Article / 20 May 2016 at 2:32 GMT

Morning Report APAC: Crude gains ground on easing in US dollar rally

APAC Sales Trading Desk / Saxo Capital Markets
  • June is definitely a" live" meeting in terms of rate decisions, says a Fed speaker
  • A yes Brexit vote may prompt a Fed pause in hiking rates
  • Equity markets generally weakened as investors reacted to Fed commentary
  • US jobless claims fell to just 278,000 from 294,000 in the previous reading
  • Precious metals continue to drop, and silver was the main metal to move lower
  • Oil rallied on easing in the USD rally and news about Nigeria’s oil industry
  • Bank Indonesia and Bank Negara Malaysia kept their rates on hold.

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time: GMT plus 8 hours)

1200: MYR – CPI YoY (Est. 2.1%, Prev. 2.6%)
1400: EUR – Germany PPI MoM (Exp. 0.1%, Prev. 0.0%), YoY (Exp. -3.0%, Prev. -3.1%)
2030: CAD – Retail Sales MoM (Exp. -0.6%, Prev. 0.4%), Ex Autos MoM (Exp. -0.4%, Prev. 0.2%)
2030: CAD – CPI NSA MoM (Exp. 0.3%, Prev. 0.6%), YoY (Exp. 1.7%, Prev. 1.3%)
2030: CAD – CPI Core MoM (Exp. 0.1%, Prev. 0.7%), YoY (Exp. 2.0%, Prev. 2.1%)
2030:: CAD – GDP MoM (Exp. 0.1%, Prev. 0.3%), YoY (Exp. 1.0%, Prev. 0.8%)
2130: CAD – Quarterly GDP Annualized 3Q (Exp. 2.3%, Prev. -0.5%)
2200: USD – Existing Home Sales MoM (Exp. 1.3%, Prev.  5.1%)


2100: USD – Fed's Daniel Tarullo Speaks in Washington

Overnight news

  • US: Initial jobless claims fell to 278,000 in the week ending May 14 (previous: 294,000), broadly in line with expectations of 275,000
  • Philadelphia Fed Business Outlook dropped to -1.8 (Exp. 3.0) showing sluggish factory activity in the region
  • INDONESIA: Bank Indonesia stays on hold but leaves door open for further easing (Bank Indonesia Lending at 7.25%, Deposit, 4.75%, Reference Rate at 6.75%, 7D Reverse Repo at 5.50%)
  • MALAYSIA: BNM is on hold at 3.25% with a more neutral tone under new governor

Fed speeches: There were a few Fed speakers again last night. New York Federal Reserve President William Dudley said:

  • "To reiterate what some of my colleagues have said, June is definitely a live meeting depends on how the economy is going to evolve.
  • "If I get convinced that my own forecast is sort of own track, then I think tightening in the summer, with a June or July frame, is really a reasonable expectation
  • "It's really a question of whether the economy cooperates in terms of my personal expectations."
  • "Looking at the market expectations, it looks like June is roughly one-third of a percent and a tightening through the July meeting looks like about 60% in Fed funds futures market
  • "Clearly looking back a few days ago I think there's a pretty strong sense among FOMC membership that the market was not putting a sufficient probability in June or July meeting quite pleased" to see the probability of a rate hike rising

Richmond Federal Reserve President Jeffrey Lacker said that the case for a June rate hike is pretty strong:
  • "My sense of things is that markets took the wrong signal from us pausing in March and April. Their interpretation was that the threshold for pause was fairly low, and I think they set it too low"
  • "If prospects looked uncertain enough and the direct expected consequences [of a yes Brexit vote] looked problematic enough, I might be persuaded to pause and wait until July"
Federal Reserve Vice Chairman Stanley Fischer said:
  • "What we need most, now that we are near full employment and approaching our target inflation rate, is faster potential growth"

Foreign exchange


The Fed minutes effect slowed down overnight with a temporary stop in the USD rally. We actually saw some profit taking ahead of the week-end in emerging market currencies such as USDSGD and USDKRW for example. 

The GBP continued to outperform following the recent poll from Ipsos Mori showing 47% in favour of staying in the European Union vs 41% to leave.

The Australian dollar confirmed the break below the 200 day moving average (0.7258) and should become the initial resistance for the time being.

As usual, USDCNH back end vols are still bid on the back of hedge funds buying upside even though the local banks are still selling the forwards.

Following the break lower in the Australian dollar, there are buyers of AUD gamma with no specific direction noted.



Treasury yields initially declined as Fed Vice Chairman Stanley Fischer was silent on June, then pared losses as New York Fed president William Dudley confirmed that the meeting will be a "live" one in decision-making terms; 10 year down 1 basis point to 1.85%.

The US auction of $11 billion in 10-year Treasury Inflation-Protected Securities is expected to draw a yield around 0.270% according to the average forecast of four of the Federal Reserve’s 23 primary dealers.







Equity markets have generally weakened over the past 24 hours as investors have reacted to the Fed commentary and priced in the increased likelihood of a summer Fed rate hike. The S&P500 end 0.5% lower for day, but well off the lows after being down 1.1% during the morning.

