Article / 12 August 2016 at 1:29 GMT

Morning Report APAC: Oil-driven surge on Wall St lifts Asian sentiment

APAC Sales Trading Desk / Saxo Capital Markets
  • Oil futures rallied on comments by the Saudi oil minister
  • The Dow, S&P 500 and Nasdaq all hit record highs on the back of oil price hike
  • European stocks rose on the back of rallying oil prices and corporate earnings
  • Copper has posted substantial gains, and corn prices have consolidated


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time: GMT plus 8 hours)

Overnight news


  • US import prices unexpectedly rose during July. Import prices crept up 0.1% MoM (Exp. -0.4%) from an upwardly revised increase of 0.6% in June (Prev: +0.2%). YoY prices dropped 3.7% (Exp. -4.3%). The monthly increase was due to higher prices for non-petroleum imports, including industrial supplies and food. The price of imports ex-petroleum increased 0.5%, the largest monthly increase since April 2011. Non-petroleum industrial supplies increased 2.1% while foods, feeds and beverages prices rose 3.3%. The price of petroleum imports slid 3.6%.
  • Initial claims for unemployment benefits declined 1,000 to a seasonally adjusted 266,000 (Market est: 265,000) in the week ended Aug. 6.  The four-week moving average firmed 3,000 to a seasonally adjusted 262,750. Continuing unemployment claims rose 14,000 to 2,155,000 (Mkt est: 2.133mln).

Federal Reserve speech

  • San Francisco Federal Reserve President John Williams said the central bank should raise interest rates again this year. "As the economy gets closer to its goals, we can again pull our foot off the gas a bit and hopefully execute a nice, soft landing over the next couple of years," Williams said. Asked if the Fed's gradual rate increases should include any rate hikes this year, Williams said, "In my view, it does."


  • Saudi Arabia energy Minister Khalid Al Falih claims that his country is ready to work with OPEC and non-cartl members to help the market find a balance


  • The Peoples Bank of China pledged a greater market role in setting the yuan's exchange rate, while keeping the currency basically stable. China will also push ahead with capital-account convertibility, the central bank said in its annual renminbi internationalization report, without setting time targets. Additional promises include easier approval of Panda bonds.
  • China’s net capital outflows accelerated to $39 billion in July, the most in six months, the Institute for International Finance said. Exchange-rate fluctuations last month boosted forex reserves by $4.5 billion, mainly due to an appreciation in the yen and euro against the US.


Foreign exchange


  • The US dollar continued the move higher during the New York session which started in Asia following the rally in equities and oil and yields higher. DXY was up 0.34%.
  • USDJPY is holding well above the ¥100 level  so far, which is the main support. The pair benefited from the overnight rally in rates. Short term resistance resides at ¥102.50.
  • NZDUSD completely erased its rally following the RBNZ cut yesterday and the series of stops following the market disappointment. AUDNZD is now trading in a volatile fashion at the top of the range close to the 100 day moving average.
  • GBPUSD is attempting to confirm the break below the 1.3000 which it failed to do in July. If we manage to close below that level tonight, there is room to move much lower
  • In emerging markets, very quiet overnight session with the Asia currencies more or less at the same level we left them at Asia close and some profit taking in the short USDBRL positions ahead of the week-end

  • There is a $2bn expiry today in USDJPY at ¥102.50, so the market should be sticky around there.
  • USDCAD is attempting to break lower the 1.3000 even lower, and we saw some interest from hedge funds to buy downside strikes in the pair.




The  rally in iron ore since June has helped boost bond investors’ confidence in Rio Tinto group. Standard & Poor’s Global Ratings said it may shift its negative outlook on the company’s A- rating to stable, though stressed the improvement in commodities remains tied to Chinese demand growth. The CDS for Rio Tinto have fallen 62 basis points to 139 as of Wednesday, which is near the lowest level in 10 months.

Westpac sold $5 bn of bonds in five parts, while Standard Chartered issued $2bn of Tier 1 notes.

Bloomberg: U.S. companies have sold more than $245 bn -- or almost a quarter of all bonds issued this year -- in only seven weeks. And investors can’t get enough, driving down borrowing costs for even the junk-rated issuers to 14-month lows. With the month not even half over, more than $30 billion in issuance this week has already cemented August as the busiest since 2010 for debt sales by blue-chip companies. The high-yield market is also showing signs of life, with companies selling more than $11 billion of notes this month, compared with $14.5 billion in July.


In bonds, 10 year US bonds rallied by 6.6 basis points to 1.561% and the two year bond surged 6 bps to 0.742%. Treasuries declined after an auction of 30-year bonds drew weaker demand than the debt sales undertaken earlier this week as speculation mounts that the Federal Reserve will raise interest rates in 2016 before year end. The bid-to-cover ratio was at 2.24 at the $15 billion 3 year sale, its lowest in three months.

After the expected rate cut yesterday from the Reserve Bank of New Zealand, the central bank commented that the markets missed the downside risks to the outlook for interest rates presented in Thursday’s policy document and got ahead of themselves in driving the currency to a one-year high. The RBNZ assistant governor also highlighted the fact that the NZ economy is growing well and so they will not want to overdo it and with no monetary policy tools to simulate the economy if something really bad happens. The expectation of another cut by the end of the year sits at 75%.






