Article / 08 June 2016 at 3:16 GMT

Morning Report APAC: GBP rallies on 'no news'

APAC Sales Trading Desk / Saxo Capital Markets

  • The USD selloff continued at a slower pace following the poor payroll number
  • Emerging markets currencies are the beneficiaries of the USD selling
  • The GBP rallied 130 pips on no apparent news
  • The S&P 500 hit its highest level since late July before profit-taking set in

By Saxo APAC Sales Trading

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

  • 0750: JPY – GDP SA QoQ (Exp. 0.5%, Act. 0.5%), Annualised (Exp. 1.9%, Act. 1.9%)
  • 1630: GBP – Industrial Production MoM (Exp. 0.0%, Prev. 0.3%), IP YoY (Exp. -0.4%, Prev. -0.2%) 
  • 1630: GBP – Manufacturing Production MoM (Exp. -0.1%, Prev. 0.1%), YoY (Exp. -1.5%, Prev. -1.9%) CNY – China Exports YoY (Exp. -4.0%, Prev. -1.8%), Imports YoY (Exp. -6.8%, Prev. -10.9%) CNY – Trade Balance (Exp. $55.7Bn, Prev. $45.56bn)  

Overnight news

United States

  • US nonfarm productivity fell at a slower than first estimated rate in Q1 but has now declined in four of the last six quarters. Productivity, a measure of hourly output per worker, contracted at a 0.6% annualised rate (Exp: -0.6%), an improvement from the initial estimate of minus 1.0% last month. 
  •  Output per worker was revised to 0.9% (Prev: 0.4%). Unit labour costs rose at an upwardly revised 4.5% (Exp: 4.0%) from the initial estimate of 4.1%. Hourly compensation increased at a 3.9% annual rate and rise 3.7% over the past year, the largest annual gain in two years. 

Foreign exchange


The USD selloff continued in a slower pace following the very poor NFP. Federal Reserve chair Janet Yellen’s speech has not altered completely the big stops we had in the long USD.

Everybody was asking yesterday why GBP rallied 130 pips so quickly on no apparent news and the answer is "we don’t know". We asked everyone we know in the street and got no answers. Some put that move on a model fund, which could be possibility.

Emerging markets currencies are the most beneficiaries of the continuous USD selling. Now we have confirmation that the market was heavily positioned for imminent US rate hikes and was long USD/EM. 

USDKRW moved from 1200 to 1158 in one week, gapping to below the 200d MA. USDSGD had a similar move going from 1.3800 to 1.3525 looking closely to the lows of the year at 1.3400. USDBRL is trading at the lows of the year at 3.4420 from a high of 3.60 few days ago .

With USDJPY quite offered, the market is buying gamma again and USD puts. USDCNH always finds a way to retrace after few days of bidding interest and the volatilities dropped significantly on this move lower in the USD, similarly to USDSGD.



Interest rates declined led by the German 10-year bund yield which fell to a fresh record low of 0.045% ahead of the European Central Bank implementing corporate bond purchases and the US 10-year Treasury yield fell to 1.72. 

The interruption in the Fed’s June tightening plan has spurred a rally in risk appetite and return to investors who stayed on the sidelines in May. Despite the higher yields seen in the Australian 10-year government bond in the wake of yesterday's Reserve Bank of Australia statement, we would expect a drop in yields today. 







US stocks closed marginally higher with the S&P 500 edging 0.13% up to 2112.13 after paring most of its gain in the final hour of trading. WTI crude oil settled above $50/barrel for the first time in over 10 months and a rally in energy producers offset slumping healthcare and bank shares – Goldman Sachs posting among the biggest declines in the Dow. 

The Dow briefly traded above the psychologically key 18,000 level for the first time since April 28 and the S&P 500 hit its highest level since late July before profit-taking set in.

United Natural Foods gained 14% after boosting its annual earnings and sales forecasts. Alexion Pharmaceuticals tumbled 11% after its drug for a rare neuromuscular disease didn’t meet its primary goal in a final-stage trial.




The rally seen in Treasuries the past two days has pushed lower the CDS indices, doing some catch up. The main movers being the Itraxx Europe.

