Article / 14 June 2017 at 3:31 GMT

Morning Report APAC: Asia gains early after Wall St rebound

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Markets await the FOMC meeting and announcement on rates
  • Asian markets open mostly higher after US technology shares rebound
  • GBPUSD recovers further, boosted by better than expected UK inflation data
  • CAD continues to strengthen amid market optimism about a rate hike this year 


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

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Speeches

1515 – EC – ECB Vice President Vítor Manuel Ribeiro Constancio speaks at Rome event

1600 – EC – ECB’s Hanson speaks on Estonian, Euro Area outlook 

1600 – EC – ECB’s Jens Weidmann speaks in Frankfurt 

2015 – IT – Bank of Italy governor Ignazio Visco speaks to lawmakers in Rome 

0130 – EC – ECB’s Ilmars Rimsevivs speaks in London

0230 – US – Federal Reserve’s Janet Yellen holds a news conference after FOMC rate decision



Overnight news

US: producer prices were unchanged, in line with economists’ expectations. As reported by the Labor Department, the producer price index for final demand is unchanged for last month followed a 0.5% increase in April. This indicates that the inflation pressure is easing off compared with the start of the year.

Treasury Secretary Mnuchin proposed massive changes to the Dodd-Frank regulations, looking to reduce the power of the Consumer Financial Protection Bureau and oversight of financial institutions, and to put in place some rollbacks.

Europe:  Germany’s ZEW survey of investor optimism dropped to 18.6, lower than market consensus of 21.7, and from 20.6 the previous month. The current situation reading strengthened to 88, higher than the expectation of 85, and from 83.9 the previous month. 

UK inflation resumed its upward trend in May, with CPI YoY printing at 2.9%, higher than the expected 2.7%. That was the fastest pace in four years, despite the contribution of a weaker pound.

 

Foreign exchange

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GBPUSD rebounded further, boosted by better than expected inflation data. However, the market is still cautious about the uncertainty of Brexit negotiations amid the ongoing political debacle.

CAD continued to strengthen amid market optimism about a rate hike this year following BoC Governor Poloz’s comments on rates being too low. 

Emerging: Mexican outperformed and strengthened steadily, supported by cheap valuation, low vols and long positions being added. Now USDMXN is testing the key 18 level, last seen in Aug 2016.  


Foreign exchange movement

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USDCAD 1m vol was higher, as spot continued to move lower on the back of a potential rate hike this year brought up by BoC’s governor. Wait for further forward guidance.

Vols are generally low ahead of the FOMC meeting tonight, with 1d breakeven 0.7% for USDJPY and 0.6% for EURUSD.


Rates
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US yields barely changed ahead of the rate decision in tonight’s FOMC meeting.

Bunds yield were higher, with ZEW survey still at healthy levels, peripherals outperformed lead by Italy amid risk easing. 

Gilt yield was boosted by headline inflation hitting a five-year high of 2.9% y/y, beating market expectation.


Commodities 

 

 

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Equities
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Yesterday’s trading session saw the tech sector recovered with the FAANGS recovering from the selldown last Friday. Nasdaq was the best performer, up 0.73%, while the Dow and S&P 500 were up about 0.45%. It is also worth noting that the two other selldowns in 2017 in the Nasdaq were swiftly recovered as well. Tesla was one of the best performers in the tech sector, up 4.72% as it closed at its all-time high again.

Most European markets managed to close in the green with the exception of the FTSE 100 which was down 0.15%. Best performer was the German Dax, which was up 0.59% as the tech selloff subsided.

Shares of Cheesecake Factory dropped 10% after the company provided its new outlook for its fiscal second quarter. The restaurant chain expects comparable sales for the quarter to be down 1% and would have impact on margin and EPS. The CEO also highlighted that the company experienced “unfavourable weather” that negatively impacted the chain’s same-store-sales for its second quarter. The stock plunged almost 10% and closed at $52.58, its lowest in six months.

Retailer Sears announced on Tuesday that it is cutting 400 jobs to reduce costs by $1.25bn in the 2017 fiscal year and that includes three senior executives. The move came after Sears announced that it will be closing more than 65 Sears and Kmart stores last week, in addition to the 180 closures announced earlier this year. Sears closed 2.56% lower at $6.85.


Asia Pacific Stocks

Hong Kong 

Analyst Ratings: 

- Goodbaby Intl (1086 HK): Cut to accumulate at Guangfa Securities 

- AVIC Aircraft (000768 CH): Raised to buy at HSBC, PT 24.40 Yuan 

- Everbright Int’l (257 HK): Rated new buy at Guangfa Securities 

- Inner Mongolia Xingye Mining (000426 CH): Rated new buy at Cinda Securities 

- Prada (1913 HK): Rated new hold at Kepler Cheuvreux, PT HK$30.40 

- SMIC (981 HK): Raised to outperform at Macquarie 

- Sinopharm (1099 HK): Cut to neutral at CCB Intl, PT HK$36.80 

  

Preview: 

- Energy: China May Power Consumption Rises 5.1% on Year: Daily; China diesel use falls 1st time in a decade as industry slows 

- AAC Technologies (2018 HK): Capital Group raises AAC Tech Stake to 13.12% 

- Anhui Conch (914 HK): Venture Plans to Sell Up to 50m Shares of Conch Cement 

- Bank of China (3988 HK): Cameroon to Borrow $123m for Solar Project 

- Baoshan Steel (600019 CH): 12.9m Shares to Become Tradable June 19 

- China Eastern (670 HK): May Traffic Rises 11.1% on Year 

- China Comm Cons (1800 HK): To Start Rail Project in Malaysia 

- CMEC (1829 HK): China Machinery, Mota-Engil in Pact for Mozambique Railway 

- CCT Fortis (138 HK): Unit Signs LOI with Ferrari for Dealership in H.K. 

