Sterling has been blasted lower after BoE governor Carney cast doubt on a previously pretty-much-expected UK May rate hike. The EU's rejection of Britain's latest Brexit-Irish border plan only served to deepen the rot.
Article / 12 July 2016 at 1:45 GMT

Morning Report APAC: Market rallies on Japan PM's stimulus plans

APAC Sales Trading Desk / Saxo Capital Markets

  • The S&P 500 closed at a record high on hopes the earnings recession is ending
  • USDJPY rallied more than 1% on news the Prime Minister plans to add stimulus
  • The CAD is the commodity currency suffering the most; USDCAD broke 1.3100
  • The FTSE 100 closed above the 6600 level for the first time since last August

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time: GMT + 8 hours)

  • 0900: PHP – Exports YoY (Exp. -2.4%, Prev. -4.1%)
  • 12:00: MYR – Industrial Production YoY (Exp. 2.5%, Prev. 3.0%)
  • 1400: EUR – Germany CPI MoM (Exp. 0.1%, Prev. 0.1%), YoY (Exp. 0.3%, Prev. 0.3%)
  • 2000: INR – CPI YoY (Exp. 5.79%, Prev. 5.76%), Ind. Prod. (Exp. -0.4%, Prev. -0.8%)
  • 2200: USD – Wholesale Inventories May (Exp. -0.4%, Prev. 1.0%)


  • 1100: AUD – RBA's Luci Ellis Gives Speech in Sydney
  • 1700: GBP – Mark Carney Speaks on Financial Stability in Parliament in London
  • 2115: USD – Fed's Daniel Tarullo Speaks in Washington
  • 2135: USD – Fed's James Bullard Speaks in St. Louis

Overnight news

United Kingdom

Theresa May will become the next UK Prime Minister, replacing David Cameron, following the withdrawal from the race of Andrea Leadsom. Theresa May was in the "Remain" camp. She will take the office on Wednesday. She said she will not invoke the Article 50 EU exit clause this year.

Federal Reserve speech

Kansas City Federal Reserve President Esther George said US interest rates are too low and she wants the Federal Open Market Committee to get back to raising short-term interest rates gradually to reflect progress on hiring and inflation. George views the current level of short-term rates as “too low given the progress we’ve seen in the economy” and that "keeping rates too low can create risks". “Gradual adjustments” in short-term interest rates mean the central bank is more likely to achieve its growth and inflation goals. 

Foreign exchange



USDJPY rallied more than 1% after Prime Minister Shinzo Abe said he is planning to add fiscal stimulus following the ruling party’s victory in Sunday’s upper-house elections. He will order measures to support domestic demand, including plans to speed up the construction of high-speed trains. USDJPY was also helped by the positive speech from Fed’s George Osborne on rates and the new Prime Minister announced in the UK. The short-term resistance is at 103.50/103.70 for the pair.

GBPUSD is finding some good support at the 1.3000 level and the market took positively from the nomination of Theresa May as the next Prime Minister of the UK.

The NZD came off 1% since the post-NFP rally driven partially by buying interest in AUDNZD after the failure to confirm the break at 1.0400

The CAD is the commodity currency suffering the most and USDCAD broke 1.3100 and the 100d MA on the back of lower oil. The next target for the pair is now the 200d MA at 1.3313.

Foreign exchange movements


Macro and real money are buying aggressively topside USDJPY in the three months area. The strikes are from 107 to 110. The market has also been paid gamma in USDJPY and banks are struggling to buy it back.


Treasury yields rebounded from record lows to reverse much of last week’s plunge due to rising expectations on Japanese fiscal stimulus and Friday's jobs report pushed investors to riskier assets.
The two-year note yield jumped 4.8 basis points to 0.65% while the 10-year bond yield recouped 7.2bps to 1.43%. At one point, Treasury 30-year yields tumbled to touch an unprecedented low of 2.09%.
In addition, an auction of $24 billion three-year notes at a high yield of 0.765%, garnered the weakest demand since 2009. The bid-to-cover ratio for the auction came in at 2.69, well below a recent average of 2.92. This may also put pressure on Treasury market this week, with new sales of 10-year bonds and 30-year bonds set for Tuesday and Wednesday.  






The S&P 500 closed at a fresh, record high on the back of hope that the earnings recession is coming to an end. The S&P 500 climbed 7.26 points, or 0.3%, to 2,137.16. The Dow Jones Industrial Average gained 80.19 points, or 0.4%, to 18,226.93. The Nasdaq rose 31.88 points, or 0.6%, to 4,988.64.

The FTSEurofirst 300 index jumped 19.47 points, or 1.5%, to 1,315.49 as European stocks rose for a third successive session after Theresa May, leader of the conservative party won the race to succeed David Cameron as UK Prime Minister and as investors welcomed the possibility of further central bank stimulus. 

May, the Home Secretary since 2010 will be taking over from Cameron formally on Wednesday. The FTSE 100 also jumped 92.22 to 6682.86, closing above the 6600 level for the first time since last August as the market somehow had erased its concerns on the Brexit fear.

