Morning Report APAC: Forex in focus following German, NZ elections
- Merkel was re-elected, but support for the far right Alternative for Germany rose
- New Zealand faces uncertainty following the election of a hung parliament
- Precious metals strengthened amid rising geopolitical tension over Nth Korea
- Crude prices rose on talk of output cuts at the Opec meeting in Vienna on Friday
- The resumption of Brexit talks this week could impact GBP
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
- 1330 – Japan: Bank of Japan governor Haruhiko Kuroda gives a speech in Osaka
- 1500 – EC: European Central Bank vice president Vítor Constâncio speaks in Frankfurt
- 2030 – US: Fed’s Dudley speaks on workforce development
- 2100 – EC: ECB’s president Mario Draghi speaks in Brussels
- 2245 – EC: ECB executive board member Benoit Coeuré chairs a panel is Frankfurt
- 0040 (on Tuesday) – US: Chicago Fed president Charles Evan speaks on economy, monetary policy
- 0515 – Australia: Assistant Governor Michele Bullock takes part in panel in Sydney
- 0630 – US: Fed’s Neel Kashkari speaks in Grand Forks, North Dakota
Overnight news, Germany
- Angela Merkel won her fourth term despite that the CDU/CSU party has seen its worst result in almost 70 years, but will remain the largest in parliament. The worry came from the populists' rise. The far right Alternative for Germany (AfD) has won its first seats and is set to be the third party in parliament.
- Merkel said she would listen to the "concerns, worries and anxieties" of voters of the AfD in order to win them back. She also said her government would have to deal with economic and security issues as well as addressing the root causes of migration - one of the main reasons behind the AfD's rise.
Overnight news, New Zealand
- New Zealand's ruling National Party gained the most votes in the country's general election but it does not have enough seats to govern without forming a coalition. The National Party got 46% (which won 58 seats), while support for Labour was 35.8% (45 seats). The populist New Zealand First Party had 7.5% (9 seats) of the vote so far.
- The Nationals' Bill English said "In the next few days we will begin negotiations with NZ First,". "We intend to form a strong, stable government." Labour leader Jacinda Ardern, after being party leader for just seven weeks, called English to acknowledge National had won the most seats but said it wasn't over yet. "There are conversations to be had," she said, confirming that she too expected to be talking to Peters.
Overnight news, North Korea
- North Korea's foreign minister fired back at Donald Trump, saying the president was the one on a suicide mission, having pushed Pyongyang to the tipping point. Ri Yong Ho spoke at the UN, hours after US bombers flew near the North. Separately, Russian Foreign Minister Sergei Lavrov said Kim Jong Un's possession of nuclear weapons prevents a US first strike.
- Beijing slapped fresh sanctions on Pyongyang, curbing some oil product exports. China halted the outbound shipment of condensate and LNG to North Korea from September 23, and will limit exports of refined oil products starting October 1, the Ministry of Commerce said. The country also banned imports of textiles from its neighbour.
Overnight news, Iran
- Iran tested a new ballistic missile that is reportedly capable of carrying multiple warheads, the nation's state-run broadcaster announced Saturday.
- Iran unveiled the ballistic missile Friday at a military parade in Tehran and successfully tested it the same day, Press TV reported. It said Iran released footage of the test-launch. Called the Khorramshahr missile, the weapon has a range of 2,000 kilometers and can carry multiple warheads, according to Press TV. "The Khorramshahr missile has become smaller in size and more tactical and it will be operational in the near future," the broadcaster said. "We will promote our defensive and military power as much as we deem necessary," Rouhani said. "We seek no one's permission to defend our land."
- President Trump responded to the news with a tweet on Saturday: "Iran just test-fired a ballistic missile capable of reaching Israel. They are also working with North Korea. Not much of an agreement we have." The US extended sanctions relief for Iran last week as part of the agreement, which Trump has described as "the worst deal ever."
- French President Emmanuel Macron on Tuesday said while the 2015 Iran deal was not perfect, the international community should stick with it, or risk facing another situation like North Korea.
- It was a quiet night overall yesterday despite the European and New Zealand elections. Watch the GBP this week when Brexit talks resume. We have had some geopolitical news this weekend, which could have an effect on the market if they are escalated.
- DXY is still hovering around 92.00 for the whole month. The consolidation continues at the lows and we should get some strong resistance below 93.00.
- EURUSD is still trying to break the support trend line at 1.1943. Looking at the graph, 1.2000 is now the level chosen by funds as a strong resistance and a selling area.
- AUDUSD managed to rally back helped by AUDNZD, which bounced back hard after the New Zealand election. We still trade above the 200 weekly average at 1.0758 and will be the only main support.
- Emerging Markets: if emerging markets are a good indicator of the market’s mood, then the geopolitical events don’t seem to be having a strong impact on the market. USDEM is down 0.4% overall with no outflows to note. The USD selling trend and bond inflows should resume slowly.
Foreign exchange movements
- It seems that some real money and funds still have the view that EUR will break 1.2000 and there has been good demand of the 1.2200 strike in EUR for mid to end October.
- US treasuries managed to hold earlier gains due to a flight to safety, after the North Korea foreign minister talked about possible hydrogen bomb tests in the Pacific Ocean in response to Trump's threats.
- UK gilts rose as Therese May’s Brexit speech pushed yields lower.
- US stocks were mixed on Friday as health care stocks managed to pair most of their losses. The S&P500 rallied 1.62 points to 2,502.22 with the best performing sector Telecom Services rise by 1.35%.
