Article / 19 March 2018 at 2:22 GMT

Morning Report APAC: Jittery investors push stocks lower in Tokyo

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Oil came close to breaking below its 100 day moving average
  • Base metals have lost ground, led by copper, on the back of stronger USD
  • Gold took a tumble on USD strength towards the end of last week

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

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Speeches (Singapore Time)

  • 2140: US – Atlanta Federal Reserve bank president Raphael Bostic speaks on Community Reinvestment Act
  • 0200 on Tuesday: EU – ECB executive board member Yves Mersch speaks in Frankfurt
  • 0830: Australia – Reserve Bank of Australia March meeting minutes


Overnight news: no surprise in Russia

  • Vladimir Putin won a record fourth six-year term easily.  Putin received 76% of the votes. The main opposition leader, Alexei Navalny, was barred from the race

 Overnight news: China

  • China named Yi Gang to run the People's Bank of China, the WSJ reported, elevating a long-serving deputy governor with deep international links. The National People's Congress will almost certainly approve President Xi Jinping's choice for central-bank governor in a formal vote due Monday. Yi joined the body in 1997 (Bloomberg)
Overnight news: Libor spread
  • The Spread between the 1M and 3M USD Libor is widening and this can be attributed to repatriation of USD assets to the US, probably sue to the US tax reforms. The direct consequence of this is the USD liquidity becomes more sparse in Europe making the cost of borrowing higher.
  • The other consequence of this is that it’s more expensive to issue Commercial Papers for banks. We are not in crisis levels, as in 2007/2008. This move should be temporary.

 

Foreign exchange

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  • AUD and NZD continue to be well offered and AUD trades now at a short term support of 0.7700. AUDJPY is also breaking a very important level at ¥82.
  • Emerging Markets: Not much going on in emerging markets; we are just following the equity moves and we still see inflows in Indonesian and Korean bonds.


Foreign exchange movements
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  • The market has become more active in AUDJPY downside with the spot getting close to an important level.
  • There is still interest in USDJPY Risk Reversal to hedge the long USDJPY carry trade.


Rates

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  • US yields were higher across the curve however steepened, with rate-lock selling at the long end being the main driver. The Libor-OIS spread jumped to its highest since December 2008.
  • Gilts closed with minor gain ahead of Bank of England rate decision later this week, with 20% expectation of a rate hike. Bunds paired earlier gains following US treasury declines. Portugal bonds outperformed as market is still digesting solid growth outlook from S&P took place on March 17.

Commodities 

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Equities

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US equities

  • The Dow Jones (+ 72 points) and S&P 500 (+4 points) rose; stocks finished in mixed session as weighed down by fears of a possible trade war and White House turmoil.
  • The memory-chip maker, Micron Technology (MU) is scheduled to report its fiscal Q2 results after the market close. The Idaho-based company is expected to earn $2.74 a share, up 204% year over year, on sales of $7.28 bn, up 57%, in the February quarter. Micron stock has been in record high territory lately, buoyed by strong demand and pricing trends for DRAM and Nand memory chips. Share price closed nearly 3% higher, at 60.58. Riding on the flow, Western Digital (WDC) gained 4% to 106.45 after an upgrade to "outperform".
  • The top health savings account custodian HealthEquity Inc (HQY) will report its Q4 results, and Wall Street expects EPS to drop 13.3% to 6 cents, marking the first profit drop in five years, with revenue up 23% to $58 million. Last month HealthEquity's stock plunged amid concerns over health savings account enrolment growth. However, it has since rebounded, and last week reached an all-time high of 60. Shares remain just below that high, closed at 59.39.
  • U.S. Expands Wells Fargo (WFC) Sales Probe to Wealth Management. WFC has been under investigation since the bank admitted that employees had opened as many as 3.5 million accounts without customer's approval. The investigation had been centered on the company's retail banking arm, but now seems to have spread to other parts of the business. Share prices closed down 1.6% lower at 55.90, falling below 50 DMA at $60.50.

European equities

  • European stock markets closed on a high note  as investors tried to shake off concerns surrounding trade and political disruption in the White House. U.K.'s FTSE ended up 24 points and Germany's Dax closed higher by 44 points.
  • Oil and gas was the strongest performing industry, with the sector closing up 1.46% on the back of a sharp rise in oil prices. At the market close, while U.S. crude hovered around $62.17. In the sector, Austria based O&G company OMV rose over 4% after announcing that it had acquired Shell's upstream assets in New Zealand.
  • Looking at individual stocks, Berkeley Group announced that it could not boost house building volumes beyond its current plans. It cited planning constraints and government changes in recent years in making buying a property less attractive to people. Shares of the U.K. builder fell over 5%, closed at GBp 3,713.

Hong Kong equities

  • The Hang Seng Index (HSI) gained 106 point / 0.3% closed at 31,541 on Friday, hovering around 3100 point. The financials sub-index eked out gains on the whole, even though heavyweights HSBC and AIA were down 0.13% and 0.2%, respectively before the market close.
  • Billionaire Li Ka-shing announced his retirement on Friday with effect from the conclusion of the annual general meeting, from the business empire that he built over nearly seven decades. CK Asset (1113.HK) said in the results report that the group is cautiously optimistic about Hong Kong’s economic outlook for 2018 given the further strengthening of the global economy and the steady economic growth in China, despite the accelerated pace of the U.S. interest rate increases.
  • In utilities space, Power Assets (6.HK)  shot up 3.3% to $71.2 after it had declared a generous special dividend of $6 on nearly 30% increase in annual profit. China Power (2380.HK) announced that its 51%-interested Dabieshan Power Plant entered into the project tender and facilities services agreement with CEC pursuant to which the agent has been engaged to provide project tender and facilities services for Project Dabieshan and the power pipelines procurement agreement at the consideration of RMB13.5 million and RMB120 million respectively.

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 Base metals have lost ground, led by copper, on the back of stronger US dollar and easing fears of a miners' strike in Chile. Photo: Shutterstock

 
– Edited by Robert Ryan


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