Article / 06 June 2016 at 2:32 GMT

Morning Report APAC: Dollar at a loss after NFP shock

APAC Sales Trading Desk / Saxo Capital Markets

  • US NFP rose by just 38,000, the smallest increase since September 2010
  • MSCI's Asia-Pacific shares outside Japan rose 0.4% in early trade
  • Nikkei was hit in early trading - slipping 1.6% after USD skidded against JPY
  • NFP numbers kills bets on the the Fed raising rates in the next two months
  • US ISM Non-Manufacturing dropped to 52.9 from 55.7
  • Fed's Brainard called for more data and result of Brexit before FOMC decision

By Saxo APAC Sales Trading

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

1400: EUR – Germany Factory Orders MoM (Exp. -0.5%, Prev. 1.9%); YoY (Exp. 0.6%, Prev. 1.7%)


1600: EUR  – ECB's Nowotny Presents Austrian Economic Outlook
1600: EUR  – ECB Vice President Constancio Speaks in Frankfurt

Overnight news

  • US: Nonfarm Payrolls was much lower than expected adding 38,000 jobs compared to the 160,000 expected - the worst data since 2010. Data for March and April was revised lower by a collective and materially significant 59,000 jobs.
  • The month-long strike by workers at telecom giant Verizon probably cost 35,100 jobs. The private sector added a mere 25,000 jobs (market estimate: 150,000), the smallest since February 2010. Manufacturing employment fell 10,000 and construction payrolls dropped 15,000, the most since December 2013. Mining employment fell 10,000. Retail payrolls increased 11,400. Wholesale trade employment fell 10,300. Temporary-help jobs declined 21,000. Government payrolls rose 13,000 and healthcare jobs leapt 55,400.
  • The unemployment rate dropped three-tenths of a percentage point to 4.7% (market estimate: 4.9%) which is the lowest level since November 2007. However that was primarily due to the fact that 458,000 Americans gave up their search for work. The participation rate declined 0.2 percentage points to 62.6%.
  • Wage growth was the only positive of the report. Average hourly earnings of private-sector workers increased 0.2% to $25.59. Year-on-year hourly wages rose 2.5%, higher than the 2.1% average during most of this economic expansion.
  • ISM Non-Manufacturing dropped to 52.9 from 55.7 (Exp. 55.3). 
  • US factory orders rose at their fastest pace in six months during April. Reflecting a jump in orders for commercial aircraft factory orders spiked 1.9% after rising an upwardly revised 1.7% in March (Previous: 1.1%). Durable goods orders jumped 3.4%. Orders for non-defense aircraft and parts surged 65.3%. 
  • The US trade deficit widened during April. The trade deficit rose 5.3% MoM to a seasonally adjusted $37.44 billion (Expected: $41.5bn). Exports increased 1.5% while imports rose 2.1%. March’s trade deficit was revised lower by almost $5bn to $35.54bn and was the lowest deficit since December 2013.
  • Fed Speech: Federal Reserve governor Lael Brainard called for the Federal Open Market Committee to wait for more economic data as well as the “Brexit” vote before raising interest rates. “Recognising the data we have on hand for the second quarter is quite mixed and still limited, and there is important near-term uncertainty, there would appear to be an advantage to waiting until developments provide greater confidence.” “The data in today’s labor market report on balance suggest that the labor market has slowed,” he said.

Foreign exchange

The worst NFP number since 2010 pushed rates and the USD much lower on Friday. The market was going more and more for a rate hike in June and July and this NFP is confirming that the second quarter data has been mixed in the US. DXY fell hard from the 100 Day Moving Average  to drop to the support at 94.

Every currency rallied again USD, even emerging markets currencies, most probably on stop losses as the CFTC data is showing that leveraged funds added to their net long USD positions in the week ended 31 May after turning long in the previous week on speculation that the Fed would start hiking rates in June or July.

Foreign exchange movements


The market was caught wrong footed on the big move lower in USDJPY and we saw a lot of payers of Risk Reversal in the pair (Buying of USD Puts). All the volatilities in G10 are overall higher following this poor NFP number.




Treasury yields have tanked to three-week lows following the shocking low number of jobs created in May and downward revisions to the prior months. The probability of a hike in June has declined back to around 6% while a hike in July is about 27%.

Two-year US Treasury yields tumbled 11 basis points to 0.784% and the 10-year was down 10 bps to 1.700%. The 10-year German bund yield nearly touched a fresh all-time low, sinking as low as 0.069% at one point.







US equities opened significantly down after the NFP miss but retraced some of the losses in the afternoon. The Dow Jones Industrial Average dipped 0.2% to 17,807.06 while the S&P 500 dropped 0.3% to 2,099.13.

