on supply concerns, stocks buoyant

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • All three US three major indexes logged another round of records
  • Precious metals sold off on stronger USD fuelled by US Manufacturing data
  • Better-than-expected producer prices in China have given copper a boost
  • Markets have raised the probability of a Fed rate hike in December to 80%
  • News from Iraqi and Trump’s Iran moves have driven up crude prices 
  • European stocks were mainly weighed down by Spanish stocks,

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8)
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Speeches

  • 1730 – EC: European Central Bank chief economist Peter Praet is speaking at a panel in Brussels.
  • 1815 – UK: Bank of England governor Mark Carney testifies to members of parliament.
  • 2130 – UK: BOE’s Alex Brazier speaks in Lisbon.
  • 0100 – US: Fed’s Patrick Harker speaks on Equitable Transit.
  • 0330 – Canada: Bank of Canada deputy governor Carolyn Wilkins speaks at Sibos conference.

Overnight news, Fed

  • Fed chair hopeful John Taylor's star is rising in the race for Fed chair and Kevin Warsh's is falling. Taylor, a Stanford University economist — and namesake of a well-known policy rule that advocates for higher rates — made a favourable impression on President Trump in an hour-long interview last week at the White House. Incumbent Janet Yellen remains on the shortlist, and is set to meet the president this week.

Overnight news, Japan

  • Japan election preview: The polls suggest Abenomics is here to stay. Opinion polls suggest PM Shinzo Abe and his Liberal Democratic Party will secure an absolute majority in the lower house. The Bank of Japan is set to maintain an extremely easy policy as underlying price pressures weaken due to structurally low wage growth (source: HSBC).

 

Foreign exchange

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  • USD was slightly bid due to US rates moving higher on the speculation that the hawkish John Taylor is ahead in the race of the next Fed’s chairman. Nothing large though to the point of saying that we found the next big trade.
  • DXY is back to the boring 93.00/94.00 range. The yearly chart show a strong support at 92.70. We had a failed attempt to break it in September but since then it has been holding well. In terms of risk reward, it makes sense to go long here with a stop just below 92.70.
  • USDCAD: short term support is at 1.2450 and seems to hold for now.
  • Emerging Markets: the market is caught short USDMXN following the worries that the US and Mexico can’t reach an agreement on NAFTA. The pair broke the 200 day moving average at 18.7905 and trade at its May highs.

Foreign exchange movements
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  • There is a pickup in euro vol around March/April next year to cover the Italian elections.
  • USDMXN vols have picked up significantly following Spot and off the support of 10.00 in the one-month ATM. The market still seems short upside vol in USDMXN.


Rates

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  • Markets digested speeches from a plethora of Fed speakers, focusing on gradual rate hike with the possibility for December raised to 80%.
  • European yields were driven down by market’s expectation on dovish ECB tapering, and bonds favoured amid uncertainties in Spain and Brexit negotiation. Italian bonds outperform as it is easiest for ECB to extend duration.


Commodities 

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Equities
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  • All three US three major indexes logged another round of records, as investors kept their eyes closely on corporate earnings reports, with Morgan Stanley and Goldman Sachs Group Inc. due on Tuesday.
  • Netflix Inc. reported a good set of earnings soon after Monday’s closing bell, lifting price as much as 4.1% to $211 in extended trading before easing to $205.20. The entertainment company announced Q3 earnings of $0.37 per share beating consensus estimate of $0.32 per share, adjusted and added 5.3 mln versus 4.5 mln (est), with a big share coming from foreign subscriptions.
  • Tesla dropped 1.4% following a report that the electric-car company fired hundreds of workers, including engineers, managers and factory workers, came despite the company push to significantly boost production of its mass-market Model 3 sedan.
  • European stocks were mainly weighed down by Spanish stocks, with IBEX falling for the third session, as the central government in Madrid gave Catalonia’s separatist leaders until Thursday to drop their push for independence. On the other hand, the DAX 30 index closed above the 13,000 mark for the first time ever.
  • Novo Nordisk AS jumped 5% after a preliminary review from the U.S. Food and Drug Administration concluded that the Danish insulin maker’s semaglutide is effective and carries no heart risk.
Asia-Pacific equities preview

Hong Kong analyst ratings

  • Shanghai Prime Machinery H Shares (2345 HK): Rated New Buy at Haitong Intl
  • Henan Pinggao Electric (600312 CH): Henan Pinggao Electric Cut to Underweight at Morgan Stanley
  • Semiconductor Manufacturing (981 HK): Semiconductor Manufacturing Cut to Underperform at Mizuho
  • Tingyi (322 HK): Tingyi Downgraded to Neutral at Haitong Intl; PT $HK11.70.
  • Want Want China (151 HK): Want Want China Upgraded to Buy at CICC; PT $HK7.34.
  • Xiabuxiabu (520 HK): Xiabuxiabu Initiated at UOB Kay Hian With Buy; PT $HK13.88.
  • XJ Electric (000400 CH): XJ Electric Cut to Equal-weight at Morgan Stanley; PT 17.80 Yuan.

