Article / 28 February 2017 at 1:49 GMT

Morning Report APAC: Markets await Trump address to Congress

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Trump foreshadows infrastructure announcement in upcoming address to Congress
  • The probability of a US rate hike in March has climbed to 50% 
  • Former UK leader John Major sees a full Brexit deal by 2019 as very unlikely
  • USD is bid on Trump's infrastructure comments and hawkish Fed rate comments

 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
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Speeches

1715: UK – Bank of England’s Charlotte Hogg speaks at appointment hearing in London

0400: US – Federal Reserve’s Patrick Harker speaks on economy in Philadelphia 

0430: US – Fed’s John Williams speaks in Santa Cruz 

0740: US – Fed’s James Bullard speaks in Washington


Overnight news

 

US: Mixed durable goods numbers were reported overnight, with the headline number up 1.8% vs 1.6% expected, while the details, ex transport, cap good orders and goods shopped all declined month on month .

Pending home sales surprised with a month on month contraction of 2.8%. 

President Trump promised there will be something significant in his address to Congress with respect to infrastructure plans. He talked up a very large boost in the infrastructure budget by 10%, to be funded by budget cuts elsewhere, lifting defence stocks. 

The March rate hike probability climbed to 50% after Fed voter Robert Kaplan – a hawk – talked about the need to move sooner rather than later. With a myriad of speakers still to come this week, culminating in Janet Yellen at the end of the week, a March hike remains a possibility.

Europe:  European economic confidence continued its climb to 5-year highs despite missing estimates at the margin, printing a 108 figure versus 107.9. 

Former UK prime minister John Major said he sees a full Brexit deal by 2019 as very unlikely and does not expect a second referendum on Brexit. He also criticised Theresa May, saying she is making undeliverable promises and treating the remain camp with disregard.

Foreign exchange

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USD caught a bid on the back of Trump’s infrastructure comments, which set the stage for today’s congressional address and the seemingly hawkish comments from the Fed's Robert Kaplan, which helped push the probability of a March hike up to 50%.

CAD was the worst G10 performer yesterday and much-loved CAD longs were bailed on as the pair traded back above its 200-day moving average. The 1.3210 area is forming strong near-term resistance.

Emerging Markets: A mixed bag for EM yesterday, with the eastern European currencies outperforming their African and Asian Peers. RUB, HUF and RON were up on the day while the ZAAR gave up some ground as EM’s worst performer.


Foreign exchange movement

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GBP short-dated volatilities climbed after early Asia news articles about increased risks of a second Scottish referendum.

With a heavy calendar of Trump today and Fed speeches this week, USDJPY volatilities for Friday cut have been bid up. 

Outside of that, the market has been patiently awaiting the start of a busy week.


Rates

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US yields rose from near their 2017 low, led by short maturities, as positioning in Fed fund futures and eurodollar futures implied increased odds of a rate hike in March, which now stands at 50:50 .

The German 10-year bund yield rose from its lowest level since last December, as a flight from French election risk eased. Peripheral spreads narrowed.



Commodities 

 

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Equities

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US equities were up marginally ahead of Trump's address to Congress tomorrow. The Nasdaq was the best performer as it rose 0.28% but both the Dow and the S&P 500 continued to make record highs from yesterday's session.

European markets finished mixed compared with their recent closing prices. The DAX gained 0.16% while the FTSE 100 was higher by 0.13%. The CAC 40 was flat at 4845. 

Tesla continued its drop from last week's earnings release and was down 4.19% after Goldman Sachs downgraded the electronic car-maker from neutral to sell, and expect it to fall by another 25% from the current price. Goldman questioned the company's ability to launch its Model 3 mass-market sedan, execute on the strategy behind its acquisition of solar specialist SolarCity, and deal with the need to tap the capital markets to raise cash. Tesla closed at $246.23. 

Sotheby's gapped up 15.71% and broke the triple top level on the price chart, closing at $46.39. Shares in the auction house rose due to better than expected earnings as the company swung from losses to profits this quarter despite lower revenue, thanks to a cost-cutting effort from the management.


Asian equities preview

Hong Kong

Analyst Ratings: 

  • BOE Technology (000725 CH): Rated new neutral at Credit Suisse 
  • Guangzhou Auto (2238 HK): Raised to market Perform at Bernstein 
  • Texhong Textile (2678 HK): Cut to hold at China Securities 

Preview:

  • Infrastructure: China to invest 15tn yuan in transportation in 5 years to 2020: Eco. Info. Daily 
  • Beingmate (002570 CH): Prelim. FY sales 2.77bn yuan vs 4.53bn yuan a year ago 
  • Chongqing Store (600729 CH): FY sales 33.8bn yuan vs 36.5bn yuan year ago 
  • Dongjiang Env.(002672 CH): Prelim. FY sales 2.61bn yuan vs 2.4bn yuan year ago 
  • HSBC (5 HK): Buys back 3.70m shares at avg 651.36 pence each Feb. 27 
  • Hualan Biological (002007 CH): Prelim. FY sales 1.93bn yuan vs 1.47bn yuan year ago 
  • Hung Hing (450 HK): Subsidiary to sell Shenzhen unit for 1.03bn yuan 
  • Kong Sun (295 HK): Unit to pay 171m yuan for stake in Hohhot Jingu Bank 
  • Luxshare (002475 CH): Prelim. FY sales 13.8bn yuan vs 10.1bn yuan year ago 
  • Shanshui Cement (600036 CH): Misses repayment of 1bn yuan 3-year bond 
  • Wanda Cinema (002739 CH): FY sales 11.2bn yuan vs 8bn yuan year ago 
  • Yanghe Brewery (002304 CH): Prelim. FY sales 17.2bn yuan vs 16.1bn yuan year ago 
  • Yingde Gases (2168 HK): Directors Sun, Strutt say they welcome Oasis proposal; co. says not proper to make commitment to Oasis before EGMs 
  • Yunnan Aluminium (000807 CH): Terminates share sale plan after new rules 
  • Yunnan Baiyao (000538 CH): Parent stake purchase gets anti-monopoly clearance 
  • Zhejiang Shibao (1057 HK): Says 2016 net profit rises 20% to 64.25m yuan 
  • Zhongheng (002364 CH): Prelim. FY sales 892m yuan vs 842m yuan year ago 

