Morning Report APAC: Markets mixed after inflation data, Fed hike
- Australian bonds followed a rally in Treasuries
- The yen was little changed at 109.54 per dollar
- US Consumer Price Index dropped 0.1% MoM
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
1540 – AU – RBA’s Debelle speech in Sydney
0400 – UK – BOE Governor Marke Carney speaks at Mansion House in London
- The Fed raised rates by 25 basis points, and kept is economic projections largely unchanged.
- The central bank noted that household spending had "picked up in recent months," an upgrade from the May statement. The Fed also provided more details on how it plans to reduce its $4.5 trillion balance sheet.
- The Fed also lowered its 2018 unemployment rate estimate to 4.2% from 4.5%
- However, the Fed now believes inflation will fall well short of its target this year. The statement noted that inflation in the next 12 months "is expected to remain somewhat below 2% in the near term" but to stabilise. She blamed recent declines on one-off factors such as reductions in wireless-plan and drug costs.
- Consumer Price Index dropped 0.1% MoM, weighed down by declining prices for gasoline, apparel, airline fares, communication and medical care services, among others. It was the second drop in the CPI in three months. CPI rose 1.9% YoY, less than expected (Exp. 2.0%) from 2.2%.
- Retail Sales came in lower than expected at -0.3% MoM (Exp. 0.0%). Decline is due to declining purchases of motor vehicles and discretionary spending.
- May's talks with Northern Ireland's DUP dragged on and calls mounted for a cross-party consensus on Brexit. Scottish First Minister Nicola Sturgeon wrote to May to demand clarity on her plans for talks with the EU and to protect "participation" in the bloc's single market and customs union.
- USD was overall muted overnight, dropping after the weak CPI numbers before rallying back on a more hawkish FOMC. It seems though that the rally is weak and we should see very quickly the USD come off again with no major events remaining for a big part of the year.
- Emerging Markets: The search for carry following the FOMC meeting should continue in the EM world and we should continue to see strong foreign inflows in bonds and equities pushing the USD lower
Foreign exchange movements
- All the G10 Vols trade at the 2/3 year lows for up to 3 Months. And despite this level, no one is really buying. The only interest we see is in the 6 Months and above.
- We are seeing some buyers of GBP low delta upside for 2/3 Months area playing a softer Brexit
- The main focus the last two days was USDCAD with a lot of buyers of Gamma after the very hawkish comments from BOC
- US yields were lower across the curve due to lower inflation data and ‘dovish’ outlook, with the curve flattened as rake hike lifted more on front end.
- Bunds yield curve was flattened as well with far end dropped, taking the hint from US. peripherals outperformed led by Spain and Portugal.
- UK 10yr yield dropped more than 10 pips on with soft wage data printed.
- US market was mixed after the FOMC but Dow Jones continued to make new high while NASDAQ and S&P 500 closed in the red. Europe markets finished mixed with the Dax leading the Europe with gains of 0.32%. However, FTSE 100 lost steam and retreated 0.35% together with the CAC 40.
- Do take note Peter Garnry issued a buy call on Petrofac, a facility provider to the oil and gas industry which has been sold off massively in 2017. For more details, click here.
- H&R Block Inc, the tax preparerer announced its earnings yesterday with an increase of 11.8% over the year ago thanks to its aggressive share repurchases which saw a 20% jump in the EPS.The Rising wedge pattern was also invalidated as a result of the earnings release as share price closed 7.93% higher and attempted to break the $30 level yesterday.
- Alexion Pharmaceuticals jumped 9.26% or $10.00 after news of an executive hire of a new CFO. The new addition was seen as a world class addition and would bring deep experience and could steer Alexion the right directions. While the stock is still on a downtrend channel since 2017, a break of $130 will see a change in the momentum and sentiment.
- AVIC Aircraft (000768 CH): Raised to overweight at Morgan Stanley
- Bank of China (3988 HK): Raised to buy at BOC Intl
- Beijing Capital (600008 CH): Cut to reduce at HSBC, PT 4.60 Yuan
- Fangda Special Steel (600507 CH): Initiated at GF Secs with buy
- Global Brands (787 HK): Cut to hold at HSBC, PT HK$1.10
- L’Occitane (973 HK): Raised to outperform at KGI Securities, PT HK$18
- Want Want China (151 HK): Cut to sell at Haitong Intl, PT cut to HK$4.50
- Aluminum producers: U.S. includes China pallets in extrusions antidumping
- Developers: HK Fin Sec says property market ‘irrationally stimulated’: RTHK; Hong Kong’s housing prices “too expensive”: Far East Consortium
- New energy, environmental: China to test green finance reforms in some provinces: Radio
- AAC Tech (2018 HK): Says Ping An Bank (000001 CH) to provide 10b yuan of credit line
- Air China (753 HK): May traffic rises 7% from year earlier
