Article / 15 December 2015 at 2:03 GMT

Morning Report APAC: Oil and junk seep through the market

APAC Sales Trading Desk / Saxo Capital Markets
Singapore







  • Oil prices in the mix, with the market falling to new lows before recovering
  • Eurozone industrial production a stronger-than-expected 0.6% m/m in October
  • Bank of England official's dovish comments have weighed on GBP
  • Selloff in US junk-bonds is continuing, with asset managers offloading


By Saxo APAC Sales Trading

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


1200: IDR – Exports YoY (Est. -10.7%, Prev. -20.98%), Imports YoY (Est. -19.75%, Prev. -27.81%)

1200: IDR – Trade Balance Nov (Est. $900Mln, Prev. $1019 Mlm)

1300: SGD – Retail Sales Oct MoM (Est. 1.7%, Prev. -3.7%) YoY (Est. 2.6%, Prev. 4.6%) Ex Auto YoY (Est. -3.5%, Prev. -1.4%)

1730: GBP – CPI Nov MoM (Est. -0.1%, 0.1%) YoY (Est. 0.1%, Prev. -0.1%) Core YoY (Est. 1.2%, Prev. 1.1%)

1730: GBP – RPI Nov MoM (Exp. 0.0%, Prev. 0.0%), YoY (Exp. 0.9%, Prev. 0.7%)

1730: GBP – PPI Input MoM (Exp. -1%, Prev. 0.2%), YoY (Exp. -12.4%, Prev. -12.1%)

1730: GBP – PPI Output MoM (Exp.- 0.1%, Prev. 0%), YoY (Exp. 0.1%, Prev. 0.3%)

1800: EUR – Employment 3Q QoQ (Prev. 0.3%) YoY (Prev. 0.8%)

1800: EUR – Germany ZEW Survey Current Situation (Exp. 54.2, Prev. 54.4)

1800: EUR – Germany ZEW Survey Expectations (Exp. 15.0, Prev. 10.4)

2130: CAD – Manufacturing Sales Oct MoM (Est. -0.5%, Prev. -1.5%)

2130: USD – Empire Manufacturing Dec (Est. -7, Prev. -10.74)

2130: USD – CPI Nov MoM (Exp. 0%, Prev. 0.2%), CPI ex Food and Energy (Exp. 0.2%, Prev. 0.2%)

2130: USD – CPI YoY (Exp. 0.5%, Prev. 0.2%), CPI ex Food and Energy (Exp. 2%, Prev. 1.9%)

2130: USD – CPI Index (Est. 237.2, Prev. 237.838) Core (Est. 244.09, Prev. 243.7)


Speeches

08:30am: AUD – RBA December Meeting Minutes


Overnight news

  • Eurozone industrial production rose a stronger-than-expected 0.6% m/m in October (market expected 0.3%), with annual growth lift to 1.9% y/y. There were large gains in French, Italian and Dutch production, which overshadowed weaker results from Germany and Spain.
  • Bank of England deputy governor Nemat Shafik delivered some dovish comments, noting that wage growth needs to pick up to support a recovery in inflation towards the BoE’s 2% target before it would raise rates, given the headwinds presented by weaker oil prices, softer growth in emerging economies and a stronger GBP – and we saw these comments weigh on GBP. 
  • Distressed debt/high-yield: The selloff in US junk-bonds continued.The iShares iBoxx $ High Yield Corporate Bond ETF declined 0.9% but it was down 1.6% at session lows. Publicly-traded asset management firms with junk bond portfolios were under pressure. Many of the most heavily traded individual bonds traded in the red; with debt from energy and mining companies continuing to be weak with very little liquidity. Lucidus Capital is now next in line to liquidate $900m of holdings and return capital to investors, following the same path as Third Avenue yesterday. 
  • Oil prices dominate markets and fell to new post-2008 lows during the session (before recovering), weighing on equity markets ahead of this week’s Federal Open Market Committee decision. 

 


Foreign exchange

xxx

Source: Saox Bank
 

USD unwind was the theme of the night as the street reduced longs (sometimes violently) ahead of the FOMC meeting. When the dust settled we ended up around Friday's close. 

EURUSD traded as high as 1.1049 before hitting good offers on the street. Breaking the 200 Day Moving average at 1.1030 but significantly not the 100 DMA at 1.1055. 

AUD and NZD both traded higher to $0.7270 and $0.6790. AUDUSD has resistance at the $0.7300 area and NZD a quadruple top at $0.6785/90. The NZDUSD is just bubbling under this level this morning and it seems like only a matter of time before it breaks and inflicts a lot more pain on shorts and AUDNZD longs. 