Hong Kong stocks

  • BAIC Motor (1958 HK): BAIC Motor, Baidu to Work on Self-Driving, Cloud Services.
  • China Foods (506 HK): China Foods Sells Units to COFCO in $HK5.07b Deal.
  • China Grand Auto (600297 CH): Grand Automotive January to September Net 2.91bn Yuan vs 2bn Yuan Year Ago.
  • Glencore (805 HK): Rio Tinto Is Said in Aluminium Asset Talks With GFG: FT.
  • Guoyuan Securities (000728 CH): Guoyuan Sec. Prelim. Q3 Net 376.7mln Yuan vs 443m Yuan Year Ago.
  • Jiangxi Copper (358 HK): Jiangxi Copper Expects Jan.-Sept. Net to Rise 50%-70% on Year.
  • LVGEM (95 HK) Outlook to Negative From Stable by Moody’s.
  • Midea Group (000333 CH): IG LOANS PIPELINE: M&A, Emerging Market Deals, Schuldschein.
  • Ping An Insurance (2318 HK): Ping An 9-Month Life Insurance Premium Income 313.9bn Yuan.
  • Sany Heavy Ind. (600031 CH): Sany Heavy Ind Expects 9-Month Net to Rise up to 937% on Year.
  • Semiconductor Manufacturing (981 HK): SMIC Appoints Liang Mong Song as Co-Chief Executive Officer.
  • Shenzhen Energy (000027 CH): Canadian Solar’s Recurrent to Sell 6 US Plants to Two Buyers.
  • Sinopec (386 HK): Sinopec SEG 9-Month Total Value of New Contracts 26.1bn Yuan.
  • Sinopec (386 HK): Russia May Weigh Lower Div. Tax for Chinese Yamal Partners: IFX.

Japan analyst ratings

  • Create Restaurants (3387 JP): Raised to buy at Ichiyoshi Research.
  • Hitachi Construction (6305 JP): Raised to buy at Jefferies.
  • Komatsu (6301 JP): Raised to buy at Jefferies.
  • Megachips (6875 JP): Reinstated at Mizuho with neutral.
  • Nabtesco (6268 JP): Raised to hold at Jefferies.
  • Toyota Industries (6201 JP): Raised to buy at Daiwa.
  • Start Today (3092): Initiated at Macquarie with outperform.
  • Fanuc (6954): New netural at Mitsubishi UFJ Morgan Stanley.
  • Yaskawa Electric (6506): New neutral at Mitsubishi UFJ Morgan Stanley.
  • THK (6481): New overweight at Mitsubishi UFJ Morgan Stanley.
  • CKD (6407): New overweight at Mitsubishi UFJ Morgan Stanley.
  • SMC (6273): New overweight at Mitsubishi UFJ Morgan Stanley.

Japan stocks

  • Bridgestone (5108): To invest €266mln to boost tire output in Spain, Poland.
  • Daihatsu Diesel Manufacturing (6023): Lifts full-year operating profit outlook 40% to ¥3.5b yen
  • JP Retail Fund (8953): To spend as much as ¥10bn to invest in unit buyback.
  • Kobe Steel (5406): Will likely see its borrowing costs rise amid a data-falsification scandal and that could “put pressure” on its profit, according to SMBC Nikko Securities.
  • Environmental assessment of construction of two coal-fired units at Kobe Works Thermal Power Plant have been delayed indefinitely due to data manipulation scandal.
  • Nihon M&A (2127): Preliminary half-year operating profit at ¥7.1bn, beating company’s forecast by 24%.
  • Ryosan (8140): Preliminary half-year operating profit at ¥3.2bn, beating company’s forecast by 28%.
  • Toho/Tokyo (9602): Half-year operating profit +32% y/y to ¥32.3bn, beating company’s forecast by 11%.

Australasian analyst ratings

  • MOE: Moelis Australia New Hold at Ord Minnett, PT $A5.32.
  • ALU: Altium Cut to Sell at Bell Potter, PT $A10.50.
  • AWC: Alumina New Positive at Evans and Partners, PT $A2.41.
  • BPT: Beach Energy Raised to Hold at Shaw and Partners, PT $A0.70.
  • FPH NZ: F&P Healthcare Cut to Neutral at Forsyth Barr; PT NZ$12.60.
  • MND: Monadelphous Cut to Sell at Morningstar.
  • PRU: Perseus Raised to Buy at Canaccord, PT $A0.75.
  • RIO: Rio Tinto Cut to Neutral at Clarksons Platou.
  • TLS: Telstra Cut to Sell at Erste Group.

Australia stocks

  • ANZ: ANZ Shares Halted in New Zealand Pending Statement on Transaction.
  • BHP: What to Watch in Commodity Markets This Week: Oil, China, Alcoa.
  • GEO NZ: GeoOp Will Revert to N.Z. Listing After Dropping Australian IPO.
  • QAN: Qantas, American Air to Resubmit JV Request to U.S. DOT.
  • IFL: IOOF Is Said to Hold Talks to Buy ANZ’s Wealth Business: AFR.
  • OSH: Oil Search set to issue third-quarter production report.
  • RIO: Rio Tinto Is Said in Aluminium Asset Talks With GFG: FT.
  • SBM: St Barbara to release Sept. quarter production figures.
  • WPL: Woodside Is Said to Delay Some Myanmar Gas Drilling: Reuters.


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  WTI crude hit a two-week high after Baghdad seized oilfields near Kirkuk in response to the outcome of the Kurdish independence referendum (above). Photo: Shutterstock

 

– Edited by Robert Ryan


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