- Guangzhou Baiyunshan (874 HK): Subscribed 1.81b yuan WMPs from Dec.’16 to today
- CALC (1848 HK): To buy 50 Boeing 737MAX aircraft for list price of $5.8b
- China Hongqiao (1378 HK): Takes steps to meet bourse terms on share restart
- China Res Land (1109 HK): bought 5 land parcels for 5.64b yuan in May
- China Shenhua (1088 HK): May coal sales 33.7m tons vs 28.7m tons year ago
- CK Property (1113 HK): repurchased 1,517,500 shares on June 13
- Fosun Int’l (656 HK): In China JV with Mattel to rollout child development clubs
- Glencore (805 HK): S. Africa’s Chamber of Mines won’t attend govt meeting Thursday
- Global Brands (787 HK): FY net income $90m
- Gold-Fin Hldg (1462 HK): prelim yr attr profit down about HK$20m on year
- Haitong Securities (600837 CH): Haitong Bank S.A. says carried out EU160m capital increase
- HSBC (HK 5): Hexagon said working with HSBC, GS to gauge ABB, GE interest: FT
- Shenzhen CAU (000004 CH): Under CSRC probe on disclosure violation
- Tencent (700 HK): Russia to identify online-messenger users, restrict content
- Zijin Mining (2899 HK): says Minxi Xinghang pledged 289.4m co. shares
- Ajinomoto (2802): Upgraded to buy at Daiwa; PT raised to 3,000 yen
- Dai-ichi Life Holdings (8750): Raised to buy at Mizuho
- Itochu (8001): Upgraded to buy at Daiwa; PT raised to 2,050 yen
- Japan Exchange Group (8697): Cut to neutral at Goldman
- Mabuchi Motor (6592): Cut to equalweight at Morgan Stanley
- Mitsui & Co. (8031): Raised to outperform at Daiwa; PT cut to 1,800 yen
- Morinaga (2201): Cut to neutral at Macquarie
- Nintendo (7974): Raised to underperform at CLSA
- Nishimatsu Construction (1820): Cut to neutral at Tokai Tokyo; PT lowered to 650 yen
- Rakuten (4755): Cut to neutral at Storm Research
- Shinko Electric (6967): Raised to equalweight at Morgan Stanley
- Sumitomo Corp. (8053): Upgraded to outperform at Daiwa; PT raised to 1,700 yen
- Taiyo Yuden (6976): Raised to overweight at Morgan Stanley
- TDK (6762): Cut to underweight at Morgan Stanley
- Tokio Marine Holdings (8766): Cut to neutral at Mizuho; PT lowered to 5,450 yen
- Agriculture industry: Japan’s agriculture fund, created in March 2014, has spent 2.4b yen on innovation projects for boosting productivity
- Daihatsu (7203): Says its compact cars may be sold in South America
- Daiwa Motor Transportation (9082): To form capital tie-up with Motion Inc.
- Japan Tobacco (2914): To open two Ploom e-cigarette shops in Tokyo June 29
- JSR (4185): Agrees to acquire entire stake in Selexis SA
- Mabuchi Motor (6592): Cut to equalweight at Morgan Stanley; PT lowered to 6,500 yen
- Nippon Columbia (6791): Nippon Columbia rejects RMB’s offer, recommending shareholders accept Faith’s stock swap proposal
- PanaHome (1924): Panasonic aims to hold 80% of co. and plans to start procedures to delist co.
- Recruit Holdings (6098): Acquires 100% stake in Munich-based Trust You GmbH
- Shinko Electric (6967): Raised to equalweight at Morgan Stanley; PT raised to 950 yen
- Start Today (3092): To cancel 3.3% of shares June 30
- Taiyo Yuden (6976): Raised to overweight at Morgan Stanley; PT lifted to 2,200 yen
- TDK (6762): Cut to underweight at Morgan Stanley; PT lowered to 6,000 yen
- Tokyo Dome (9681): 1Q net income +66% to 2.4b yen, maintains full-year outlook
- Toshiba (6502): To end manufacture and sale of home fuel-cell systems by end of July; separately, co.’s ratings remain on creditwatch negative at S&P
- Hitachi (6501): SG Holdings applies to list shares in Tokyo to diversify funding
- CSL (CSL): Cut to hold at Wilsons, PT A$130.99
- Nine Entertainment (NEC): Cut to hold at Morningstar
- Northern Star (NST): New sell at UBS, PT A$4.64
- Starpharma (SPL): Raised to buy at APP Securities, PT A$0.65
- Vocus (VOC): Cut to underperform at APP Securities, PT A$3.72
- I-Med Management holds preliminary talks with suitors: CEO
- APA Group (APA): May chase more M&A to keep growth momentum: BI
- DWS (DWS): Considering options including counter proposal for SMS Mgmt (SMX)
- F&P Healthcare (FPH): Trades ex-div.
- Fortescue (FMG), BHP Billiton (BHP), Rio Tinto (RIO): Iron ore rises 2%, most in two weeks, according to price index compiled by Metals Bulletin
- Newcrest (NCM), Evolution (EVN), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), OZ Minerals (OZL): Gold falls to two-week low as Fed raises rate, sticks to outlook
- Oil Search (OSH): Mulls mini gas plant in PNG to supply needy Australia
- Origin Energy (ORG), Santos (STO): Australia flips gas supply outlook to sufficient from shortage
- Seek (SEK): Australia May job ads up 8.5% y/y
- Seven Group (SVW): Caterpillar unexpectedly boosts dividend, citing solid cash flow; NOTE: is authorized dealer in West Australia, NSW, North China
- South32 (S32): South Africa’s Chamber of Mines won’t attend govt meeting Thursday
- Ten Network (TEN): Anchorage Capital said to be seeking role in refinancing: AFR
- Woodside (WPL), WorleyParsons (WOR), Beach Energy (BPT), Karoon (KAR): Oil tumbles to lowest since November as gasoline supplies surge
– Edited by Adam Courtenay
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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