Article / 22 July 2016 at 2:48 GMT

Morning Report APAC: Equities rally takes a breather as crude falls

APAC Sales Trading Desk / Saxo Capital Markets
  • The ECB kept its powder dry and left the refinancing rate at 0%
  • It said any fallout from Brexit would be countered by using all tools in its mandate
  • Gold rebounded from a three-week low
  • Oil is headed for a decline for the week after falling overnight
  • Silver, platinum and palladium gained overnight

By Saxo APAC Sales Trading

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


1125: GBP – Bank of England Governor Mark Carney, China’s premier Li Keqiang, IMF’s Christine Lagarde speak in Beijing

Overnight news

  • European Central Bank: The ECB kept its powder dry and left the refinancing rate at 0%, the deposit rate at -0.4% and asset purchases at €80bn per month. The ECB reiterated that any economic fallout from Brexit would be countered by using all instruments in its mandate.

  • US: The June existing home sales report was very strong, with the annualized rate of sales rising a bit more than 3% y/y to a nine-year high of 5.57 million. The market's biggest challenge is still supply: inventory was 5.8% lower y/y, the 13th consecutive month of declines.

Foreign exchange


EURUSD tried to move higher on the ECB outcome bet met resistance at 1.1060 and settled to its starting position of 1.1020. Talk of strong USD data was a factor in the rally fading.

Other net thematic interest has been shifted towards light USD selling against JPY, and AUD, with light USD buying against MXN.

GBPUSD showed limited reaction to the June retail sales and budget, as this was mostly pre-referendum information.

NZDUSD is still stuck at 0.7000 and while dialogue around the next Reserve Bank of New Zealand move has shifted from potentially 25 basis points to potentially 50 bps, our New York trader is worried about being short.

Foreign exchange volatilities



Treasuries rebounded following losses in both stocks and oil and as European sovereign bonds declined in the wake of the ECB meeting.

US government sold $13bn of 10-year TIPS at a yield of 0.045%, the lowest since May 2013. The bid-to-cover ratio rose to the highest level in 16 months. Primary dealers, who are obligated to bid at U.S. sales, received only 23.9% of the debt, reflecting robust demand.






The Dow Jones Industrial Average retreated 0.42%, ending a streak of all-time closing highs. The S&P 500 fell 0.36%, dragged down by losses in industrials (-1%), energy (-0.9%) and materials (-0.6%), while utilities (+0.6%) and healthcare (+0.4%) were the lone winners.

Shares in mining gear maker Joy Global Inc., soared 20% after Japanese construction machinery giant Komatsu Ltd. (+2.26%) said it has agreed to buy Joy for $2.89 billion, $28.30 per share in cash, a 20% premium to Wednesday’s close.

European stocks edged lower as ECB president Mario Draghi offered little hint of additional stimulus in the very near-term.

Airlines stocks plunged after Deutsche Lufthansa (-5.7%) and easyJet PLC (-5.3%) signalled that the recent terrorist attacks and political turmoil in Europe were weighing on their businesses.

Hong Kong

Analyst Ratings

  • ICBC (1398 HK) raised to ’outperform’ at Credit Suisse.
  • CM BANK (3968 HK)  raised to ’outperform’ at Credit Suisse.
  • Sun Art Retail Group (6808 HK): Rated new “sell” at Haitong International.
  • Tingyi Cayman (322 HK): Downgraded to “sell” from “neutral” at Haitong International.


  • Bankrate (RATE US): China unit suspends business from August 1.
  • Bestway Intl (718 HK) to take control of Hua Lien.
  • Citic Bank (601998 CH): CBRC approves Li Qingping as bank chairperson.
  • China National Building Material (3323 HK): Issues profit warning.
  • Citic Bank (998 HK): Gets CBRC approvals for chairperson, president.
  • Citic Securities (600030 CH): H1 net 5.32bn yuan vs 12.5bn yuan year ago.
  • Fosun (656 HK) bought Wolverhampton Wanderers for £30mln.
  • ICBC (1398 HK): Gets CBRC approval for Wang Bairong as chief risk officer.
  • Nirvana (1438 HK): Appoints Somerley to advise on proposed privatization.
  • Shenhua (1088 HK) said to seek CGN merger to form $204 billion power giant.
  • Sichuan Guodong Construction (600321 CH) in Sheffield, UK investment pact.
  • Sihuan Pharma (460 HK) bought back 36.9m shares for HK$68.5m Thursday.
  • Tencent (700 HK) disciplined over Xi Jinping headline error, SCMP says.
  • Vanke (2202 HK), Jushenghua summoned by CSRC for talks over dispute.
  • Want Want China (151 HK) bought back 10m shares for $HK50.7mln Thursday.


  • IPhone cutback hurts Japanese component makers.
  • GPIF plans socially responsible investment index.
  • Nikon Q1 Operating Profit Seen Up More Than Double.
  • Fujifilm to Bid for Takeda Research Reagents Unit.
  • Watchdog eyes fines for foreign cartel members.
  • Nippon Gas three-month operating profit Seen about ¥4.5bn.
  • Mitsui OSK to Open Uruguay LNG Terminal in 2018.


  • 1300 hours: Ricoh Leasing (8566 JP).
  • 1500: Tokyo Steel Manufacturing (5423 JP)
  • 1500: JAFCO (8595 JP).
  • 1500: Nidec (6594 JP).
  • 1500: Fujitsu General (6755 JP).

Analyst Ratings

  • GMO Internet (9449 JP): Raised to overweight at Morgan Stanley MUFG.
  • Monotaro (3064 JP): Cut to equalweight at Morgan Stanley MUFG.
  • Start Today (3092 JP): Cut to equalweight at Morgan Stanley.
  • Yahoo Japan (4689 JP): Raised to overweight at Morgan Stanley.
  • Zojirushi (7965 JP): Raised to outperform from neutral plus at Iwai Cosmo.

Source: Bloomberg

 Gold has rebounded from a three-week low, while silver, platinum and palladium rose overnight. Photo: iStock

– Edited by Robert Ryan

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