Article / 24 May 2016 at 2:25 GMT

Morning Report APAC: More Fed speakers enter the bull ring

APAC Sales Trading Desk / Saxo Capital Markets

  • More US Federal Reserve speeches favouring two rate hikes this year 
  • US Treasury yields have retraced earlier falls
  • Main movers in G10 were AUD and NZD, following a 6.7% tumble in iron ore 
  • Brexit: implied probability of a Remain vote is now 85%

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time – GMT + 8)
1400: EUR – Germany GDP WDA YoY (Exp. 1.6%, Prev. 1.6%), NSA YoY (Exp. 1.3%, Prev. 1.3%), SA  QoQ (Exp. 0.7%, Prev. 0.7%) 

1400: EUR – Germany Exports QoQ (Exp. 0.5%, Prev. -0.6%), Imports QoQ (Exp. 1.0%, Prev. 0.5%) 

1700: EUR – Germany ZEW Survey Current Situation (Exp.  49.0, Prev. 47.5) 

1700: EUR – Germany ZEW Survey Expectations (Exp.  12.0, Prev. 11.2) 

2200: USD – New Home Sales (Exp. 523k, Prev. 511), MoM (Exp. 2.3%, Prev. -1.5%)

1115: AUD – RBA's Glenn Stevens remarks at business briefing in Sydney

1700: GBP – BoE's Mark Carney, Ben Broadbent, Martin Weale and Gertjan Vlieghe in Parliament

Overnight news

  • Fed Speeches: Speeches from the Federal Reserve's James Bullard and John Williams are similar to what we heard before, favouring two hikes this year and happier with market expectations.
  • US: Markit Manufacturing PMI drops from 50.8 to 50.5 (Exp 51.0). A renewed fall in production was the one key factor weighing on the headline index, alongside softer new order growth and further cuts to stocks of inputs. New order growth was slowest of 2016, primarily due to reduced foreign demand. Output contracted for the first time since September 2009.
  • Brexit: See below

Foreign exchange


The main movers in the G10 space were AUD and NZD, following a 6.7% drop in iron ore yesterday as port stockpiles top 100m tonnes. AUD is settling down below the 200-day moving average for the past three days, which should build as a stronger resistance (0.7256). Technically, there is not major support until 0.7000. 

NZD has been trading between the 50-day and 100-day MA and only a break outside these levels (0.6721/ 0.6838) would give a stronger signal for the currency. USDJPY was grinding lower the whole day after it hit the 500-day MA as the main resistance.

Foreign exchange movements


Volatilities moving lower continued overnight on a lack of big spot moves. Flows have been very light but there is traction in AUD downside interests, with the spot staying below the 200-day MA. 

The market seems to be long USDCAD calls but we saw some mild profit-taking on the move higher in spot. 

One-week EUR trades at 6.5 vol, which is the lowest level seen in the past two years, including Christmas periods.



Hawkish Federal Reserve comments saw US Treasury yields retrace earlier falls, leaving the 10-year yield  unchanged at 1.84%, while at the margin the US curve is a little flatter. The difference between yields on five- and 30-year debt narrowed to its flattest on a closing basis since March 15. 

Furthermore, Treasuries are prone to repricing and higher yield due to the misalignment between the Fed and the markets' rate hike expectations. Moves in European yields were modest the Bunds one basis point higher at 0.17%.





Markets started the week in slight risk-off mode as Monday's economic reports printed a shade weaker than market expectations. 

Applied Materials (AMAT:xnas) added 1.1% to a 14% surge on Friday as the company reported an almost fourfold leap in orders for equipment to make displays. Interestingly, Samsung, LG and 

Foxconn Technology Group (all Apple suppliers) have announced increased spending on new display technology in the past two months. 

Fiat Chrysler Automobiles fell 5.1% (FCA:xmil, FCAU:Xnys) as its fight with Germany over vehicle emissions escalated after the country’s most-read newspaper reported that authorities found the company had cheated. 

