Morning Report APAC: High yield currencies back in fashion
- Janet Yellen came across as slightly more dovish in her second day of testimony
- Initial Jobless Claims data revealed little about the US jobs market
- Crude made gains on reports of lower shipments and stockpiles
- Base metals lost ground, apart from aluminium, which made gains
- Both gold and silver lost ground, while grains retreated massively
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
- 2100 – Italy: Bank of Italy releases the quarterly economic bulletin.
- 2130 – US: Fed’s Robert Kaplan speaks in Mexico City.
- 0100 – US: Chicago Fed to post Charles Evans' speech on website.
Overnight news, US
- Fed Chair Janet Yellen’s second day of testimony was more of the same. There was a slight move back to her old dovish ways. She said that inflation risks are two-sided.
- The Fed's Lael Brainard and Robert Kaplan also spoke yesterday saying that their primary goal is 2% inflation and remains as such. Interestingly, Brainard commented that asset price valuations appeared to be stretched.
- Jobless claims data provided limited insights into the US labour market with very marginal upticks in both initial and continuing claims.
- US PPI data increased 0.1% versus 0% expected m/m. Ex-food and energy saw a 0.1% increase versus an expected0.2%.
- House Republicans delivered their latest iteration of the new health care bill.
Overnight news, Europe
- CPI data from Germany and France came out in line with expectations at 1.6% and 0.7% respectively.
- Mario Draghi announced tha he will be attending this year’s Jackson Hole Fed summit in August. The announcement saw EUR rally off the lows as traders interpreted this as an opportunity for Draghi to announce his reduction in stimulus. EUR traded lower later.
Foreign exchange
- USD: generally weaker in a risk on day in forex markets, as the carry trade was favoured after Yellen's first day of testimony.
- NZD: High yielding currencies, like the NZD (and AUD) were the top performers in the wake of both Janet Yellen's speech, and strong China trade numbers.
- SEK: Despite the less hawkish than expected Riksbank last week, the SEK continues to outperform its peers as the idea of reduced quantitative easing and higher rates takes flight on good data.
- JPY, CHF: Safe haven currencies were the underperformers as risk on mode was the key theme of yesterday’s trading.
- Emerging Markets: KRW, MXN and TWD were the standout performers in the EM space as carry trades and risk premier (in KRW case) was reduced after Janet Yellen's testimony.
Foreign exchange movements
Rates
- US yields were higher amid upbeat tone from Janet Yellen on long term market rates during balance sheet shrinkage, and echoed by Lael Brainard’s speech later.
- Canada yields were higher by 5-6 pips with hiking expectations continue to be priced in.
- European bonds were sold off on a Wall Street Journal report that said the ECB considering announcing tapering plans at its September meeting.
Commodities
Equities
- The Dow closed at a record for the 24th time in 2017, as gains in the financial sector (+0.6%) helped the broader market book modest gains ahead of earnings.
- Retail stocks represented by XRT (+2.31%) posting its best daily climb of the year after Target Corp. (+4.80%) which said it now expects a surprise “modest increase” in same-store sales for the fiscal second quarter, citing improved traffic and sales trends. As a result, lifted shares of Camping World Holdings Inc. (+8.6%) and J.C. Penney (7.8%).
- Snap Inc. jumped 3% after Stifel Nicolaus upgraded the Snapchat parent to buy, saying that a recent selloff in the stock had created a “compelling” opportunity.
- AstraZeneca PLC shares dropped sharply in the wake of reports that CEO Pascal Soriot is expected to take the top job at Israel-based Teva Pharmaceuticals Industries Ltd. (+3.40)%.
Hong Kong analyst views
- Ajisen China (538 HK): Raised to Add at CIMB, price target $HK3.90.
- Hengan Int’l (1044 HK): Cut to Reduce at HSBC, PT $HK50.10.
- Huaneng Renew (958 HK): New Buy at DBS Vickers, PT $HK3.
- Vinda Int’l (3331 HK): Cut to Hold at HSBC, PT $HK16.
Hong Kong stocks
- Angang Steel (000898 CH) Expects H1 Net to Be About 1.82bn yuan.
- China Hongqiao (1378 HK) Says Capacity Cut to Be Offset by New Additions.
- China South City (1668 HK) Acquires Land in Hefei City for 3.21bn yuan.
- China United Network (600050 CH) Gets Regulatory Letter on Trading Halt.
- Guangzhou Auto (2238 HK) to Add Trumpchi Car Capacity.
- Nexus Capital Cuts China Vanke H-Share Stake to 4.99%.
- Standard Chartered (2888 HK) Names 5 for South Asia Private Banking Roles.
- Shenhua Plans (1088 HK) to Develop 3 Mines at Australia Watermark Project.
Japan analyst views
- Fujitsu General (6755): Cut to neutral from outperform at SMBC Nikko
- Kao (4452): Initiated at neutral at Okasan Securities; PT ¥6,750.
- Saizeriya (7581): Cut to neutral from buy at Ichiyoshi Research.
- Dip (2379): Raised to outperform from neutral at Tachibana Securities
Japan stocks
- Daikokutenbussan (2791): Full-year operating profit +3% y/y to ¥5.9bn vs company forecast for ¥6.1bn; forecasts ¥6.2bn for current fiscal year.
- Daiwa Computer (3816): To conduct 1.1-for-1 stock split effective August 1.
- Fast Retailing (9983): Q3 profit missed analyst estimates; ADRs fall 3.6%.
- Ichigo (2337): 1Q operating profit -48% y/y to 2.8b yen; maintains full-year forecast at ¥20.6bn.
- Noda (7879): Lifts full-year operating profit forecast 23% to ¥4bn.
- S Foods (2292): 1Q operating profit +15% y/y to 2.8b yen, maintains full-year forecast at ¥11.5bn.
- Sakata Seed (1377): Forecasts operating profit -13% to ¥6.7bn for current fiscal year.
- Teijin (3401): Fast-tracking plans to expand its industrial fibers brand Twaron to keep pace with demand; enters licence and development dealwith Radius Health for abaloparatide-SC for osteoporosis.
- Tokyo Gas (9531): To renegotiate with LNG suppliers on resale restrictions.
- Totenko (8181): Q1 operating profit for parent co. surges to ¥67mln from ¥7mln yen a year earlier; maintains full-year forecast at ¥130mln.
Australia analyst views
- Macquarie Group (MQG AU): Florio Said to Rejoin Macquarie for Credit Sales and Distressed.
Australia stocks
- Metlifecare (MET NZ): Metlifecare Raised to Outperform at Forsyth Barr, price target $NZ6.43.
- Navitas (NVT AU): Navitas Cut to Neutral at UBS, price target $A5.
Base metals prices have lost ground, while prices for both gold and silver have retreated as well. Photo caption. Photo: Shutterstock
– Edited by Robert Ryan
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