Morning Report APAC: Nikkei obliterating post-Brexit woes
- Nikkei powers up to 16,341.26, up 1.53% at 0200 GMT
- GBP extends gains as AUD and NZD drop after surging overnight
- GBP climbs for a fourth straight day, strengthening 0.3% to $1.3287
- Crude reverses some of it 4.6% jump after industry data shows US stockpiles up
- Global stocks regain nearly $4 trillion wiping out Brexit vote calamity
- JPY gains 0.1% and was at 104.58 per dollar in early Asian trade
- Fed's Kashkari says no huge urgency to raise rates due to low inflation
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
- 1230: JPY – Industrial Production MoM (Prev. -2.3%), YoY (Prev. -0.1%)
- 1445: EUR – France CPI MoM (Exp. 0.2%, Prev. 0.2%), YoY (Exp. 0.2%, Prev. 0.2%)
- 1500: CNY – China Exports YoY (Exp. -5.0%, Prev. -4.1%), Imports YoY (Exp. -6.2%, Prev. -0.4%)
- 1500: CNY – Trade Balance (Exp. 45.65B, Prev. 49.98B)
- 1500: MYR – BNM Overnight Policy Rate (Exp. 3.25%, Prev. 3.25%)
- 1700: EUR – Eurozone Indus Prod. SA MoM (Exp. -0.8%, Prev. 1.1%), YoY (Exp. 1.3%, Prev. 2.0%)
- 2030: USD – Import Price index MoM (Exp. 0.5%, Prev. 1.4%), YoY (Exp. -4.6%, Prev. -5.0%)
- 2200: CAD – Bank of Canada Rate Decision (Exp. 0.5%, Prev. 0.5%)
- 2200: CAD – Bank of Canada Releases Monetary Policy Report
- 08:30am: NZD – RBNZ Assistant Governor John McDermott speaks on OCR process
- 09.00pm: USD – Fed's Kaplan Speaks to World Affairs Council of Houston
US: US wholesale inventories moved up 0.1% (expected +0.2%) after expanding a revised 0.7% in April (previous: +0.6%) during May, weighed by the largest decline in automobile stocks in more than 2-1/2 years.
The component of wholesale inventories that is used in the calculation of GDP - wholesale stocks excluding autos - rose 0.4% driven by higher prices for commodities, notably petroleum.
Auto inventories sank 1.9%, the largest decline since September 2013. Wholesale stocks of petroleum leapt 3.2% and farm products inventories spiked 5.9%. Sales at wholesalers grew 0.5%.
Fed speech: Federal Reserve Bank of Minneapolis president Neel Kashkari says “there’s not a huge urgency to raise rates because inflation is coming up low”.
“We’re a long way away from that so we feel like we can continue to be patient,” he said.
The whole move started with GBPJPY in the Asia session with strong buying interest from funds in USDJPY and stops in GBPUSD at 1.3050 and it continued in the New York session.
In two sessions, GBPJPY moved from 130 to 138.8 (6.4%) and should find a short-term resistance at 140. For USDJPY the main resistance will be at 106/107, the level before Brexit.
After some stops got triggered at 1.3050 in GBP, we saw a flurry of buying from funds. It seems there is more certainty in the market with the nomination of Theresa May as the new PM. The next resistance level is at 1.3500.
I keep hearing and reading trade views to go long USDCAD and it feels the market is long USD now. The rally in oil overnight pushed it down but still above the support level of the 100 Day Moving Average at 1.2989.
A drop below will most probably trigger a lot of stops. The Bank of Canada meets today at 2200 Singapore Time (GMT 1400) and no chance is expecting in the rates (expected: 0.50%).
AUD and NZD benefited from the rally of commodities overnight and reaching new highs since May for AUD above 0.7600 while NZD is trading again at the highs of the year.
Emerging market currencies rallied as well in sympathy but not as much as the rest
Foreign exchange movements
The vols in the commodities currencies AUD and NZD are coming off with the rally in spot.
Auction of US 10-year notes at a high yield of 1.516%, was met with tepid demand after yields had sunk to record low levels last week.
The bid-to-cover ratio was 2.33, its lowest level since March 2009 and below a recent average of 2.65. Indirect bidding, a proxy of demand from foreign investors, fell to 54.3% from a record high of 73.6% in the June auction.
The 10-year yield ended higher by 7.5 basis points at 1.505%, near its highest level since June 30 when it went as high as 1.546%. The two-year note yield rallied 3.2bps to 0.685.
Government bond yields from Germany, the UK, France, Sweden and Denmark all climbed on Tuesday. The rally in rates and some more hawkish speech from the Fed has moved up the rate hike expectation and the market is pricing now a 33% chance of rate hike in December.
We have the Bank of Canada rate decision today and the market is only pricing a 7% chance of rate cut. Economists expect no change at 0.5%.
The Bank of England is meeting tomorrow, the first time since the Brexit vote and the market expects a rate cut to 0.25% from 0.5%. The market is pricing a 78% chance of rate cut.
The Dow followed the S&P 500 into record territory and gained 120.74 points to 18,347.67.
The S&P rose 14.98 points or 0.7% to 2152.14. Nasdaq climbed 34.18 points or 0.7% to 5,022.82 and climbed to positive for the first time this year. Volume across all exchanges were high and could indicate institutional activities.