Hong Kong 

Analyst views

  • China Comm Const (1800 HK): Cut to hold at Morninstar 
  • China Galaxy Securities (6881 HK): Raised to hold at Daiwa 
  • China Mobile (941 HK): Cut to hold Deutsche Bank 
  • China Shenhua (1088 HK): Cut to hold at Morningstar 
  • Evergreen Marine (2603 TT): Raised to buy at President 

Equity preview

  • Chow Tai Fook(1929) FY net profit down -46.1% YoY to HK$2.9bn vs est of HK$3.2bn; a net forex loss of HK$229mn due to RMB volatility 
  • CKH(1) and VimpelCom made a formal offer of concessions to EU antitrust regulators probing their deal to combine Italian mobile phone units
  • Yuzhou PPT(1628) May contracted sales was RMB2.28bn, +120% YoY; contracted sales for the first five mths was RMB10.4bn, +150% YoY 
  • Yuexiu PPT(123) May contracted sales was RMB2.1bn, -13% YoY; contracted sales for the first five mths was RMB13.5bn, +66% YoY 
  • Central China Real Estate(832) May contracted sales was RMB2.6bn, +152% YoY; contracted sales for the first five mths was RMB5.3bn, +21.1% YoY 
  • Newtree(1323) issued profit warning, sees substantial loss for the year ended March 31, 2016 
  • China Reinsurance(1508) says its Singapore branch licensed to carry out general business as reinsurer in country 
  • Guolian Sec(1456) May net profit was RMB61.8mn, +23% MoM 
  • Skyworth Digital(751) May TV sales +15% YoY to 1.059mn units 
  • Far East Horizon(3360) plans to issue 2bn yuan of asset-backed notes by selling leases to a special-purpose trust set up by Ping An Trust; it is China's first asset-backed note sale via trust 
  • Hang Fat(911)'s ED Yeung Wing Yan said he was “coerced and deceived” into signing 1.2bn Hang Fat shares over to a company controlled by Huishan Dairy chair Yang Kai in Feb 
  • Guangdong Land(124) to buy Buxin Land rights for RMB2.27bn 
  • Kaisa(1638)'s default offshore bond rallied 167% amid restructuring 
  • Chuan Hld(1420) debut today, grey market closed at HK$0.74, down 15.9% vs listing price of HK$0.88 


Analyst views

  • Chubu Electric (9502 JP): Raised to buy at Mizuho 
  • Daiwa House Industry (1925 JP): Raised to outperform from neutral at SMBC Nikko Securities 
  • Kajima (1812 JP): Raised to buy from hold at Jefferies 
  • Kansai Paint (4613 JP): Cut to hold from buy at Jefferies 
  • Rinnai (5947 JP): Cut to underperform from neutral at SMBC Nikko Securities 
  • Sony (6758 JP): Raised to hold at BNP Paribas 
  • Sompo Japan (8630 JP): Raised to buy at Daiwa 
  • Sumitomo Forestry (1911 JP): Raised to neutral from underperform at SMBC Nikko Securities 
  • Tokio Marine (8766 JP): Raised to buy at Daiwa 
  • Toto (5332 JP): Lowered to underperform from neutral at SMBC Nikko  

Equity preview

  • AI Holdings (3076 JP): Fidelity Investments increases stake in co. to 9.56% from 7.64%
  • Dentsu (4324 JP): May parent-based sales fall 0.4% y/y 
  • Gurunavi (2440 JP): Fidelity Investments reduces stake in co. to 4.18% from 5.2% 
  • Inpex (1605 JP): Plans exploratory well off Japan’s west coast 
  • JGC (1963 JP): Technip and partners JGC and Samsung Heavy win FLNG contract for Coral field run by Eni, Africa Intelligence reports 
  • Kubota (6326 JP): Co., NTT (9432 JP) and NTT Communications to develop ICT solutions for agriculture and water infrastructure
  • Kyocera (6971 JP): Japan’s SESC recommends fine for co. worker for insider trade 
  • Kyushu Electric (9508 JP): Estimates 10bn yen for quake-related repair cost; expects additional capex spending of 10bn yen from quake 
  • MTI (9438 JP): To sell 876.3mln yen of Treasury shares in private sale to Medipal Holdings (7459 JP) 
  • Rakuten (4755 JP): To close marketplaces in UK, Spain, and Austria, focus on France and Germany 
  • Renesas Electronics (6723 JP): Expects Q1 profits to plunge after Kumamoto earthquake 
  • ReproCell (4978 JP): Co. and Kyoto University tie up on self-replicating RNA iPS research 


Equity preview

  • SkyCity Entertainment (SKC NZ) says retail bookbuild cleared at NZ$4.66/shr 
  • Xero (XRO NZ) signs deal with Wells Fargo on data software, Business Insider reports
  • BHP Billiton (BHP AU) among final bidders for Anglo American’s Australian coal mines; Adara agrees to buy BHP’s stake in joint coal ops for $120mln 
  • Rio Tinto (RIO AU) starts new cash tender offer for up to $3bn notes 
  • Scales Corp. (SCL NZ) annual meeting 
  • Myer (MYR AU) CEO Richard Umbers speaks at AICC event, Sydney 
  • Greencross (GXL AU) raised to buy vs hold at Morningstar • A2 Milk (ATM NZ) rated new buy at Bell Potter 
Source: Bloomberg / CIMB


 Sugar continues to rally as heavy rains in Brazil – the world's largest grower and exporter – disrupt processing and delay shipments. Photo: iStock


– Edited by Gayle Bryant

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