However, surprisingly upbeat results out of Walmart (up 9.5%) failed to counter the narrative that the Fed is now poised to move in June. After the close, Gap reported in line with expectations but announced it would close 75 international stores, including 53 Old Navy locations in Japan.



Bank Indonesia and Bank Negara Malaysia kept their rates on hold. Adding to that a better expectation of a rate hike in the US are triggering outflows in the bonds markets in these two southeast Asian countries pushing the CDS indices higher.

The fear of debt for China is still in the mind of the major funds globally which also supports the CDS market

Hong Kong equities preview

Analyst views

  • China Resources Power (836 HK): Raised to buy at UBS.
  • Cosmo Lady (2298 HK): Rated new buy at Haitong.
  • Datang Intl Power (991 HK): Cut to sell at UBS.
  • Huaneng Power (902 HK): Cut to sell at UBS.
  • Shanghai Fosun Pharma (600196 CH): Assumed buy at Jefferies.
  • Soho China (410 HK): Rated new sell at Haitong Intl.
  • Yuexiu Property (123 HK): Rated new buy at China Merchants Securities.

Company news

  • BOC (3988) is planning to sell ~301mln yuan of its debt through bonds backed by non-performing assets, first bad loan securitization Since 2008.
  • HSBC (5) plans to close down six of its 13 branches in Bangladesh this year as part of its business strategy (New Age).
  • Kingsoft (3888) Q1net income +16.9% YoY to 133.8mln yuan.
  • ZTE (763) HKEX allows ZTE's ZTEsoft, a non-wholly owned subsidiary, to list on new third board.
  • China Unicom (762) Apr 4G net additions -3% MoM to 4.38m while mobile billing subscribers net additions -45% Mom to 609,000
  • CSCL (2866) to subscribe to Kingray’s new share with 1.5bn yuan.
  • Parkson Group (3368) Q1 net loss narrowed to just 17.8mln yuan, against a loss of 27.3mln yuan last year.
  • Anta Sports (2020) Q4 order value of co’s branded products sees low double-digit growth YoY.
  • China Environmental Energy(986) entered into agreement to sell 93.33% stake in Ideal Holding Co, which mainly engaged in recycling business, for $HK150m.
  • TCL (1070) to form strategic cooperation with Elaraby, the largest home appliance enterprise in Egypt.
  • Poly Ppty (119)’s unit to form joint venture with related co Shandong Heshun to develop a land project in Jinan on a 70:30 basis and target injection of a total of 160mln yuan.
  • Genclore (805) CEO says ’hopefully’ this year is better than 2015 and company is prepared for current or even lower commodity prices.
  • Cogobuy (400) Q1net profit +19% YoY to 85.1mln yuan.

Japan equities preview

Analyst views

  • Disco (6146 JP): Cut to neutral from neutral plus at Iwai Cosmo.
  • Hitachi High-Tech (8036 JP): Rated new buy at Jefferies.
  • Mitsui (8031 JP): Raised to neutral at Goldman.
  • Musashi (7521 JP): Cut to neutral from buy at Ichiyoshi Research.
  • Resona (8308 JP): Raised to outperform from market perform at Keefe, Bruyette & Woods.
  • Ricoh (7752 JP): Raised to neutral at Mitsubishi UFJ-MS.
  • Ricoh Leasing (8566 JP): Credit rating cut to A- from A at S&P.
  • Screen (7735 JP): Rated new hold at Jefferies.
  • Shiseido (4911 JP): Raised to buy at Haitong.
  • Sumitomo (8053 JP): Cut to sell at Goldman.
  • Teijin (3401 JP): Raised to buy at Nomura.
  • Tokuyama (4043 JP): Raised to hold from underperform at Jefferies.
  • Ushio (6925 JP): Cut to neutral from overweight at Mitsubishi UFJ Morgan Stanley.

Company news

  • Hitachi High-Technologies (8036 JP): Rated new buy at Jefferies, PT ¥4,000.
  • Kayac (3904 JP): To split shares two-for-one on July 1.
  • Mitsubishi Motors (7211 JP): MUFG raises stake in co. to 7.23% from 6.19%.
  • Sekisui Plastics (4228 JP): To conduct 1-for-2 reverse split October 1.
  • Shidax (4837 JP): Preliminary full-year net loss ¥7.12bn vs co. forecast ¥1.5bn loss
  • Shinkin Central Bank (8421 JP): Full-year net income ¥42.8bn versus ¥42bn co. forecast; targets ¥39bn for current fiscal year.
  • Sinanen Holdings (8132 JP): To conduct one-for-five reverse split October 1.
  • Wellnet (2428 JP): To split shares on a two-for-one basis on July 1.

Australia equities preview

  • Mantra Group (MTR AU) raised to buy vs hold at Bell Potter.
  • James Hardie (JHX AU) cut to sell vs neutral at Citi.
  • Metcash (MTS AU) raised to outperform at Credit Suisse.

Source: Bloomberg / CIMB


 Crude prices gained ground on easing in the US dollar rally and news about Nigeria’s oil industry. Photo: iStock

– Edited by Robert Ryan

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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