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​The Trump administration has not yet formally deployed the long-awaited latest $200 billion in tariffs against China, but a new Wall Street Journal report indicates that Japan might be next on the agenda.
Article / 29 May 2017 at 1:50 GMT

Morning Report APAC: North Korea test-fires another missile

APAC Sales Trading Desk / Saxo Capital Markets
Singapore










  • North Korea fires reported short-range ballistic missile on Monday morning
  • Trump says he won't decide on continued Paris Accord participation until next week
  • USD rallies slightly following good US GDP number
  • Gold climbs to its highest in three weeks on haven demand


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)

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Speeches
  

0915 - SI - US Federal Reserve's John Williams gives keynote address 

1515 - AS - European Central Bank's Ewald Nowotny speaks at Austrian central bank conference 

2100 - EC - ECB's Mario Draghi Speaks to the European Parliament


Overnight news

China: Official NBS data released on Saturday showed that Chinese industrial firm profits rose 14% YoY to 572.78 billion yuan ($83.59bn) in April. Profits had spiked 23.8% YoY in March. For the first fourth months of 2017 profits rose 24.4% to 2.28 tn yuan compared with growth of 28.3% in the first quarter. The slowdown in industrial earnings had been expected given prices of iron ore, steel and other commodities fell and as growth in factory output, investment and retail sales tapered. 

 
US: US GDP grew more than expected at 1.2% QoQ from 0.7% (Exp. 0.9%) due to stronger growth for both consumer and business spending as well as a less-material drop in government spending. 

Personal Consumption grew 0.6% in the first quarter from 0.3% (Exp. 0.4%). Durable goods dropped 0.7% from upwardly revised 2.3% (Exp. -1.5%).   

The first estimate of US corporate profits for Q1 indicated that after-tax profits, without inventory valuation and capital consumption adjustments, declined 0.3% QoQ but soared 11.9% YoY. The Commerce Department said profits were weighed by legal settlements involving US subsidiaries of Credit Suisse, Deutsche Bank and Volkswagen. 
 
G-7: G-7 leaders pledged to keep markets open and fight protectionism, but almost deadlocked over climate change. The US pushed back on worldwide efforts to curb global warming, which Obama had agreed to, and won a reference in the final statement on the need for trade to be "fair and mutually beneficial." President Trump declared victory, and said he'd decide on continued Paris Accord participation next week. 
 
South Africa: South African President Jacob Zuma survived a bid by some members of the African National Congress’s top leadership to order his removal from office, according to people familiar. The decision will probably increase the chances that Zuma, 75, will survive a no-confidence motion called by opposition parties in parliament.  
 
North Korea: North Korea fired what was reported to be a short-range ballistic missile on Monday morning that landed in the ocean. The missile was fired at 0539 local time (1639 Sunday ET) from an area near Wonsan, Kangwon province, towards the eastern part of the Korean Peninsula, according to a statement from South Korea's Joint Chiefs of Staff. The missile was "assumed" to be one of the Scud series, the statement said.

 

Foreign exchange


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USD rallied slightly overnight following the good GDP number in the US. The resistance is still at 98.00.

The biggest loser overnight was GBP, which dropped from the strong resistance of 1.3000, a bit more than 1%, a continuation of the low GDP print from Thursday and the latest polls for the UK elections which showed that the Labour is closing the gap on the Conservatives.

Emerging Markets: USDCNH continues its dive, breaking the 200-day moving average easily and the big support is at 6.8000 now. The pain trade is still on the downside, with locals intervening since the Moody’s cut and selling the forward curve. USDZAR remains below the resistance of 13.0000 after President Jacob Zuma was saved during the weekend from a removal from office.



Foreign exchange movements

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The curve continues to be extremely bid in USDCNH, with 1M ATM rallying from 2.5 to 3.3 in just two days following the strong move lower in spot. We start to see some selling interest at this level. 

Vols in G10 continue to be well offered and one good example is USDCAD 3M trading at the lows since November 2014. It is a good level to take a cheap view on USDCAD now. 

