Article / 14 August 2017 at 2:09 GMT

Morning Report APAC: North Korea worries weigh on stocks

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Oil prices closed higher, on EIA stockpile reports and supply rebalancing concerns
  • Libya’s partial oil production halt is also providing support for crude prices
  • Copper prices have eased following speculation buying last week
  • Sugar prices are falling, in their longest slide since December 2013

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)


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Speeches (Singapore Time)

  • 0735 – Australia: RBA assistant governor Christoperh Kent gives speech in Sydney.
  • 2030 – EU: Andreas Dombret, board member of the Germany's Bundesbank, speaks in Pretoria, South Africa.

Overnight news, US

  • CPI came in lower than expected at 0.1% MoM (Exp. 0.2% from 0.0%) and 1.7% YoY (Exp. 1.8% from 1.6%). Core inflation also rose 1.7% YoY still below the Fred’s 2% goal. A key reason for the decline was lodging costs.
  • The cost to consumers of lodging away from home, which includes hotels and housing at schools, fell 4.2% in July from a month earlier, the biggest one-month decline since records began in 1997. This aspect of the index is consistently volatile so some economists are expecting a reversion in August.
  • President Trump will sign an executive memorandum on Monday directing US Trade Representative Robert Lighthizer to consider investigating China over its intellectual property policies, especially the practice of forcing US companies to transfer technological knowhow, administration officials said. Possible remedies include import tariffs.  

Overnight news, North Korea

  • US National security adviser H.R. McMaster said Sunday that the U.S. is "taking all possible actions" to resolve the nuclear threat from North Korea without resorting to military action, but he declined to rule out responding to another threat from the country with force.
  • Joint Chiefs of Staff chairman Joseph Dunford is travelling to China for a previously scheduled visit.

Overnight news, France

  • The French president Emmanuel Macron approval rating after his first 100 days in office has fallen to just 36%, according to an Ifop poll for Le Figaro. Former president Francois Hollande was at 46% at this point.

 

Foreign exchange

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  • USD: it was calm on Friday on the North Korea front and the lower than expected CPI pushed the market to look again at economics data triggering some USD selloff. The resistance will be at 94.00 for the time being. If nothing new comes out of North Korea, we should see USD back lower again quickly on stops or investors back to trading the major trend lower.
  • JPY: All the cross JPY traded higher on the breather of the risk off, EURJPY was the big mover, with AUDJPY and NZDJPY.
  • Emerging market currencies: the main mover was USDKRW, which traded lower on Friday and again this morning at the open. It seems that the tension with the North is easing up slightly.


Foreign exchange movements

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  • Funds seems to be focused on the short term by buying USD puts.
  • The North Korea tensions are pushing the Funds to buy USDJPY vega (the longer part of the curve) on top of the Gamma (one month or less) and CrossJPY calls.
  • The Vol in one month USDKRW moved much higher last week from 8.3 to 11, and seemed to find some good offering interest there this morning.

Rates

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  • US yields were lower on the back of weaker-than-expected CPI data, and geopolitical tension is fuelling demand for treasuries. Curve steepened with short term yield dropped more than longer terms.
  • European bonds are taking the hint from geopolitical tensions, which boost risk safety asset demand.

Commodities 

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Equities

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  • US stocks edged higher from the sharp decline in the previous session and VIX eased 3.30% to 15.51, but overall markets still posted a weekly loss on lingering geopolitical uncertainties. The Russell 2000 index of small-cap stocks finished out the week 2.7% lower, its biggest one-week decline since February 2016.
  • Snapchat plunged 14% after reporting weaker-than-expected results for the second quarter and said its user base grew at a slower pace than expected.
  • Nvidia Corp. fell 5.3%, despite posting upbeat as sales for its data centre and automotive businesses missed the mark. The stock may be due for a correction after prices more than doubled over the past 12 months, gaining more than 160%.
  • Teh retailer J.C Penney tumbled more than 16% after reporting a loss of $0.09 per share, more than the expected loss of $0.05 and also its fourth straight quarter of comparable sales declines. Its revenue of $2.96 billion, however, compares favorably to Wall Street's forecast of $2.84bn.
  • European stocks were under pressure logging a weekly loss of 2.7%, the worst since early November 2016.
  • Old Mutual sold off 3.1% even after the financial services company reported an 87% jump in net profit in the first half of the year and raised its dividend 32%.

