Article / 02 June 2017 at 1:52 GMT

Morning Report APAC: Nikkei leads Asia higher

APAC Sales Trading Desk / Saxo Capital Markets
Singapore
APAC:

 

  • Nikkei 225 Stock Average topping 20,000 for the first time since 2015
  • ADP National Employment Report indicated private payrolls rose 253,000
  • USD keeps gains as companies added more workers than forecast
  • JPY slides 0.3% to 111.65 per dollar, after falling 0.5% on Thursday

By Saxo APAC Sales Trading


Economic data of the day (Singapore Time)
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Speeches

00:45:US – Fed’s Harker speaks about the economic outlook
01:00:US – Fed’s Kaplan speaks in Dallas

Overnight news

US: The ADP National Employment Report indicated private payrolls rose 253,000 (market estimate: 180,000). That is the fastest pace of growth since 2014. Tonight the market is expecting 182,000 for nonfarm payrolls (previous: 211,000).

ISM inched up to 54.9 from 54.8 (expected: 54.8). The new orders index jumped to 59.5 from 57.5 but the production index declined to 57.1 from 58.6.

The employment index improved to 53.5 from 52.0. The prices paid index tumbled to 60.5 from 68.5.

Former FBI director James Comey will testify before the Senate Intelligence Committee next Thursday, June 8. 

President Trump announced the decision to withdraw the US from the “draconian” Paris climate accord.

Federal Reserve: The Federal Reserve's Jerome Powell said the US economy was "healthy" and the central bank should continue to along the path to normalisation.

"While the recent performance of the labor market might warrant a faster pace of tightening, inflation has been below target for five years and has moved up only slowly toward 2%, which argues for continued patience, especially if that progress slows or stalls," Powell said.

"If the economy performs about as expected, I would view it as appropriate to continue to gradually raise rates," he added without mentioning the June 13-14 meeting.

Powell said the gradual inflation rise "appears to have paused" due in part to temporary factors, "and there are good reasons to expect that inflation will resume its gradual rise".

"Today, the economy is as close to our assigned goals as it has been for many years," he said.


Foreign exchange

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USD rallied overnight following the strong economic data ahead of NFP tonight but DXY remains at the lows of the year.

EURUSD has been consolidating around 1.1200 for the past 2 weeks. Interests to sell started to emerge at this level.

AUDUSD dropped the most against the USD following the poor Caixin China PMI Manufacturing which dropped below 49.6 (expected 50.1) from 50.3. Technically, AUD shows bearish signs that would push the pair to 0.7300

Emerging markets: The focus will be again on USDCNH which finally found some small buying interest around 6.7500.

The fixing will be closely watched. Few banks believe that this big move lower was a one-off to send Renminbi depreciation is finished.

Foreign exchange movements
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Front-end volatilities is quite offered in EURUSD ahead of NFP. Movements in USDCNH finally find some supply with this level of spot. GBP 1w just rolled to UK election so that tenor has jumped.
 

Rates

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US yields were driven higher by stronger-than-expected private job report overnight, and bonds demand weakened as equities headed higher. 

Core European bonds were steady as pan-Europe PMI data are within expectation. Peripherals mixed with Italy yields higher while Portugal treasuries outperformed.


Commodities 

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Equities

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US stocks were boosted by strong private sector payroll report and all three majors equities are heading higher to record levels. Financial and healthcare are the two leading sectors, both with more than 1% gain.

Express slumped 19.2% after this specialty retail apparel company reported that revenue sank 7% to $467m, lower than market expectation of $467.8m.

Express forecast FY adjusted EPS cap to be at $0.48 while market is looking at $0.66. 

European stocks rose on the back of firmer oil prices and stronger than expected read on Italian growth. In London the FTSE gained on weaker GBP.

Nokia surged 3.2% as the stock gain momentum on its re-launched classic 3310 "brick" phone in its home market of Finland.

Asia Pacific Stocks
 
Hong Kong
 
Analyst ratings
 
-          Bank of East Asia (23 HK): Rated new neutral at UBS, PT HK$32.50
-          Beijing Enterprises Water (371 HK): Rated new buy at Citic Securities, PT HK$7.50
-          BOC Hong Kong (2388 HK): Rated new buy at UBS, PT HK$39
-          Champion REIT (2778 HK): Cut to outperform at Daiwa, PT HK$5.45
-          Hang Seng Bank (11 HK): Rated new sell at UBS, PT HK$156.50
-          Man Wah Holdings (1999 HK): Cut to neutral at Haitong Intl, PT HK$8
-          New World Dev (17 HK): Rated new buy at Haitong Intl, PT HK$12.50
-          Shangri-La Asia (69 HK): Raised to buy at Goldman