GBP vols are slightly bid going into the UK elections, following the latest poll.


Rates
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US Treasuries were barely changed amid mixed economic data from the US, and early support from European bonds faded.

European bonds rallied on the back of month-end demand and short covering on bunds, and partly supported by sliding European stocks.


Commodities 

 

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Equities

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US stocks finished relatively flat on Friday but higher for the week, with both the S&P 500 index and the Nasdaq eking out records and the Dow losing marginally lower.

BlackBerry Ltd closed 1% lower, even after the company said the final award in its arbitration with Qualcomm Inc. (down 0.62%) was $940m — higher than the $815m that had been announced in an interim ruling in April.

Ugg boot maker Deckers Outdoor Corp. surged 18.8% after posting a surprise earnings of reported adjusted Q4 EPS of $0.11 (vs est loss of $0.06).

European stocks ended lower on Friday, logging a tiny weekly loss, with oil and gas shares pushed down on disappointment stemming from OPEC’s agreement.

Shares of auto makers fell after a Der Spiegel newspaper report that U.S. President Donald Trump complained to European officials about Germany’s exports. BMW AG fell 1.1%. Daimler AG and Volkswagen AG each gave up 0.6%.

Petrofac Ltd slumped 9.7%, extending its 30% plunge on Thursday after the oil services company said it suspended Chief Operating Officer Marwan Chedid until further notice. The company is under UK investigation on suspicion of bribery, corruption and money laundering.


Asian equities preview


Hong Kong

Analyst Ratings: 

- China Resources Power (836 HK): Raised to buy at Citi 

- Cnooc (883 HK): Cut to Hold at BNP Paribas, PT HK$9.30 

- Datang Power (991 HK): H shares raised to neutral at Citi 

- Huaneng Power (902 HK): H shares raised to buy vs sell at Citi 

- IMAX China (1970 HK): New neutral at UBS, PT HK$38.40 

Preview:

- Airlines: Hong Kong Airport mulls moving business jet flights to Zhuhai 

- China Southern Airlines (1055 HK): Enters leasing agreement for 28 aircraft 

- Chow Tai Fook (1929 HK), New World Development (17 HK): Form JV on loyalty program 

- Citic Ltd (267 HK): To spin off Citic Press unit on Shenzhen GEM 

- Cosco Shipping (2866 HK): Unit plans to raise stake in Bohai Bank 

- Grand Ming (1271 HK): Expects FY net to drop about 50% y/y 

- Hysan (14 HK): Reports Gainwick unit facility for up to HK$1.12bn

- Jiangxi Copper (358 HK): Scales back A-share private placement plan 

- Kingsoft (3888 HK): Cheetah Mobile unit among group to invest $40.8m in robotics business 

- PetroChina (857 HK): CNPC to transfer 0.24% stake in PetroChina to Angang Group 

- Sino Biopharmaceutical (1177 HK): 1Q net 579m yuan vs 427.6m yuan 

- Sino Land (83 HK), China Overseas Land (688 HK), K Wah Intl (173 HK): Win MTR site for HK$8.33bn 

- TVB (511 HK): Needs further delay in dispatch of offer document 

Japan


Analyst Ratings: 

 - Calbee (2229): Rated new outperform at Iwai Cosmo 

- Central Glass (4044): Raised to neutral from underperform at Mizuho 

- Kureha (4023): Raised to outperform from neutral at Tokai Tokyo Securities 

- Kyoei Steel (5440): Raised to neutral from underperform at Mizuho 

- Metaps (6172): Rated new positive at Storm Research 

- Nippon Steel & Sumitomo Metal (5401): Downgraded to hold from buy at Jefferies 

- Nippon Television Holdings (9404): Cut to neutral from overweight at MUFJ-MS 

- Otsuka Corp. (4768): Cut to neutral from overweight at MUFJ-MS 

- Shin-Etsu Chemical (4063): Upgraded to neutral from underperform at Mizuho 

- Stanley Electric (6923): Cut to neutral from buy at Okasan Securities 

- Toyoda Gosei (7282): Raised to buy from neutral at Okasan Securities 

- Zenkoku Hosho (7164): Cut to neutral from outperform at Tokai Tokyo Securities 

Preview:

