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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 / 13 November 2017 at 1:19 GMT

Morning Report APAC: Nikkei leads Asian markets lower

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian markets were trading lower at the start with the Nikkei down 0.9%
  • The UK Tories are very close to signing a letter of no confidence in Theresa May
  • Australia's Coalition government was reduced to a minority after a MP resigned

By Saxo APAC Sales Trading

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

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Speeches (Singapore Time)

  • 1700 - EC - European Central Bank Vitor Constancio speaks in Frankfurt
  • 0000 - AS - ECB's Ewald Nowotny speaks at Vienna University
  • 0145 - JN - Bank of Japan's Governor Haruhiko Kuroda scheduled to speak in Zurich


Overnight news

US

  • The Senate's plan to rewrite the tax code would go much further than a competing House proposal toward making good on Republican promises to focus on the middle class, a new report shows. Moderate-income people would consistently see the largest percentage declines in their tax bills, according to an analysis released late Saturday by the official, nonpartisan Joint Committee on Taxation.

United Kingdom

  • Up to 40 Conservative MPs are now said to be prepared to sign a letter of no confidence in Theresa May. The number has increased in recent weeks, since the Tory conference after May’s Government has been hit by a series of crises. If eight more MPs put their name to the letter it would trigger a vote of no confidence which, if lost, would lead to a Conservative leadership contest.

Australia

  • Australian politics got plenty of attention in the weekend press – the Coalition government is now reduced to a minority after another MP was forced to resign due to citizenship issues, triggering a second by-election. The Turnbull government will now have 73 seats in the House of Representatives for the remaining two sitting weeks in December; Labor will have 69, while independents make up 5. While Labor (with the help of independents) can pass motions or block legislation they are still short of the absolute majority needed to pass a “no-confidence motion” (76 seats). (HSBC)
  • Newspoll: Voters have delivered a damaging blow to Turnbull’s standing as preferred prime minister, cutting his rating from 41 to a new low of 36% and narrowing his lead over Bill Shorten to just two percentage points.
  • The Reserve Bank of Australia's Guy Debelle says it is still a risk that wages growth will stay lower for longer. He also says the infrastructure spending surge will last a while. (Reuters).

 

Foreign exchange

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  • USD traded sideways on Friday with no major data or news triggering a move either side. The excitement of the day was the GBP and a possible vote of no confidence against Theresa May.
  • DXY is still trading above the broken H&S support at 94.00 and should find some support above that.  
  • GBPUSD dropped 80 pips this morning following an article saying that the Tories are very close to signing a letter of no confidence in Theresa May. The main question for me is more, why is she still there and didn’t resign by herself already. The pair trades still above the longer term support at the 100d MA.
  • AUDUSD remains well anchored below the 20d MA following the political turmoil (See above).
  • Emerging Markets: USDEM has found some good bids on Friday and this morning in Asia following US yields higher. USDKRW doesn’t seem to be able to break 1110 like it did all year and it’s a good stop level to try a long position for year-end. In USDCNH, there are some sellers of USDCNH from onshore corporate but offshore has been buying following the rest of EM.   


Foreign exchange movements

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  • EUR: EURUSD ended the week at the highest level since the US tax reform was introduced around a month ago. We reached a low in spot in Tuesday at 1.1550, but spot was well supported there, and a move below 1.1500 in 2017 will likely require renewed progress in the tax reform talks. One-month volatility hit a year low during this week, but we ended the week with good buying interest from the market, as we saw single market participants buying good amounts of both gamma and vega.
  • GBP: Quiet week where spot was range trading but closed at the high end of the range as the Brexit negotiations showed it is still possible to move on to trade talks by next month. GBP has now made back most of what it lost after the Bank of England move last week. Volatilities started offered and took a jump higher at the end of the week on back of the general vols buying which made the curve to close flat on the week. Market was buying GBP calls during the week in hope of some good news from the Brexit negotiations. This put pressure on the risk reversals which traded lower in the front end, less bid for GBP puts.
  • EM currencies were under pressure this week where USDZAR and USDTRY made new highs during the week. ZAR and TRY vols trades bid with spot on the highs but also RUB vols are higher after the spot traded 1.5 weaker during the week.


Rates

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  • US 10-year yields marched back towards the 2.4% as it increased 5.5 basis point level as the tax cuts could be possibly delayed until 2019.
  • There will be a host of central bankers speaking tomorrow, Draghi, Carney, Kuroda and Yellen.


Commodities 

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Equities

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United States

  • The Dow snapped its eight-week rally as the delay on the tax plan spooked investors on Friday. Nasdaq and S&P500 were both flat on Friday.
  • Nvidia delivered a sold result which saw the premium chip maker breaking the top of the trend channel on Friday, up 5.27%. Following the earnings report, 20 analysts raised their price targets on Nvidia for an average target price of $205.68 which was only $179 before Thursday. Notable Chipmaker such as Micron and AMD also rose 2.94% and 1.26% respectively.
  • JC penny soared 15% after the company reported a bigger-than-expected climb in same-store sales. JC. Penney reported third-quarter sales of $2.81 billion, down from $2.86 billion last year, but ahead of the $2.78 billion FactSet consensus. Meanwhile, Alibaba racked in $25.3 billion worth of sales in Singles Day, which is more than JC Penny's revenue for the whole year.
  • Mattel rose 4.95% on takeover rumours from Hasbro (which also rose 3.1%) but no official takeover offer was launched yet.

Europe

  • ArcelorMittal climbed 3.4%, with the Netherlands-listed steelmaker’s third-quarter net profit nearly doubling to $1.21 billion and outstripping expectations.

Hong Kong

  • IPO today – Razer, a Li Ka-shing-backed US gaming equipment maker, saw an oversubscription by retail bidders in an IPO worth up to HK$4.3 billion (US$550 million), rising to as high as HK$5.13 in grey-market trading vs IPO offer price of HK$3.88 apiece. 


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 Australia's Coalition government, headed by Prime Minister Malcolm Turnbull, is now reduced to a minority after another MP was forced to resign due to citizenship issues. Photo: Shutterstock

 
– Edited by Gayle Bryant


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