Article / 18 October 2016 at 1:34 GMT

Morning Report APAC: Nikkei down in early trade on stronger yen

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Markets in Asia opened mixed; Japanese shares fell on the back of a stronger yen 
  • US stocks finished lower on concerns about accelerating inflation 
  • US Treasury yields were lower as caution returned to the market


By Saxo APAC Sales Trading

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

  • 0830 – AUD – Reserve Bank of Australia October meeting minutes

Overnight news

United States

  • Weaker than expected Empire Manufacturing data raises concerns about the next month’s ISM data and the risk that the manufacturing sector is on the decline.
  • US Industrial production data was in line at up 0.1% m/m, while last month’s figure was revised lower to minus 0.5%.
  • Federal Reserve's Stanley Fischer comments were seemingly at odds with his Chair Janet Yellen, saying the Fed risks being too late if it lets its labour market run too hot and inflation overshoots.

 Europe

  • CPI data came in exactly in line with expectations and the previous month at up 0.4%y/y. Core was up 0.8%, again in line with expectations and the prior month. This is some distance away from a 2% goal. 

Foreign exchange

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  • The USD lost ground yesterday, giving back some of last week’s gains; on the surface this appears to be profit taking and position adjustment. 
  • The EUR recaptured the 1.10 handle after trading to a low of 1.0964 in early Asian trade yesterday. With the house view that the USD strengthens in the run up to the elections and December hike, EURUSD is one of the Sales Trading team's favourite expressions.
  • Emerging market currencies recouped some recent losses as the USD paired gains, however with a number of key levels broken recently in the likes of KRW, MYR, ZAR, TRY the trend for weaker EM remains.

Foreign exchange volatilities

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  • The European Central Bank's Thursday meeting has seen interest pick up in EURUSD downside options with 1.095 and 1.09 strikes.
  • With the probability of a Clinton presidency increasing the US election date USDMXN volatilities have come off as the market pairs that event risk.

Rates

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  • US Treasury yields were lower on Monday, as caution returned to the market after two-week bonds selloff that pushed yields to four-month highs.
  • The benchmark 10-year yield slipped 2.6 basis points to 1.766%. The 30-year bond yield declined 3.1 basis points to 2.522%.
  • Across the Atlantic, UK and German government bond yields continued to climb on rising inflation expectations.
  • The UK 10-year gilt yields jumped more than 10 basis points intraday to hit 1.22%, though closed only 2.7 basis points higher at 1.03%. The yield on the 10-year German bund also jumped in sympathy initially, but pared gains to end flat at 0.05%.


Commodities 

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Equities

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  • US stocks finished lower as concerns about accelerating inflation accompanied by crude-oil trading below $50/barrel overshadowed strong earnings from Bank of America. The S&P 500 index slipped 6.48 points to 2,126.50.
  • Bank of America reported both earnings and revenue that topped expectations, attributed to a rise in trading revenue. The stock closed up 0.3%.
  • Toy maker Hasbro shares surged more than 7%, being the best performer in the S&P 500 after it exceeded analysts’ forecast for profit and revenue.
  • European stocks slumped Monday, led by a pullback in oil shares, while investors are waiting for an update on monetary policy from the ECB. The Stoxx Europe 600 fell 0.7% to 337.42, with all sectors ended in red.
  • Educational-materials publisher Pearson tumbled 8.4% after it reported underlying sales fell 7% during the first nine months of the year, though Pearson did reaffirm its 2016 targets and 2018 targets.

Asia-Pacific stocks

IPO watch

  • Antipodes Global Investment (APL AU) trading debut expected after selling 90.91mln shares at $A1.10 each in IPO
  • i-mobile (6535 JP) expected to price 5.55mln shares in range of 1,220-1,320 yen each

Greater China highlights

  • China Animal Health (940 HK): Sets up special investigation committee
  • Jiangnan Group (1366 HK): Gets privatisation proposal from Power Heritage
  • Zhejiang Expressway (576 HK): To sell Development Co. stake for $HK291.9mln

Japan highlights 

  • Credit Saison (8253 JP): Said leads bids for GE Cap stake in SBI Cards: ET
  • Nippon Yusen (9101 JP): Sees ‘tough earnings climate’ through FY17: Nikkei
  • Daio Paper (3880 JP): April-Sept operating profit seen up 10%: Nikkei

 South-East Asia highlights

  • Astra International (ASII IJ), Indomobil Sukses (IMAS IJ): Indonesia’s Sept. domestic auto sales fall to 93,156 units
  • CIMB (CIMB MK): CIMB, China Galaxy in talks for stockbroking JV
  • Singapore Press (SPH SP): To cut jobs by up to 10% over two years

Source: Bloomberg

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 Japanese shares fell at the open of today's trading on the back of a
relatively stronger yen. Photo: iStock
 


– Edited by Gayle Bryant


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