- Aozora Bank (8304): To conduct 10-to-1 reverse stock split 

- Banks: Japan’s top-three banks are increasing subordinated loans, which is credit positive, according to Moody’s 

- Chugai Pharma (4519): Roche investigating brain infection in multiple sclerosis patient treated with ocrelizumab 

- Fujifilm (4901): Sony’s (6758) patent case proceeds to next phase 

- Hirata (6258): Seeks 12.2bn yen from public sale of treasury shares 

- HIS (9603): To buy back as much as 5.82% of shares for 10bn yen; maintains full-year forecasts 

- J-Lease (7187): To conduct 2-for-1 stock split on July 1 

- Koito Manufacturing (7276): Settles Michigan court case for $30.25m 

- L’attrait (8885): Seeks 246m yen from warrant sale to Macquarie Bank 

- M&A Capital Partners (6080): Seeks 4.06bn yen from public share sale 

- Maruwa (5344): To acquire operations from Hitachi Power Semiconductor Device 

- Mobile Factory (3912): To conduct 2-for-1 stock split on July 1 

- Nippon Electric Glass (5214): To buy PPG Industries’s US glass fiber operations for $545m 

- Orix (8591): Considers sale of its power retailing and generation unit, Orix Electric Power 

- PanaHome (1924): Rejects 1,300 yen/share offer from Oasis Management, saying it still supports Panasonic’s takeover bid 

- Sharp (6753): Forecasts 90bn yen operating profit this fiscal year, versus analyst estimate for 80.2bn yen 

- Tepco (9501): Halted Kashima plant No. 6 1,000MW heavy oil unit on May 24 

Australia

  Analyst Ratings: 

- Healthscope (HSO): Cut to underperform at Credit Suisse, PT A$2.10 

- Macquarie Atlas (MQA): Cut to neutral at Credit Suisse, PT A$5.90 

- Westpac (WBC): Raised to buy at Morningstar 

- Medibank Private Cut to sell at Shaw and Partners, PT A$2.65; Ramsay Health cut to neutral at Credit Suisse, PT A$73 

- Nine Entertainment (NEC): Raised to buy at Morningstar 

Preview:

- The great Aussie recession-free run looking shaky once again 

- BHP Billiton (BHP): CEO tells investors options for US shale unit under review 

- Commonwealth Bank of Australia (CBA): Tyme has less than two weeks to seek South African bank licence: SARB 

- G8 Education (GEM): Annual meeting scheduled 

- Medibank Private (MPL), NIB Holdings (NHF), Ramsay Health (RHC), Healthscope (HSO): Private health insurance rebate may be abolished and hospital funding plans altered under new govt proposals, Fairfax Media reports 

- Rio Tinto (RIO): Western Australia may ask BHP, Rio to cash out iron ore levy 

- Bank of New York Australia ADR Index down 0.8% 

- BHP Billiton ADR down 1% to A$24.07 equivalent, 0.2% premium to last Sydney close 

- Rio Tinto ADR down 1% to A$55.06 equivalent, ~ 13% discount to last Sydney close 

- Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: ALL, WOR, FPH, ILU, GMG 

- Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: AHG, API, SIG 

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Gold climbed to its highest in three weeks. Photo: Shutterstock

 

– Edited by Susan McDonald



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. Follow us on @SaxoStrats on Twitter

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1y
Vity Vity
market still has much risk
1y
djustoe djustoe
how much higer can the Nasdaq go?
1y
fxtime fxtime
I am amazed North Korea can afford all these missile tests. Are they testing missiles for China and can North korea afford to arm these missiles as it isn't shall we say the most financially astute economy.

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