In emerging  markets, USDMXN pulled back from record highs near 17.50 on Friday with support at 17.28 portending a much deeper correction. After a tumultuous Monday session, USDZAR has held onto most of its gains to settle at 15.10 with a break of yesterday’s lows at 14.92 opening up another potentially emotional leg lower. 

USD/Asia should come under pressure today following on price action and the rebound in oil. USDCNH in particular was capped above 5.5600 by official “smoothing” and has much the same set up as MXN and ZAR above. 

Overall, the USD selloff shows the level of nervousness out there. We would expect this to continue. I would not be surprised if the level of USD long positioning into the Fed this week is a lot lighter than the market thinks.


Foreign exchange movements

xxx











Source: Bloomberg

USDJPY: There is still plenty of interest to buy downside strikes for Thursday and Friday which gets the FOMC event. Curve is very well supported and gamma should squeeze higher if spot breaks below 120.00. USDCNH volatilities were paid up yesterday with spot pushing above 6.5550 and the forward points still near the highs.

1 year USDCNH is around 7.6 mid and the risk reversal is 3.2 for the USD calls. AUDUSD volatilities are also seeing decent buying interest yesterday when spot was under $0.7200 but this has eased somewhat. Expect the curve to come off if spot grinds higher or holds $0.7200-$0.7280 range.


Rates
xxx

 


Global rates markets were choppy overnight from fluctuating oil prices. The bounce in oil prices led to a broad-based selloff. US Treasury 10-year yields were up over six basis points  and European yields were up between three and 10 bps.


Commodities  xxx

xxx
Source: Bloomberg



Equities
xxxx

 










Source: Bloomberg

Lower oil prices and some concerns over global credit markets generally weighed on equity markets.  European stocks were under pressure, with the Euro Stoxx 50 closing down 2%. European stocks reversed early wins to close at 2½ month lows as the commodity-related sectors continued to lose ground and Brent crude slid below $37/barrel for the first time since December 2008.

Anglo American dived 4.2% after S&P Ratings Services warned that it may further cut its credit rating.

US stocks rallied late to close comfortably in positive territory having earlier whipped around either side of break even as all eyes remained focused on a bounce in oil, further pressures in the distressed debt market and the impending monetary policy decision from the Federal Reserve Bank.

Credit

xxx
 







Source: Bloomberg (IG: Investment Grade)


Company/country News:

Hong Kong 

Two of China Ocean Shipping's units, China COSCO Holdings (1919) and COSCO Pacific (1199), plunged 28 percent and 17 percent respectively after the government announced merger plans to create one of the world's largest container lines.

Japan

Bank of Japan officials are gaining confidence in the resilience of Japan's economy thanks in part to the revised GDP and improving capex numbers. They are likely to extend the life of its loan-support programs by one year.

Source: MS and CIMB


Saxostrats

xxx xxx


xxx
 The oil price was under pressure last night, moving as low as $35/b. Photo: iStock


– Edited by Adam Courtenay


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. Join our Global Market Call daily at 15:40 SG Time

All material contained herein is provided for your general information. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets Pte. Ltd. (“SCM SG”). Any expression of opinion (which may be subject to change without notice) is personal to the presenter and/or author; they do not reflect the view or opinion of SCM SG or its affiliates, neither do they constitute an endorsement of SCM SG’s view or analysis of the same.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. SCM SG does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment based on any commentaries or information provided here.
For further information, please click here.  


Saxo Capital Markets Pte Ltd ("Saxo Capital Markets") is a licensed subsidiary of Saxo Bank A/S, an online trading and investment specialist. Saxo Capital Markets serves as the APAC headquarters and holds a capital markets services licence under the Monetary Authority of Singapore; and a commodity broker licence issued by the International Enterprise Singapore. Clients can trade Forex, CFDs, Stocks, Futures, Options and other derivatives via SaxoWebTrader and SaxoTrader, the leading multi-asset online trading platforms.
Trading risks are magnified by leverage - losses can exceed your deposits. Trade only after you have acknowledged and accepted the risks. You should carefully consider whether trading in leveraged products is appropriate for you based on your financial circumstances. Please consider our Risk Warning and General Business Terms before trading with us. Please see full General Disclaimer.

Thousands of serious traders receive free news and analysis from Saxo Capital Markets each day. Saxo Capital Markets never sends these emails unsolicited; they are sent following acceptance of your membership and subscription request by Saxo Capital Markets at saxomarkets.com.sg. If you do not wish to receive any emails from Saxo Capital Markets in the future, please reply to this email with the word "UNSUBSCRIBE" in the subject header.

Copyright | Disclaimer | Risk Warning | Privacy Policy | Contact Us
Samsung Hub | 3 Church Street | # 30-01 | Singapore 049483
Company No. 200601141M


Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail