Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 14 March 2018 at 2:05 GMT

Morning Report APAC: Markets slip following 'Rexit' slide on Wall St

APAC Sales Trading Desk / Saxo Capital Markets


  • Trump's firing of Tillerson was perceived as a sign of turmoil in the White House
  • Investor appetite for risk retreated on the turmoil
  • USD lost ground; base metals were stronger on the back of the USD
  • Markets reaction to US CPI data for February was muted
  • Oil prices were under pressure after the EIA forecast rises in US shale output

 By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8hrs)



  • 1600 – EU: European Central Bank president Mario Draghi speaks in Frankfurt.
  • 1645 – EU: ECB chief economist Peter Praet to speak in Frankfurt.
  • 1645 – EU: ECB banking supervisor Ignazio Angeloni speaks in Rome.
  • 1845 – EU: ECB’s vice president Vitor Constancio speaks in Frankfurt.
  • 2130 – France – Bank of France governor Villeroy De Galhau speaks in Frankfurt.
  • 0015 (on Thursday) – EU: ECB member Benoit Coeure speaks in Berlin.

Overnight news; market summary

  • The market moved on White House turmoil following the news that Donald Trump has fired his Sectary of State Rex Tillerson and replaced him with CIA director Mike Pompeo.
  • The market reaction to US CPI numbers was muted. US and European equities fell by 0.6% to 1.6%. Yields were lower helped by solid demand in the bond auction and moderate US CPI. The US dollar weakened; the Canadian dollar was is the worst performer. Precious metals were higher while oil prices fell.

Overnight news, US

  • US CPI data for February showed consumer price slowed, in line with expectations. Headline and core CPI both rose 0.2% m/m; that led to annual inflation of 2.2% and 1.8% respectively.
  • CPI numbers confirmed a slow picking up of inflation without any  breakout that would alter the Fed’s planned rate hikes. The Fed is still on set to remove stimulus gradually. So is a "goldilocks" economy back on the table in the US?
  • Donald Trump fired Tillerson as Secretary of State over disagreement on the Iran nuclear deal, and CIA director Mike Pompeo will replace him. This might heighten risks as Pompeo is regarded as firmer on geopolitical issues. Oil prices could be supported in this case as there could be tougher sanctions on Venezuela and Iran.
  • In the meantime, after granting exemptions on tariffs to its allies, US is talking about wider charges on its Chinese imports. More than $30 billion could be on the table, now extending to electronics, furniture and toys. US visas for Chinese nationals may also be limited. The pictures in getting clearer that China is the target, pending its reaction.
  • The prospect of a US-China ‘trade war’ now looks more likely.

Overnight news, Canada

  • Bank of Canada governor Stephen S. Poloz is confident that the central bank has room to let the economy run under current conditions, as he believes that increased investment has potential to drive growth. Rate hike expectations have now dimmed.

Foreign exchange


  • The US dollar dropped against most other G10 currencies as risk appetite retreated on White House turmoil.
  • The Canadian dollar was the worst performer after Bank of Canada governor Stephen Poloz tried to talk down  rate hike expectations as he asserted that the bank has room to let the economy run. Note that 1.30 is a key level to watch.
  • Emerging Markets: narrow range trading was the theme before US CPI data. USD  weakness is dominating moves for all the pairs. High yield currencies like INR and IDR benefited the most, before the risk off mood emerged. KRWUSD could be an interesting pair to watch in these few days surrounding the meeting between US and North Korea.

Foreign exchange movements


  • USDJPY for 6 month to 1 year is still quite bid, and biased to the downside
  • USD vols are seeing some interest into the next Federal Reserve meeting date (March 21).


  • The release of CPI figures that were in line with expectations and solid demand in bond auctions supported US treasuries, especially in longer maturities. The White House turmoil also contributed to demand.
  • European bonds were generally higher amid risk off demand. UK treasuries outperformed following the UK Spring statement showing a decline in sales. 

Commodities nnn





US equities
  • The Dow Jones (which fell by 197 points) and S&P 500 (down 75 points) both lost ground in choppy trading after tech shares pulled back amid concerns about trade tensions between the U.S. and China could increase.
  • Shares in Qualcomm (QCOM) fell nearly 5% to $59.70 after President Trump late Monday ordered the attempted hostile takeover of the chipmaker by Singapore-based Broadcom (AVGO) blocked on national security concerns. Investors were also monitoring banking and financial issues, after the Senate late Monday approved amendments to proposed rollbacks to Dodd-Frank oversight rules, setting up the underlying bill for final approval later this week.
  • Intel (INTC) punched up nearly 2% to the top as investors responded to the blocked Broadcom/Qualcomm deal. Intel was reported late last week to be considering its own bid for Broadcom, in order to avert a competitive threat. A four-week advance drove Intel shares to a new high, share closed at 51.78. The stock traded just below that high on Monday, and up 12% since the start of the year.
  • The miserable ride for General Electric (GE) continued. The share price tumbled 4% lower after JPMorgan cut the stock's price target to $11, from $14. The note cited "structural concerns in the key power markets, minimal margin for error on leverage," and a free-cash flow/dividend ratio that puts the company's already lowered payout at "high risk."

European equities

  • European stockmarkets tumbled by the market close on Tuesday, as investors digested the news that Trump had sacked Tillerson. Britain's FTSE was down 75 points and Germany's Dax closed 197 points lower.
  • Looking into utilities stocks, E.On (EOAN) jumped toward the top of the European benchmark after the company said it would submit a 5.2 billion euro ($6.4 billion) voluntary takeover offer for minority shareholders in Innogy. This "win-win" decision sent shares of E.ON up 3.87% to €9.25.
  • France based telecom company Iliad (ILD) slumped to the bottom of the index despite the company reporting higher annual sales and profits during 2017. The telecoms group also said the firm was in the final phase of preparing its Italy launch before the summer. Its shares closed down nearly 10% to EUR 177.55, a new 52 week low.

Hong Kong equities

  • The Hang Seng Index (HSI) closed at 31,601 points, up 7 points; China telecoms were under pressure, with a general downward adjustment on the target prices. The three most active stocks with capital inflow to the Southbound Trading were Tencent (700.HK), followed by Ping An (2318.HK) and CCB (939.HK).
  • China's third largest bank, Agricultural Bank of China (01288.HK) outperformed its peers; its shares shot up 4.9% to $4.69, on volume soaring to 398 million shares, involving $1.852 billion. Its A shares also bucked the market to jump 2.5% to RMB4.13 at midday. Deutsche Bank said the ban\k's Q4, 2017 results were satisfactory. Coupled with proposed private placement of A shares raising RMB100 billion, multiple brokers hold positive view on the placing plan; China's Ministry of Finance would be one of its backers.
  • Genscript Bio (1548.HK) announced that its subsidiary received the permission of a clinical trial granted by the China Food and Drug Administration (CFDA) for autologous infusion. Following the news, the stock slumped 9.9% to $26.2 after profit-taking by investors, on rallying volume of 80.88 million shares and turnover of $2.311 billion.


The diplomatic world may miss the steady hand that Rex Tillerson brought to the role of Secretary of State after his departure, which has been dubbed as "Rexit". Photo: Shutterstock

– Edited by Rob Ryan

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. 

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