  • The Dow, the S&P 500 and the Nasdaq each closed at all-time highs - the first trio of records on the same day since December 1999, on the back of oil price hike. The Dow Jones Industrial Average climbed 0.6%, to 18,613.52. The S&P 500 gained 0.5%, to 2,185.79, led by energy (+1.3%). The Nasdaq put 0.5% to 5,228.40.
  • Macy's Inc. soared 17.1% after reporting adjusted Q2 EPS of $0.54 better than mkt est: $0.45 and same store sales fell 2% much less that feared Mkt est: -4.7%.
  • Kohl's Corp. leapt 16.2% after it reported adjusted Q2 EPS of $1.22 overwhelmed Mkt est: $1.03, from $1.07 a year ago. Revenue declined 2% more than Market estimation, however Gross margin expanded 60bps to 39.5%.
  • Alibaba Group Holding Ltd. topped 5.1% after reporting better than estimation adjusted Q1 EPS and revenue soared 59%. The e-commerce behemoth delivered strong results in its core commerce and cloud computing categories.
  • European stocks rose on the back of rallying oil prices and generally well-received corporate earnings. The FTSEurofirst 300 index gained 11.56 points, or 0.85%, to 1,365.66. In London the FTSE 100 climbed 48.29 points, or 0.7%, to 6,914.71.
  • Household product manufacturer Henkel jumped 5% after Q2 earnings beat expectations and the company raised its core profit margin guidance.
  • Drinks bottler Coca-Cola Hellenic Bottling Company soared 7% after it reported higher interim profits.

Hong Kong preview

Analyst Ratings

  • BOC Aviation (2588 HK) rated new ’hold’ at UOB Kay Hian.
  • Melco Crown (6883 HK) rated new neutral at Buckingham.
  • PCCW (8 HK) cut to ’underperform’ at Credit Suisse.
  • Sina Corp raised to ’accumulate’ at GuoTai JunAn.
  • SMIC (981 HK) raised to ’buy’ vs ’underperform’ at Credit Agricole.
  • Sun Art Retail (6808 HK) cut to ’neutral’ at Credit Suisse.


  • CKH (1) H1 NI +3.2% to $HK14.9bn, interim div $HK0.735.
  • CKP (1113) H1 NI +24.9% to $HK8.61b, interim div HK$0.38. Profit before inv ppty revaluation +50.6% YoY to $HK8.339bm. Contracted ppty sales $HK28.8bn. Dev land bank about 13.1 mln square metres.
  • PCCW (8) H1 NI -19% YoY to $HK868m. Rev +2% YoY $HK18.5bn. Interim div HK0.0816. The co. and Tencent (700) are leading an inv round in motion picture co. STX Entertainment.
  • Poly PPTY (119) Jan-Jul contracted sales RMB19.6b, +0.5% YoY. Sales area 1.64mln sq.m.
  • Fantasia (1777)’s SZ subsidiary to buy all stakes of Wanda PPTY Management which is managing 30mln sq.m.
  • CH City Infrastr. Constr. (2349) expects to post a significant six month loss. BOCHK (2388) sees growing demand in Asian bond market as yield remains low and   economy recovery is slow. Everbright Sec (6178) to price HK IPO near midpoint. (IFR)
  • New CH Life (1336) Jan-Jul premium inc -2.8% YoY at 77.8bn yuan. Giordano (709) says it will continue to expand in CH 3rd and 4th tier cities   as residents have higher disposable inc. There will be 3 new shops in Hong Kong in the second half of the year, including a women’s clothes shop in Causeway Bay in October.
  • CH Mobile (941) says the gov and users all want to speed up fee reduction progress. A lower fee can encourage more data usage. The co. is in talk with regulators on listing China Tower A- and H-shares in 2017.
  • Alibaba (BABA) 1Q rev 32.2bn yuan, +59% YoY. Cloud computing rev $187mln. Paying   customers in cloud computing at 577,000, +156% YoY.
  • Glorious PPT (845) seeks ‘put up or shut up’ ruling on privatization.
  • ICBC (1398) says not involved in bill financing reported by media.

Japan  preview

Analyst ratings

  • Nippon Gas (8174 JP): Rated new buy at Goldman, added to conviction list
  • Orient (8585 JP): Rated new buy at Nomura
  • Ulvac (6728 JP): Cut to neutral at Nomura

Australian preview

Analyst ratings

  • AGL Energy (AGL AU) raised to hold vs sell at Shaw & Partners
  • (CAR AU) cut to sell vs hold at Shaw & Partners
  • Westpac (WBC AU) cut to neutral vs overweight at JPMorgan
  • Sealink Travel (SLK AU) cut to hold at Bell Potter


  • James Hardie (JXH AU) 1Q result
  • Synlait Milk (SML NZ) sees FY16 reported NPAT between NZ$34m-NZ$35m
  • Metro Performance Glass (MPG NZ) to buy Australian Glass Group for A$43.1m
  • Steel & Tube (STU NZ) full-yr NPAT up 20.5% to NZ$25.8m
  • BHP Billiton (BPH AU): New South Wales govt buys back Caroona coal license from BHP

Source: CIMB / Bloomberg

Crude oil futures rallied on comments from the Saudi oil minister, giving investor sentiment a boost across much of Asia. Photo: iStock


– Edited by Robert Ryan

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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