German pharma giant Bayer AG has offered to acquire Monsanto for $122 per share in cash in a deal valued at about $62 bn. The controversial move comes just three weeks after the board named Werner Baumann Bayer's new CEO and was criticised by a major shareholder for its "arrogant empire-building”.





HK equity preview

Analyst views: 

  • Gome (493 HK): Cut to hold at HSBC 
  • PetroChina (857 HK): Cut to neutral at JPMorgan
  • BOCHK (2388) is reviewing its business and asset portfolio. No firm decision has been made to proceed on any sale of assets
  • Ping An (2318) to set up Sino-Israeli Innovation Dev. Fund, with a scale of RMB10bn. The first phase of the contribution is RMB1bn. 
  • Tencent (700) is said to be in talks to buy majority stake in SoftBank’s Finland mobile game unit Supercell. (WSJ) Tencent also said they have 100m customers in mobile phone games 
  • Alibaba (BABA)’s product UC browser hit 400m monthly active users worldwide 
  • Tsingtao Brewery (168): China tycoon Chen Fashu cut H-share stake to 5.56% from 6.01% on May 18
  • TSL Jewelry (417) plans to open at least 100 franchises in China in two years. They are prudent in opening shops in Hong Kong but promise no lay-off plan 
  • CH Everbright Intl. (257) is said to be in talks to buy MP & Silva, a London-based sports media company which is valued at US$1.4bn 
  • Shun Tak (242) announced the result of tender for the PPTY in SGP. The company has received the acceptance letter whereby the vendor confirmed that it has accepted the tender at the consideration of S$145m. 
  • CK PPTY (1113) bought back 645,500 shares for HK$29.2m on May 23 
  • Future Land (1030) to pay final dividend of RMB0.05 per share 
  • SZ Expressway (548)’s Wuhuang Expressway April average daily toll revenue stayed flat. Other expressways showed year over year growth for average daily toll revenue ranging from 1.4% to 49.4%, in which Changsha Ring Rd showed the highest growth

Japan equity preview

Analyst views:

  • Century Tokyo (8439 JP): Rated new sell at Haitong 
  • Isetan Mitsukoshi (3099 JP): Raised to overweight at Mitsubishi UFJ-MS 
  • Komatsu (6301 JP): Raised to neutral at Nomura 
  • Nabtesco (6268 JP): Raised to outperform at Tokai Tokyo 
  • Accordia Golf (2131 JP): Names Yuko Tashiro president, replacing Ryusuke Kamata 
  • Calsonic Kansei (7248 JP): Nissan to sell Calsonic shrs for >100b yen, Nikkei reports 
  • Daiken (7905 JP): To conduct 1-for- 5 reverse split Oct. 1 
  • Futaba Industrial (7241 JP): Toyota to raise stake to 31.45% from 12.29% 
  • Inpex (1605 JP): Chairman Naoki Kuroda to step down June 28 
  • Isetan Mitsukoshi (3099 JP): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley 
  • Isuzu Motors (7202 JP): Raised to overweight from neutral at JPMorgan 
  • Japan Tobacco (2914 JP): Makes $500m bid for Ethiopia monopoly 
  • Oiles (6282 JP): Rated new neutral plus at Iwai Cosmo Securities 
  • Rhythm Watch (7769 JP): To buy back as much as 9.75% of shares for up to 1.5b yen 
  • SoftBank (9984 JP): In talks with Tencent for sale of Supercell stake, WSJ reports (see related story) 
  • Sharp (6753 JP): ISDA rules that extension of maturity of debt due March 31 isn’t credit event 
  • Topy Industries (7231 JP): To conduct 1-for- 10 reverse split 

Australia equity preview

  • South32 (S32 AU) cut to neutral vs outperform at Credit Suisse 
  • BlueScope Steel (BSL AU) cut to neutral vs overweight at JPMorgan; cut to neutral vs buy at UBS 
  • Lifestyle Communities (LIC AU) cut to hold from buy at Canaccord Genuity 

Source: Bloomberg / CIMB

  There was a 6.7% drop in iron ore yesterday as port stockpiles top 100m tonnes. Photo: iStock

 – Edited by Susan McDonald

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