Preview
-          Aircraft: China needs 3,200 more passenger Aircraft by 2026, Avolon says
-          Developers: China allows local govt to fund land stockpile by bond sale
-          Energy: Bluestar Jinan refinery halts 2 units for work: SCI99
-          Anhui Jianghuai Auto (600418 CH): Signs pact with Volkswagen on JV with 6b yuan investment
-          BAIC Motor (1958 HK): Daimler to take stake in Beijing electric vehicle unit
-          Bank of Guiyang (601997 CH): Preferred share sale approved by Guizhou CBRC
-          Bewinner Communications (002148 CH): Says holder to cut stake in 6 months
-          China Shansui (691 HK): Asia Cement Says co.’s stake sale “not a serious offer”
-          China Shenhua (1088 HK): Shenhua Group total assets exceed 1t yuan at end-April
-          Guangzhou Auto (2238 HK): Drops after Trumpchi output cut on gear shortage
-          HC International (2280 HK): Buys back 364,000 shares for HK$2.25m Thursday; CEO spends HK$9.76m buying shares since May 22
-          HKEx (388 HK): Appoints Lee Kwok Keung, Tai Chi Kin joint COO
-          ICBC (1398 HK: Hit by Nigerian’s alleged oil scam in U.S.
-          Metro Land (600683 CH): To halt trading from from Friday as co. plans major matter
-          Shandong Gold (600547 CH): Unit seeks up to $1.26b loans from overseas banks
-          TOM Group (2383 HK): China CAC asks Tom.com to continue rectifying problems
-          Yingde Gases (2168 HK): Says David Chan, Deng Xipeng weren’t re-elected
-          Zoomlion (000157 CH): Buys back 2.3m A-shares for 10.1m yuan

Japan
 
Analyst ratings
-          Dowa Holdings (5714): Raised to neutral from underperform at SMBC Nikko
-          Idemitsu Kosan (5019): Raised to buy from neutral at Okasan
-          JXTG (5020): Cut to neutral from buy at Okasan
-          Kobe Steel (5406): Raised to neutral from underperform at SMBC Nikko
-          Kubota (6326): Raised to buy from hold at Jefferies
-          Mazda Motor (7261): Rated new neutral at Okasan
-          Mitsubishi Electric (6503): Raised to neutral from sell at Goldman
-          Mitsubishi Motors (7211): Rated new buy at Okasan
-          Mitsui & Co. (8031): Raised to buy from neutral at Mizuho
-          NSSMC (5401): Raised to outperform from neutral at SMBC Nikko
-          Sega Sammy Holdings (6460): Cut to neutral from outperform at Daiwa
-          Showa Shell (5002): Raised to buy from neutral at Okasan
-          Sojitz (2768): Cut to underperform from neutral at Mizuho
-          Square Enix (9684): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley
-          Sumitomo Corp. (8053): Raised to neutral from underperform at Mizuho
-          Subaru (7270): Rated new neutral at Okasan
-          Suzuki Motor (7269): Raised to overweight from equalweight at Morgan Stanley MUFG

Preview
-          Autos - U.S. May sales:
-    Honda (7267) +0.9% vs est. -0.7%
-    Nissan (7201) +3% vs est. +0.6%
-    Toyota (7203) -0.5% vs est. -1.3%
-          Bridgestone (5108): Recalls almost 400,000 aluminum wheels in Japan
-          Energy industry: Japan plans deal with U.S. to promote American LNG sales, according to people familiar with the matter
-          Ito En (2593): Forecasts operating profit +3.8% to 22.6b yen for current fiscal year
-          Kirin Holdings (2503): Lifts full-year net income forecast 65% to 112b yen for 2017 after completing sale of Brasil Kirin Holdings to Heineken
-          Medinet (2370): Seeks about 2.09b yen from sale of securities
-          Metals: Nickel posts lowest close in a year on weak China factory data
-          Mitsubishi UFJ Financial Group (8306): Bought back 73.5m shares for 51b yen in May
-          Nomura Holdings (8604): Co. didn’t buy back any shares between May 17 and May 31
-          PeptiDream (4587), Sekisui Chemical (4204), Shionogi (4507): To form venture for special peptides
-          Retail - May store sales
-    Isetan Mitsukoshi Holdings (3099): Department store sales -2.9% y/y
-    J Front Retailing (3086): Department store sales +1.2% y/y
-    Takashimaya (8233): 13 store sales +2.7% y/y
-          SoftBank Group (9984): Transfers its Yahoo Japan (4689) shares to wholly owned unit SoftBank Group International
-          Takata (7312): U.S. senator 66% of faulty airbags in U.S. still not repaired
-          Suzuki Motor (7269): Maruti Suzuki sales +11.3% y/y in May

Australia

 
Analyst ratings
-          AGL Energy (AGL): Cut to underperform at Macquarie
-          ERM Power (EPW): Raised to outperform at Macquarie
-          Telstra (TLS): Raised to buy at Goldman, PT A$5
-          TPG Telecom (TPM): Cut to neutral at Goldman

Preview
-          Danger down under: Yield drop with iron fuels recession talk
-          Kiwi spread at 18-yr low vs U.S. may flag policy change: Chart
-          Arrium (ARI): Offers received from shortlisted bidders have conditions to be worked through: AFR
-          BHP Billiton (BHP): Fire reported at Mt Whaleback ore mine
-          Fortescue (FMG): Iron ore prices fell 1.8%, according to a price index compiled by Metals Bulletin
-          Harvey Norman (HVN), JB Hi-Fi (JBH): Amazon takes on remote outpost in the land of bricks and mortar
-          Henderson Group (HGGDA): New neutral at Credit Suisse, PT $33
-          REA Group (REA): What’s driving Australia’s real estate boom?: QuickTake Q&A
-          Sirtex (SRX): May have upside from failed cancer trials’ silver linings
-          Suncorp (SUN): Unlikely to make decision on future of life insurance unit before August: AFR
-          Whitehaven Coal (WHC), New Hope (NHC): Debbie derails met coal deals as contract negotiations continue
-          Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil reverses gains as rising output outweighs stockpile falls.

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Climate change? US hiring numbers are today's big deal. Photo: Shutterstock 


-- Edited by Adam Courtenay

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