Volumes totalled 913m shares on the NYSE where advancers edged decliners by 17 to 14. The VIX “complacency” gauge rose 1.2% to 13.47.

European equities also took a big hit on the NFP data release after trading sideways early in the morning. The FTSEurofirst 300 index lost 0.9% to 1,339.47.

The auto sector skidded 2.3% as the reduced expectations for a June/July rate hike weighed on the greenback and saw the euro rally to a four-week high.



The CDS Indices are rising in Europe following another poll favouring the Brexit. Expect the market to be supported until the vote.

Hong Kong market preview

Analyst views

•    Galaxy Entertainment (27 HK): Cut to hold at Daiwa
•    Sands China (1928 HK): Cut to underperform at Daiwa
•    Wynn Macau (1128 HK): Cut to sell at Daiwa

Company news

•    Developers: H.K. existing home prices fall 0.11% on week: Centaline; PBOC Shanghai adds policy framework for real-estate finance; State Council targets stable, regulated home-rental market by 2020
•    Beijing Capital Land (2868 HK): Buys stakes from parent
•    China Oceanwide (715 HK): Gets financial assistance
•    China Shipping Dev (1138 HK): Names new chairman
•    Chongqing Iron (1053 HK): May buy assets from Chongqing Yufu
•    Fosun (656 HK): Ironshore under U.S. probe, Caixin reports
•    Greentown (3900 HK): Jan.-May contract sales 36.9b Yuan
•    HKEx (388 HK): Issues guidance on IPO vetting
•    Huaneng Renewables (958 HK): Power generation rose 43% in May
•    Joyson (600699 CH): Denies report of Takata investment talks
•    REXLot (555 HK): Has consent from convertibles owners
•    Shimao Property (813 HK) May contract sales 7.2b yuan
•    Suning (002024 CH): May unveil Inter Milan deal Monday
•    Tencent (700 HK): WeBank seeks 1.2b yuan in funds: Caixin

Japan market preview

Analyst views

•    Credit Suisse on contractors:
•    Kajima (1812 JP): Cut to underperform
•    Obayashi (1802 JP): Cut to neutral
•    Taisei (1801 JP): Raised to outperform
•    JPMorgan on contractors:
•    Kajima (1812 JP): Cut to neutral
•    Shimizu (1803 JP): Raised to overweight
•    Denso (6902 JP): Cut to Neutral at UBS
•    Hitachi (6501 JP): Downgraded to neutral from neutral plus at Iwai Cosmo
•    Kawasaki Heavy Industries (7012 JP): Raised to neutral from underperform at SMBC Nikko Securities
•    KDDI (9433 JP): Raised to neutral at JPMorgan
•    Mitsui Engineering & Shipbuilding (7003 JP): Cut to neutral from outperform at SMBC Nikko Securities
•    Paramount Bed (7817 JP): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley
•    Santen Pharma (4536 JP): Raised to buy at Goldman
•    Takata (7312 JP): Ningbo Joyson denies report of investment talks
•    Toho Titanium (5727 JP): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley

Company news

•    Artra Corp. (6029 JP): To raise up to 574.2m yen from a public sale of shares as soon as June 13; co. to shift Tokyo listing from Mothers market June 23
•    Asahi (2502 JP): Explores $7.3b bid for SABMiller beers, Sunday Times reports
•    GungHo (3765 JP): SoftBank to sell 248.3M shrs back to GungHo for 294 yen each
•    HI-LEX Corp. (7279 JP): Oper. profit for 1H ended April 30 rose 8.6% to 10.3b yen; full-year oper. profit forecast maintained at 19.1b yen
•    Japan Airlines (9201 JP): Seeking partnerships in China, Southeast Asia, Nikkei reports
•    JX Holdings (5020 JP): JX Nippon Oil & Energy takes 10% stake in LNG subsidiary of Petronas; co.’s 45% share in U.K. license for Utgard field acquired by Statoil
•    Mitsui High-Tec (6966 JP): 1Q oper. profit falls 21.6% y/y to 353m yen; full-year oper. profit forecast maintained at 1.6b yen
•    Nissan Motor (7201 JP): China May vehicle sales rose 3.4% y/y
•    Panasonic (6752 JP): Tesla may purchase batteries from Samsung SDI, Nikkei reports
•    Tokyo TY Financial (7173 JP): To offer 15b yen in preferred shares to Sumitomo Mitsui Trust (8309)
•    Toyota Motor (7203 JP): China May vehicle sales rose 12% y/y

Australia market preview

Analyst views

•    Macquarie Group (MQG@AU) cut to underperform vs buy at APP Securities

Sources: Bloomberg / CIMB

US unemployment seems to be going down, but the NFP print
 showed that not enough jobs are being added. Photo: iStock

– Edited by Adam Courtenay

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