Japan

Analyst Ratings: 

  • Daio Paper (3880): Cut to neutral from outperform at Macquarie 
  • Resona (8308): Cut to neutral fom buy at UBS 
  • Ricoh (7752): Cut to underperform from neutral at Macquarie 
  • Takeda (4502): Credit rating lowered 2 notches to A-from A+ at S&P; outlook to negative 
  • TDK (6762): Cut to equalweight from at Morgan Stanley MUFG 
  • Terumo (4543): Resumed at neutral at Goldman 

Preview:

  • Aska Pharma (4514): Gets exclusive option from Pieris Pharma to license rights for anemia drug PRS-080 in some Asian markets 
  • Daio Paper (3880): Offers 32% premium to take Miura Printing (7920) private 
  • Daiwa Securities (8601), Nomura (8604) and others: Government to hold interviews with 10 securities firms that applied to underwrite Japan Post Holdings 
  • Electric Power Development (9513): Plans to restart 1,050 megawatt Tachibana Bay No. 2 unit on Feb. 28 
  • IHI (7013): Books 17.8b yen gain on sale of property to Mitsui Fudosan 
  • Kusuri no Aoki Holdings (3549): February same-store sales rise 5.2% y/y 
  • Mitsubishi Motors (7211): To open new Philippine plant in 2018, sees 50% boost in production volume there 
  • Mitsubishi UFJ Financial Group (8306), Mizuho Financial Group (8411): Co. union will not demand base pay increases, Kyodo reports 
  • Miura Printing (7920): Daio Paper offers 32% premium, paying as much as 8.36b yen, to take co. private 
  • NTT Docomo (9437): To ally with Qualcomm, Ericsson on 5G wireless standard being developed by 3GPP (3rd Generation Partnership Project) 
  • Panasonic (6752): Co. transfers all of its Tesla shares to its North America unit to strengthen ties with the carmaker in rechargeable batteries 
  • Stanley Electric (6923): To buy back up to 0.48% of shares for 2bn yen 
  • Sumitomo (8053) and partners: Get ~$3.36bn loan to build 2,000 megawatt coal-fired power plant in Indonesia from Japan Bank for International Cooperation and other banks 
  • Sumitomo Heavy Industries (6302): To acquire Persimmon Technologies for 3.6bn yen 
  • Temp Holdings (2181): To sell shares held by founder for 1,841 yen each, a 3% discount to Monday’s closing price 
  • Tokai Holdings (3167): To sell Treasury shares to one designated investor 

Australia

Analyst Ratings: 

  • Adairs (ADH): Cut to neutral at UBS, PT A$1.25 
  • Amaysim (AYS): Cut to hold at Shaw and Partners, PT A$1.90 
  • Austal (ASB): Cut to underperform at APP Securities, PT A$1.62 
  • Cardno (CDD): Raised to add at Morgans Financial, PT A$1.29 
  • Gateway Lifestyle (GTY): Raised to outperform at Macquarie, PT A$2.19; Cut to neutral at Goldman, PT A$2.25 

Preview:

  • Stellar profit season brightens outlook for Australia stock bulls 
  • Ex-dividend: APN Property, Asaleo Care, Bega Cheese, Challenger, Greencross, Insurance Australia, Navitas, Nick Scali 
  • Bega Cheese (BGA): Agrees to sell A$200m plant to Mead Johnson Nutrition 
  • Bellamy’s Australia (BAL): Chairman Woolley said to be preparing to resign; Extraordinary general meeting scheduled 
  • BHP Billiton (BHP): Escondida deal hopes fade as sides give contradicting views; "Bloody awful" trade pledges risk deflating Trump pump 
  • Fortescue (FMG), Wesfarmers (WES): Fortescue Apollo said to bid for $1.5bn Wesfarmers coalmines 
  • Harvey Norman (HVN): 1H results expected; NOTE: 2-analyst rev. est. A$1.6bn 
  • Orocobre (ORE): 1H results expected 
  • OZ Minerals (OZL): Red Kite’s Lilley sees 600kt copper deficit on Horizon 
  • Premier Investments (PMV), Woolworths Ltd. (WOW): Executive Colette Garnsey may be named next head of Big W: Australian 
  • QBE Insurance (QBE): Company says returns to rise amid Trump stimulus hopes; Cut to underperform at Credit Suisse, PT A$12.60 
  • Resolute Mining (RSG): 1H results expected 
  • Spotless Group (SPO): 1H results expected; NOTE: 2-analyst adj. net income est. A$36.4m 
  • WorleyParsons (WOR): Dar Group confirms 13% stake purchase in company; Worley says got offer Nov. 14 for A$11.80/share 
  • Woodside (WPL): Shell may be considering sale of stake in co: AFR



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Trump says his address to Congress will include a 'big statement on infrastructure'. Photo: Shutterstock

 

– Edited by Susan McDonald


This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter

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