- T-Mobile gained 1.07%, after it was reported that it is close to agreeing to tentative terms on a deal to merge. Japan's SoftBank, which controls Sprint, would reportedly own between 40 to 50% of the combined company. Sprint jumped by 6.23%.
- Apple's dropped by 0.98% latest version of the iPhone, the iPhone 8, starts shipping on Friday with mixed reviews.
- Tesla dropped by 4.2% after it reports that it will discontinue its cheapest Model S, the rear-wheel-drive 75. Tesla is shifting to an all-wheel-drive lineup for the Model S, to simplify its product offering.
Asian equities preview
Hong Kong analyst views
- HNA Infrastructure (357 HK): H Shares New Buy at Oriental Patron.
- Bank of China (3988 HK): BOC Affirmed BY S&P; Agricultural Bank Issuer Ratings May Be Cut.
- Guangshen Railway (601333 CH): Guangshen Railway A Shares Upgraded to Buy at UBS; PT 6.28 Yuan.
- Health & Happiness H&H (1112 HK): Health & Happiness H&H Upgraded to Hold at HSBC; PT $HK35.
- Huaneng Renew (958 HK): Huaneng Renew H Shares Initiated at Maybank with Buy; PT $HK3.30
- ICBC (601398 CH): ICBC, CCB Affirmed By S&P; Outlooks Stable.
- Longyuan Power (916 HK): Longyuan Power H Shares Rated New Buy at Maybank; PT $HK7.10.
Hong Kong stocks
- Bank of China (3988 HK): China’s Top 5 Banks Halt North Korea Transactions: Mainichi.
- China Coal (1898 HK): Former China Coal Energy President Expelled From Communist Party.
- China Gas (384 HK): China Gas to Work With Shandong Province in Shift Away From Coal.
- China Telecom (728 HK): China Telecom, TPG Are Said to Mull Buying Stake in Oi: Valor.
- CK Infra (1038 HK): EU Clears Ista Group/CKI/CKP Deal.
- CSPC Pharma (1093 HK): CSPC Pharma Treatment Granted Orphan Drug Status by FDA.
- Dongfeng Motor (489 HK): Dongfeng, Nissan China to Recall 1,635 Infiniti Vehicles.
- Fuyao (3606 HK): Fuyao Plans 3b Yuan Suzhou Unit For Overseas Business: News.
- Gree Electric (000651 CH): Gree Electric Says It Doesn’t Seek Control of Shanghai Highly.
- Irico Display (600707 CH): Irico Display, Corning Unit Agree on Sichuan JV.
- Leshi Internet (300104 CH): Leshi Internet Plans to Buy Finance Assets of Leshi Investment.
- NetDragon (777 HK): NetDragon Websoft Raises $125mln in Top-Up Placement: Terms.
- Ping An Insurance (2318 HK): Tsumura to Sell 27b yen of Shares to Ping An Insurance.
- Shandong Weigao (1066 HK): China’s Weigao Group Forms JV to Acquire Argon Medical Devices.
- Sinopec (386 HK): Sinopec Says Wang Yupu Resigns as Chairman.
- TCL (000100 CH): TCL Multimedia Names Kevin Wang Cheng CEO Effective October 1.
Japan analyst views
- Amano (6436): Rated new outperform at Tokai Tokyo Securities.
- JSP (7942): Rated new neutral at Daiwa.
- Lasertec (6920): Rated new positive at Storm Research.
- Mitsubishi Motor (7211): Raised to outperform from neutral at Tokai Tokyo Securities.
- NSK (6471): Raised to buy from neutral at Mizuho.
- Sekisui Plastics (4228): Rated new outperform at Daiwa.
- Tsubakimoto Chain (6371): Cut to neutral from outperform at SMBC Nikko.
- Global Group (6189): To move Tokyo listing from Mothers to 1st section.
- Hamamatsu Photonics (6965): To acquire U.S.-based Energetiq Technology for $42mln.
- Hokkaido Electric Power (9509): Won’t pay interim dividend.
- Kyushu Leasing Service (8596): Revises up full-year operating profit forecast 3.4% to ¥3bn.
- Miraca Holdings (4544): Expects 1H net loss of ¥5.8bn instead of ¥6.7bn in profit; lifts full-year net income forecast 65% to ¥16.5bn.
- Murata Manufacturing (6981): To acquire U.S. healthcare IT venture company Vios for $102mln.
- Nitori Holdings (9843): September same-store sales +5.4% y/y.
- Ono Pharmaceutical (4528): Gets Japan approval for Opdivo use in stomach cancer; FDA approves Opdivo for intravenous use of some carcinoma patients; AbbVie and Bristol-Myers in pact to evaluate combo of ABBV-399 and Opdivo in type of lung cancer.
- Rail equipment: Alstom and Siemens in talks about possible combinationof rail businesses.
- Right On (7445): September same-store sales fall 11% y/y.
- Synchro Food (3963): To move Tokyo listing from Mothers to 1st section.
- Tsumura & Co (4540): To raise 27.3b yen by selling ~10% stake to Ping An Insurance.
Australia analyst views
- no analyst reviews announced today
- Premier Investments (PMV) full-year results.
- Fletcher Building (FBU NZ): Fletcher Building Says KPMG Reviewing Key Projects.
- Fonterra (FSF NZ): Fonterra Maintains 2017-18 Milk Price Forecast at NZ$NZ6.75/kg.
- Z Energy (ZEL NZ) says FY18 profit guidance unlikely to change despite pipeline outage.
Wellington, the New Zealand capital; support from the populist New Zealand First party will decide who governs following the close result in Saturday's election. Photo: Shutterstock
– Edited by Robert Ryan
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