Morning Report APAC: Key global summits to impact oil, FX and bonds
- Precious metals slipped on the back of higher expectations of a Fed rate hikes
- Oil extended losses as the focus shifts to next week’s Opec meeting
- Iran says it won’t join any pact to freeze crude output
- Japan may announce a fiscal stimulus package around the G7 meeting
- That could put Japanese government bonds under pressure in the near term
- Corn demand is strong and soybean meal has moved sharply higher
- The UK Treasury says that a Brexit would prompt a 12% fall in the pound
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time: GMT plus 8 hours)
0750: JPY – Exports YoY (Act. -10.1, Exp. -9.9), Imports YoY (Act. -23.3, Exp. -19.2)
0750: JPY – Trade Balance (Act. JPY 823.5Bn, Exp. ¥540.bn)
1300: SGD – CPI NSA MoM (Exp. 0.1%, Prev. 0.0%), YoY (Exp. -0.7%, Prev. -1.0%)
1300: SGD – CPI Core YoY (Exp. 0.7%, Prev. 0.6%)
2145: USD – Markit US Manufacturing PMI (Exp. 51.0, Prev. 50.8)
0930: JPY – Bank of Japan deputy governor Hiroshi Nakaso speech in Tokyo
2000: USD – Fed's John Williams speaks in New York
- Fed speech: Eric Rosengren, the president of the Federal Reserve Bank of Boston said “I want to be sensitive to how the data comes in, but I would say that most of the conditions that were laid out in the minutes, as of right now, seem to be… on the verge of broadly being met,” . “The reason I am more confident is we are getting better data,”. “As long as we are getting progress that is gradual, like we have been seeing, then that is an environment where gradual increases are quite appropriate.”
- US: Sales of existing homes rose for a second straight month during April. The National Association of Realtors said sales increased 1.7% MoM (Exp. +1.3%) to a seasonally adjusted annual rate of 5.45mln (Exp. 5.4mln)
IMM futures positions
- IMM Futures Positions: USD Shorts positions were reduced slightly to $3.4 bn
Key position changes
- AUD longs fell ~a third from $2.8bn to $1.8bn, their lowest level since March
- GBP shorts increased from $3.2bn to $3.5bn
- CAD longs edged lower to $1.8bn from $2.0bn
- EUR shorts stayed flat at $3.2bn, as did JPY longs at USD6.7bn
- NZD long positions dropped to $0.5bn from $0.6bn
- MXN shorts were unchanged at $1.3bn
- CHF longs fell to USD0.5bn from $0.9bn
It was very quiet moves overnight for the US dollar, except in GBP (see our new section dedicated to Brexit below).
The USD found some good offers against emerging market currencies, with USDBRL down 1.2%, USDCNH who is still hitting locals selling in the forwards markets triggering some selling in USDKRW and USDSGD as well
EURCHF spot has reached a three-month high now, but vols remain on the lows, with 1w ard 4.25 vol. We are in the view that long gamma at this level could perform considering the levels of vols
Ten year US Treasuries were little changed at 1.84%. Market odds of a June rate hike ended the week at around 30%, up from 4% a week ago.
Japanese government bonds could come under pressure in the near term if Japan announces a new fiscal stimulus package around the G7 meeting (made up of Canada, France, Germany, Italy, Japan, the UK and the US) later this week, which runs from May 26 to 27.
Equities markets consolidated Friday helping to retrace weakness from earlier in the week. The S&P 500 finished up 0.6%, seeing it close broadly unchanged on the week despite a significant repricing of the next Fed rate hike.
Applied Materials Inc. (+13.8%) reported an adjusted Q2 profit of $0.34 (Market est: $0.32) from $0.29 a year ago. Sales edged higher to $2.45bkln (Mkt est: $2.43bln) even as orders hit a 15-year high.
Deere & Co. (-5.5%) reported a Q2 profit of $495.4mln, or $1.56 per share (market est: $1.47), down from $690.5mln, or $2.03 per share, a year ago
Foot Locker Inc. (-6.5%) reported a Q1 profit of $191mln, or $1.39 per share (Mkt est: $1.39) up from $184mln, or $1.29 per share, a year ago. CEO Richard Johnson said the company “navigated well through a variety of challenges, not least of which were rapidly-shifting product-category preferences by our customers.”
It was a similar story in Europe, although gains to end the week were larger, with the Euro Stoxx 50 finishing up 1.5%. Additionally, the FTSE 100 closed up 1.7%, the Dax up 1.2%, and the CAC40 up 1.7%.
Hong Kong equity preview
- China Life (2628 HK): Cut to neutral at Guotai Junan.
- Cosco Pacific (1199 HK): Cut to neutral at Guotai Junan.
- CRRC (1766 HK): Cut to neutral at Macquarie.
- Lenovo (992 HK): Cut to neutral at UBS.
- PICC (1339 HK): Cut o neutral at Guotai Junan.
- HK PPTY: Centa-City Leading Index (CCL) -0.17% WoW to 128.41 points.
- BOCHK (2388) is in advanced talk to sell its stake in Chiyu Banking Corp to Xiamen Intl BK and Xiamen gov.
- Minsheng BK (1988) said CBRC had approved the opening of its branch in Xining, Qinghai. CIC ended talk with Yum Brands. Yum Brands will not satisfy the CIC consortium’s desire to have majority control in the CH business.
- CH Invstmt. Dev. (204) repurchased 8.42m shares on May 20 at average price 0.113.
- CH Huarong Asset Mgt. (2799) to list $11bn MTN programme in HK.
- CH Southern (1055) to issue up to 5bn yuan of 5y bond.
- Shui On (272)’s chairman said January-April contracted sales at 8.55bn yuan. With two new projects coming, he is confident to exceed the 24bn yuan whole year target.
- MTR (66): Hong Kong government to start three month public consultant on the company’s fare adjustment mechanism.
- PetroChina (857)’s Liaoyang Petrochemical had fire at olefin factory’s cracking unit after leak.
- Anhui Conch (914) said they have fulfilled the condition to buy stakes in West CH Cement (2233).
- CH Molybdenum (3993) plans private issuance of 18bn yuan A-shares for overseas takeover, to be approved by CSRC.
Japan equity preview
- NTT Docomo (9437 JP): Raised to outperform from neutral at Daiwa Securities.
- Nihon Trim (6788 JP): Cut to neutral from buy at Ichiyoshi Research.
- Fancl (4921 JP): April sales +4.3% y/y.
- Japan Tobacco (2914 JP): April domestic cigarette volume -13.5% y/y.
- Nihon Trim (6788 JP): Downgraded to neutral from buy at Ichiyoshi Research.
- Nikon (7731 JP): Names Masahi Oka CFO.
- Nippon Sheet Glass (5202 JP): To conduct 1-for-10 reverse split.
- NTT Docomo (9437 JP): Raised to outperform from neutral at Daiwa.
- Oki Electric (6703 JP): To conduct 1-for-10 reverse split.
- Shidax (4837 JP): Forecasts full-year oper. profit of ¥3.3bn for current fiscal year after loss of ¥771mln for latest FY.
- Shin-Etsu Chemical (4063 JP): To end poison-pill takeover defence.
- Toshiba TEC (6588 JP): Forecasts oper. profit of 14b yen for current fiscal year after loss of ¥481mln for latest discal year.
Australia equity preview
- Aconex (ACX AU) raised to buy vs neutral at UBS
Source: Bloomberg / CIMB
– Edited by Robert Ryan
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