Wynn Resorts climbed 5% before closing at $94.10 after investors looked favourably on how well the Asian gaming capital of Macau is performing to start the month of July. Reports showed that gross gaming revenues in Macau for the first 10 days of the month appear to have risen by more than 8% compared to last year, and that could signal that Macau's long decline could finally have come to an end.

Alcoa closed at $10.14, up 3.2% and also released a better-than-expected result after market close as earnings came in 15 cents a share, much higher than the 9 cents expected and reaffirms its automotive global production growth forecast. Alcoa closed at $10.14; its shares jumped more than 4% in the after-hours trading.

In Germany, Steelmakers rallied on signs of sector consolidation. Germany’s ThyssenKrupp is up 6.4% and confirmed it was in talks with India's Tata Steel and other steel groups over a much-craved potential tie-up.

Hong Kong 

Analyst ratings

  • BYD (1211 HK): Raised to buy at Daiwa
  • China Jinmao (817 HK): Cut to neutral at Credit Suisse
  • China Merchants Hlds (144 HK): Cut to reduce at HSBC
  • Man Wah (1999 HK): Cut to hold at Daiwa

Equities preview

  • Greentown Service Group (2869 HK) trading debut
  • China Leon Inspection Holding (1586 HK) trading debut
  • Chow Tai Fook (1929) first financial quarter same store sales of mainland China, Hong Kong & Macau -17% and -20% YoY, expects 2Q sales to record negative growth
  • China Telecom (728) plans to start 5G service in 2020 (Daily); former chairman Chang is expelled from Party and might face prosecution for violations
  • CR Land (1109) June contracted sales +54% YoY to RMB12.7bn
  • China Res Power (836) June total net generation of subsidiary power plants -2.6%YoY to 12.01m MWh
  • Yue Yuen (551) June consolidated operating revenue +0.27% YoY to $754mln
  • China Coal (1898) issued positive profit alert, expects interim profit to swing from loss last year to up to RMB520mln
  • Shimao Ppty (813) bought back three million shares at HK$10.26-10.46/share today for a total of HK$31.2mln
  • Poly Ppty (119) Jan-June contracted sales +17.24% YoY to RMB17.0bn
  • CGS ( 6881) June profit -60.9% YoY to RMB 559.4mln
  • GOME (493) bought back 97mln shares on market for HK$95mln on Monday
  • Datang Renew(1798) Q2 power generation +4.36% YoY to 3.3m MWh
  • Datang Intl (991) to provide RMB1.2bn entrusted loan to two subsidiaries
  • CK Ppty (1113)’s residential property "La Mansion' in Yuen Long, has cashed in about HK$197mln, will hike price by 3% on the remaining four unsold houses on the price list with effect from July 25
  • Carnival Group (996) issued profit warning, expects to record HK$100.5mln 1H loss


Analyst ratings

  •  Heiwa Real Estate (8803 JP): Rated new buy at Mitsubishi UFJ Morgan Stanley
  • MonotaRO (3064 JP): Downgraded to sell from hold at Cantor Fitzgerald
  • NEC (6701 JP): Raised to buy at Citi
  • Pressance (3254 JP): Rated new buy at Mitsubishi UFJ Morgan Stanley
  • Suzuki Motor (7269 JP): Added to conviction buy list at Goldman
  • Token (1766 JP): Rated new hold at Mitsubishi UFJ Morgan Stanley

Equities preview

  • Ci:z Holdings (4924 JP): J&J’s Cilag to take up to 19.9% stake in company
  • Cosmos Pharma (3349 JP): Full-year operating profit ¥18.6bn vs company forecast ¥17.4bn, forecasts ¥18.7bn for current FY
  • Create SD (3148 JP): Full-year operating profit in line with company guidance, forecasts 5.3% gain to ¥14.7bn for current FY
  • Izumi (8273 JP): Q1 operating profit -3.8% to ¥7.78bn
  • Lawson (2651 JP): Q1 operating profit -8.8% to ¥17.5bn
  • Mitsubishi Heavy (7011 JP): Said to win order for 20 jets from Rockton
  • Nichi-Iko Pharma (4541 JP): Offers to buy Sagent for $21.75/share, 40% premium to latest close
  • Ryosan (8140 JP): To buy back up to 9.52% of shares for as much as ¥10.5bn; will pay special dividend of ¥50 or more, raising planned full-year payout to at least ¥140/share
  • Sakata Seed (1377 JP): Full-year operating profit ¥7.32bn vs company forecast ¥6bn, forecasts -18% to ¥6bn for current FY
  • Takeuchi Mfg (6432 JP): Q1 operating profit +6.5% to ¥4.85bn


Analyst ratings

  • SG Fleet Group Ltd (SGF AU) cut to hold vs buy at Bell Potter
  • Altium Ltd (ALU AU) cut to sell vs hold at Bell Potter

Equities preview

  • Investore Property (IPL@NZ) begins trading on NZX after demerger from Stride
  • Energy Resources of Australia (ERA@AU) Q2 operating review due 

Source: CIMB / Bloomberg


 Markets reacted well to the Japan PM's plans to add fiscal stimulus following the ruling party’s victory in Sunday’s upper-house elections. USDJPY rallied more than 1%. Photo: iStock


– Edited by Gayle Bryant

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