Morning Report APAC: Oil prices surge on inventory surprise
- Gold lost ground following the ECB announcement
- Oil prices headed higher on reduced inventories
- USD traded on firmer ground after the Mario Draghi press conference
- There are hopes that rising crude prices could test $50/barrel
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8 hours)
- 1900 GMT – EUR – ECB’s Rimsevics speaks in Riga press conference
- 2015 GMT – USD – Fed’s Rosengren to deliver economic forecast in Boston, US
- 2130 GMT – USD – Fed’s Kaplan speaks in Austin, Texas
- Federal Reserve: The Fed’s Lael Brainard has had a speech added to the calendar for Monday next week, just before the Fed blackout period. This is interesting as she is the most dovish permanent voting member and in her last speech said it was better to wait and see. Could this be a means of increasing the September hike probability?
- US initial jobless claims fell as did continuous claims. US stock ended slightly down on the day. USD traded firmer through the session post the ECB.
- ECB: Mario Draghi produced little for the markets to cling onto. He delivered nothing in terms of rate cut, change in dates or mixed of assets in the QE programme. Draghi, once again went to lengths to highlight that monetary policy has limitations and will not be as successful in isolation as it would be in conjunction with fiscal measures.
The US dollar traded on firmer ground after the Mario Draghi press conference. Draghi caused bonds to sell off, yields to rally and consequently the USD was on firmer ground across the board. September rate hike expectations crept higher to 28%. Worth paying attention to Brainard’s speech on Monday as the dove may turn hawkish to signal September as more live than the market currently prices.
Emerging Markets saw weakness across the EM world space yesterday as the US dollar caught a bid. Indiscriminate USD buying pushed all EM currencies weaker.
Foreign exchange volatilities
Vols were generally offered post the ECB yesterday in the wake of the very wait-and-see Draghi. Generally vols are offered across the board.
US Treasury two-year note yield rose 3.6 basis points to 0.77% and 10-year bond yield rallied 6bps to 1.599%, amid a government-bond selloff that started in Europe, after the ECB left interest rates unchanged, disappointing some by not announcing an extension of its asset-buying program.
The Dow Jones Industrial Average slipped 0.25% and the S&P 500 declined 0.2%. Losses came from REITs (1-2%), tech (-0.9%) and discretionary (-0.8%), while Energy (+1.7%), utilities (+0.4%) and healthcare (+0.1%) bucked the trend.
Apple Inc. fell 2.6% after an underwhelming iPhone 7 launch and its decision not to release first weekend sales data.
Bookstore chain Barnes & Noble Inc. shares slumped 4.1% after disappointing earnings.
Hewlett Packard Enterprise Co. (-3.2%) announced plans for a spin-off and merger of its non-core software assets with Micro Focus International Plc (+14.7%) in a transaction valued at approximately $8.8bln.
European stocks closed lower, weighed down by a slide in German equities and a rising euro, after the ECB held off from expanding its monetary stimulus.
ASML Holding NV dipped 3.7% after Samsung Electronics Co. Ltd. (-2.32%) said it plans to sell shares in the chip maker, which is a supplier to Apple Inc.
Greater China highlights
- China Financial Intl (721 HK): Sees loss ~$63mln in FY16
- Fosun (656 HK): Teams with Thomas Cook to pursue wealthy Chinese travellers
- Odella Leather (8093 HK): FY rev. likely dn
- Marubeni (8002 JP): Co. partners with Aboitiz to bid for Chevron’s geothermal assets in Asia
- Sekisui House (1928 JP): 1H oper. profit -3% to 79.3b yen vs guidance ¥72bn; lifts full-year target 2.9% to ¥175bn
- Takata (7312 JP): To relocate HQ to halve rent, Nikkei reports; to take bids from seven potential rescuers on September 19, Reuters says
Southeast Asia highlights
- Berjaya Auto (BAUTO MK): Q1 net income MYR 41.1mln versus 52.2mln; Separately, co.’s unit in Philippines plans stock exchange listing
- Petron (PCOR PM): Sets indicative rates for 20bn Peso bonds: Philippine Star
- Tenaga (TNB MK): Khazanah seeks up to MYR 1.19bn selling Tenaga shares: Terms
– Edited by Robert Ryan
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