Asian equities preview

Hong Kong analyst views

  • Ch Ovs G Oceans (81 HK): Cut to Hold at Guangfa Securities, price target $HK4.30.
  • CK Hutchison (1 HK): Raised to Buy at Morningstar.
  • Henan Pinggao Electric (600312 CH): Cut to Outperform at SWS.
  • Huatai Securities (601688 CH): A Shares Cut to Underperform at Credit Suisse.
  • Li Ning (2331 HK): Cut to Underperform at KGI Securities, PT $HK5.
  • Semiconductor Manufacturing (981 HK): Cut to Hold at China Securities.

Hong Kong stocks

  • Coal sector:Large Chinese Coal Producers Post Higher Profit in H1: Xinhua.
  • AVIC IHL (000050 CH): AVIC IHL Says Existing Deposit Cap With Avic Finance Now CNY3B.
  • JiuGui Liquor (000799 CH): JiuGui Liquor H1 Net 82.8m Yuan vs 38.7m Yuan Year Ago.
  • Changjiang Securities (000783 CH): Changjiang Securities H1 Net 995m Yuan vs 1.11b Yuan Year Ago.
  • China Shipbuilding (600482 CH): China Shipbuilding Industry Group Power H1 Net 560.7mln Yuan.
  • China Unicom HK (762 HK): China Unicom Sees H1 Profit Up 68.9%.
  • China United Network (600050 CH): Expects H1 Net to Rise About 74.3% on Year.
  • Evergrande (3333 HK): Cala Group Is Said to Revive Sale After Chinese Bid Fails: Sky.
  • FIH Mobile (2038 HK): FIH Mobile H1 Loss 2.5 U.S. Cents Per Share.
  • Founder Securities (601901 CH): Founder Securities H1 Preliminary Net Income Falls 62% Y/y.
  • HKEX (388 HK): HKEX Releases After-Hours Trading 3-Phase Implementation Roadmap.
  • HSBC (5 HK): HSBC Bought Back 4.62m Shares at Avg 738.14 Pence Each Aug. 11.
  • Huatai Securities (601688 CH): Huatai Securities First Half Net Income 2.99 bn Yuan.
  • PetroChina (857 HK): Missan Oil Director’s Home Attacked in Iraq: Spokesman.
  • Pou Sheng Int’l (3813 HK): Pou Sheng 6-Month Operating Profit 505.8M Yuan vs 570.6 mln.
  • Rusal (486 HK): Russian Railways Offer 13.3% Discount For Aluminum Exports: IFX.
  • Shenwan Hongyuan (000166 CH): Shenwan Hongyuan First Half Net Income 2.05 bn Yuan.
  • Suofeiya Home (002572 CH): Suofeiya Home Collection H1 Net 294mln Yuan vs 200mln Yuan Year Ago.
  • Tencent (700 HK): Tencent’s WeChat to Cooperate With Government on Investigation.
  • Tencent (700 HK): Tencent’s Plunge Reveals Tech Giant’s Achilles Heel: The State.
  • WH Group (288 HK): WH Group Expands in Europe via Smithfield’s Poland Acquisitions.

Japan analyst views

  • Chiyoda Corp. (6366): Cut to underperform from neutral at Credit Suisse.
  • JXTG (5020): Raised to buy from outperform at Daiwa.
  • Nitto Denko (6988): Raised to buy from neutral at Okasan Securities.
  • Sumco (3436): Raised to outperform from neutral at Daiwa.
  • Toshiba (6502): Raised to overweight from neutral at JPMorgan.
  • Toyo Engineering (633): Raised to neutral from underperform at Macquarie.