In London, the FTSE 100 closed down 2.17 points to 6,680.69 in what was a choppy session as the pound rallied.
American Airline Group was up 3.50 or 11.23% on an upgrade from Deutsche Bank and closed at $34.66. Goldman Sachs closed at $156.92 up 3.11% on heavy volume with Q2 earnings due on July 19.
Italian bank UniCredit soared 13.5% after it placed 10% of its online broker FinecoBank at €5.40 per share, in a deal worth €328mln. Unicredit closed at €2.10.
News that Unicredit could be selling off stakes in a Polish lender Bank, Pekao could mean that they have raised more than €1bn in just two days as Italian banks suffered from heightened speculation over their future. Unicredit’s stock is down from €4.96 at the start of the year to a low of €1.76 this month.
- Chongqing Rural (3618 HK): Raised to buy at Bank of China
- Geely Auto (175 HK): Cut hold at Jefferies
- Jonjee High-Tech (600872 CH): Rated new buy at Haitong
- TravelSky (696 HK): Cut to neutral at Haitong
- BBMG (2009) expects to record an increase of between 60% YoY to 80% YoY in interim net profit
- China Mobile(941) offers 37.7m CICC shares at HK$11.85-HK$12.09 each in clean-up trade, represents 2.2%-4.1% discount to y’day close
- Vanke (2202) Shenzhen Metro said no plan or action to purchase Vanke stake held by Baoneng; no plan to change Vanke’s shareholding structure or turning it into state-controlled co.
- CITIC Bank (998) ‘s shareholder CITIC Ltd bought 27.02m shrs of bank and increases stake to 65.24%
- China Railway Con (1186) 1H accumulated new contract value +18.2% YoY to RMB 375.7b
- Sinopec SSC (1033) issued profit warning, expects widening interim loss to about RMB4.5b vs a net loss of RMB1.38 billion last yr.
- Brokerage: China new stock investors was recorded to be 295,200 in week ended July 8, decreased from 353,900 a week earlier.
- West China Cement (2233) issued profit warning, expects 1H loss vs last year on currency fluctuations
- Guorui Ppty (2329) Jun contracted sales up 2.4x to RMB2.277b
- Vincent Med (1612) debut today, closed at HK$0.96 at grey market, at 4% disc from listing price HK$1
- Plover Bay Tech (1523) debut today, closed at HK$0.54 on grey market, at 8% prem from listing price HK$0.5
- Star Ppty (1560）debut today, closed at HK$1.97 on grey market, at 9% prem from listing price HK$1.8
- China Unienergy Group(1573) debut today, closed at HK$2 on grey market, at 11% prem from listing price HK$1.8
- Yihai Intl(1579) debut today, closed at HK$3.3on grey market, same as listing price
Jefferies has put "buy" ratings on:
- Asahi Intecc (7747 JP)
- BML (4694 JP)
- M3 (2413 JP)
- Nihon Kohden (6849 JP)
- Ship Healthcare (3360 JP)
- Sysmex (6869 JP)
It has put a "hold" on:
- Cyberdyne (7779 JP)
- Fukuda Denshi (6960 JP)
- Miraca (4544 JP)
- Nipro (8086 JP)
- Paramount Bed (7817 JP)
-Terumo (4543 JP)
- Ajinomoto (2802 JP): Raised to buy at Goldman Sachs
- Pigeon (7956 JP): Cut to sell at Goldman Sachs
- Suntory Beverage (2587 JP): Cut to neutral at Goldman Sachs
- Yamato Holdings (9064 JP): Cut to neutral from buy at Goldman Sachs
- Nickel Leads Metals Rally as Goldman Sees Gains on Supply Issues
- Bic Camera (3048 JP): 9-month oper. profit +23% to 17.1b yen (3Q OP -3% to 5.39b yen)
- Daito Pharma (4577 JP): Full-year oper. profit 3.56b yen in line with co. guidance, forecasts +4.1% to 3.7b yen for current FY
- Dip (2379 JP): 1Q oper. profit +23% to 2.21b yen
- Hogy Medical (3593 JP): 1Q oper. profit -3% to 2.08b yen; rated new hold at Jefferies
- Kansai Electric (9503 JP): Otsu District Court upholds injunction preventing operation of Nos. 3 and 4 reactors at co.’s Takahama plant
- Kohnan Shoji (7516 JP): 1Q oper. profit +22% to 5.78b yen
- Life (8194 JP): 1Q oper. profit 3.97b yen; equals 31% of full-year guidance
- Pal (2726 JP): 1Q oper. profit -20% to 1.66b yen
- Saizeriya (7581 JP): 9-month oper. profit +18% to 5.96b yen; to buy back up to 0.99% of shares for as much as 1b yen
- Sankyo Tateyama (5932 JP): Full-year oper. profit 6.25b yen in line with co. guidance, forecasts +36% to 8.5b yen for current FY
- Yamaha Motor (7272 JP): To replace Sharp in Nikkei 225 effective Aug. 1
- Myer (MYR@AU) CEO Richard Umbers speaks, 1200 (Melbourne)
- Scottish Pacific (SCO@AU) shares to begin trading on ASX
Information sources: CIMB / Bloomberg
– Edited by Adam Courtenay
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