- Dalian Port (2880 HK), Yingkou Port (600317 HK): Liaoning Province toMerge Ports Into Merchants-Controlled Group 

- Dazhong Transport (600611 CH): Affiliate Gets Ride-Hailing Permit in Shanghai 

- Dongfang Electric (600875 CH): DFEM Took 409.4m Yuan Asset Impairment for Hangzhou New Energy 

- Dongfeng Motor (489 HK): Honda Adding Staff to Accelerate Chinese SUV Output: Nikkei 

- Evergrande (3333 HK): Had 608.4bn yuan Outstanding Borrowings as of April 18 

- FE Consortium (35 HK): Net Profit HK$1.12bn for year ended March 31 

- Fosun Int’l (656 HK): Gemfields in Talks With Fosun Gold Over Possible Competing Offer 

- HSBC (5 HK): Hires Goldman Sachs’s Rob Ritchie for UK Investment Bank 

- PetroChina (857 HK): Venezuela, China Agree on $2.8b in Financing for Oil Boost 

- Prada (1913 HK): Luxury To Grow 6% year as Performance More Polarized: Kepler 

- Rusal (486 HK): Deripaska Says Carbon Tax Is a Way to Give Paris Agreement Teeth 

- Shanghai Electric (601727 CH): Shanghai Electric’s Public Offer for K-Electric Lapses June 30 

- Shanghai Oriental Pearl Media (600637 CH): Bourse Asks for Details of Oriental Pearl, Microsoft Cooperation 

- SJM Holdings (880 HK): Names Daisy Ho Executive Director 

- Xiabuxiabu (520 HK): Holder Seeks Up to $51m in Share Placement: Terms 

- Yili Industrial (600887 CH): To Set Up Unit for Online Small-Loan Business 


Japan

Analyst Ratings: 

- Daikin (6367): Removed from Japan conviction list at Goldman 

- Fanuc (6954): Raised to buy at Goldman 

- Fujifilm (4901): Cut to neutral plus at Iwai Cosmo; PT cut to 4,500 yen 

- Hitachi Zosen (7004): Downgraded to neutral at Tokai Tokyo; PT 560 yen 

- JSR (4185): Cut to underperform at SMBC Nikko 

- KeePer Technical Laboratory (6036): Rated new Outperform at Daiwa 

- Kubota (6326): Cut to sell at Goldman 

- Kyocera (6971): Upgraded to buy at Mizuho 

- Nippon Shokubai (4114): Cut to neutral at SMBC Nikko; PT 7,190 yen 

- NTN (6472): Removed from conviction list at Goldman, remains buy 

- Okuma (6103): Added to conviction buy list at Goldman 

- Omron (6645): Cut to neutral at Goldman 

- SBS Holdings (2384): Raised to outperform at Mito Securities 

- Seria (2782): Rated new outperform at Daiwa; PT 6,100 yen 

- Showa Denko (4004): Upgraded to buy at Jefferies 

- Suncall (5985): Rated new neutral plus at Iwai Cosmo; PT 700 yen 

- Suruga Bank (8358): Raised to outperform at SMBC Nikko 

- THK (6481): Added to conviction list at Goldman, remains buy 

- Torishima Pump (6363): Cut to neutral at Tokai Tokyo 

- Tsumura & Co (4540): Upgraded to overweight at Morgan Stanley 

- Yamaha Motor cut to sell at Jyske Bank; PT 3,050 yen 


Preview:

- Aeon Mall (8905): Hires banks for sale of 3-year, 6-year, 10-year bonds 

- Asahi Intecc (7747): To raise as much as 4.18b yen via public share sale 

- Don Quijote (7532), FamilyMart UNY (8028): Study tie-up in retail, distribution, citing shrinking population 

- Casino industry: Japan’s ruling coalition submits a bill on tackling gambling addiction 

- Japan Airlines (9201): To lower fuel surcharges for international flights from Aug. 1 

- JFE Systems (4832): Slashes full-year net income outlook by 35.5% to 980m yen 

- Nissan Motor (7201): S&P upgrades rating to A/stable from A-/positive, citing profitability and stability 

- Ono Pharmaceutical (4528): To repurchase as much as 50b yen shares, in its first buyback in 7 years 

- PeptiDream (4587): To conduct 2-for-1 stock split on July 1 

- Sumitomo Chemical (4005): Signs agreement with BASF to develop fungicide 

- Tay Two (7610): To sell 100m yen of shares to one designated investor 

- Ya-Man (6630): To conduct 10-for-1 stock split on Nov. 1 


Australia

Analyst Ratings: 

- Greencross (GXL): Cut to hold from buy at Wilsons 

- Janus Henderson (JHG): New overweight at Morgan Stanley; PT A$52.30 


Preview:

- Crown Resorts (CWN): To see reduced business from Chinese VIPs, CBA says 

- PSivida (PVA): U.S. shares drop amid financing concerns 

- ResMed (RMD): U.S. shares touch record; Needham survey shows sleep market growth 

- Rio Tinto (RIO): CEO says unable to add new aluminum capacity 

- Ten Network Holdings (TEN): Billionaires Murdoch, Gordon pull support for debt 

- Village Roadshow (VRL): To sell 50% in Golden Village to mm2 Asia 


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GBPUSD rebounded further, boosted by better than expected UK inflation data. Photo: Shutterstock

 

– Edited by Susan McDonald



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