Japan stocks

  • Aiful (8515): Q1 operating profit falls 31.5% y/y to ¥1.1bn.
  • Air Water (4088): Q1 operating profit -7.6% to ¥8bn.
  • Aoyama Trading (8219): Q1 operating profit +15% to ¥4.58bn; to buy back up to 1.08% of shares for as much as ¥2bn.
  • Asatsu-DK (9747): Half-year operating profit slips 3.8% y/y to ¥3.7bn.
  • Avex Group (7860): Q1 operating profit falls 23% y/y to ¥1.2bn.
  • Citizen Watch (7762): Q1 operating profit falls 17% y/y to ¥3.8bn.
  • Cosmo Energy (5021): Q1 operating profit slips 4% y/y to ¥12.1bn.
  • Fuji Machine (6134): Lifts full-year operating profit forecast 19% to ¥16.1bn.
  • Hirata (6258): Q1 operating profit more than doubles y/y to ¥3.2bn.
  • Hokuetsu Kishu Paper (3865): Q1 operating profit +5.9% to ¥3.79bn.
  • J Trust (8508): Q1 net profit ¥1.78bn vs ¥968mln loss year ago
  • Japan Post Bank (7182): Q1 net income +32% to ¥89.4bn.
  • Japan Post Holdings (6178): Q1 net profit +26% y/y to ¥104.5bn.
  • Japan Post Insurance (7181): Q1 net income +24% y/y to ¥24.2bn.
  • Kenedix (4321): Half-year operating profit +7.4% y/y to ¥6.8bn.
  • Kyushu Railway (9142): Q1 operating profit +35% y/ to ¥16.7bn.
  • Minebea Mitsumi (6479): To acquire C&A Tool Engineering with Development Bank of Japan.
  • Nafco (2790): Q1 operating profit slips 6.1% y/y to ¥3.8bn.
  • Nexon (3659): Forecasts operating income for Q3 of 17.76b yen to ¥20.46bn.
  • Nitto Seiko (5957): Lifts full-year operating profit forecast 12.5% to ¥2.7bn.
  • Pacific Metals (5541): Q1 operating loss widens to ¥3.1bn from ¥1.8bn loss a year earlier.
  • PC Depot (7618): Q1 operating profit slides 56.5% y/y to ¥585mln.
  • Recruit Holdings (6098): Q1 operating profit +13% y/y to ¥56.3bn.
  • Riken (6462): Q1 operating profit 40% y/y to ¥1.7bn.
  • SoftBank Group (9984): Vision Fund said to invest ~$2.5bn in Flipkart Group.
  • Sompo (8630): Q1 net income +35.5% y/y to ¥27.1bn.
  • Sosei Group (4565): Q1 operating profit sinks 94% y/y to ¥731mln.
  • THK (6481): Q1 operating profit at 11.2b yen, maintains forecasts for nine-month period ending December.
  • Toridoll (3397): Q1 operating profit +8.2% y/y to ¥2.1bn.
  • Toyota Motor (7203): Expands partnership with Intel on connected cars.
  • V Technology (7717): Q1 operating profit falls 49% y/y to ¥652mln.
  • Yokohama Rubber (5101): Lifts full-year operating profit outlook 5.3% to ¥50bn.

Australasian analyst views

  • FMG: Fortescue Raised to Hold at Morningstar
  • NZO NZ: NZ Oil & Gas Cut to Neutral at Woodward Partners
  • REA: REA Group Raised to Add at Morgans Financial, price target $A68.75;Raised to Neutral at UBS, PT $A64; Raised to Outperform at Credit Suisse, PT $A72
  • SIG: Sigma Pharma Cut to Neutral at Credit Suisse, PT A$0.85
Australasian stocks
  • AVZ: Zhejiang Huayou Unit to Invest 68.4mln Yuan in Australia’s AVZ
  • CWN: Crown Closes China Chapter as Jailed Australian Employee Freed
  • FMG: Iron Sinks as China Delivers ‘Wake-Up Call’, Plans Trading Curbs
  • CEN NZ: Contact Energy Full-Year Underlying Earnings Fall 10%
  • SML NZ: Synlait Says U.S. Approval for Infant Formula May Take 12 Months


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 Oil prices have edged higher, helped by a cut in output by Opec member Libya. Photo: Shutterstock

 
– Edited by Robert Ryan


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