Morning Report APAC: Asian shares firm, JPY continues rise
- US crude near a one-month high with rumours of Opec stabilising prices
- Chance of Fed rate hike in 2016 now lowering to below 50%
- JPY slightly up on USD by 0.1% in early trade to 101.15 per dollar
- The pound traded at $1.2882 after a Monday close of $1.2880
Economic data of the day (Singapore Time; GMT+8)
- 0930 AUD – Reserve Bank of Australia August meeting minutes
US: The National Association of Home Builders housing market index, a measure of home builder confidence rose to 60 (market's estimation: 60), the second-highest level of the year, from a downwardly revised 58 in July (Prev: 59)
The Business Activity in NY went into contraction (-4.21 vs Exp. 2.00). The new orders index remained near zero while the shipments index jumped eight points to 9.0. Labor market indicators pointed to little change in employment levels and hours worked. The prices paid index edged down to 15.5.
The USD continues to sell off without any significant data dictating the market. Concerns regarding Brexit are keeping the pressure on GBP which was the only underperformer overnight and now trades below 1.3000.
The low of the year is at 1.2798 but the break of the 1.3000 level seems already significant. We have plenty of important data from the UK today with CPI, RPI and PPI,
EURUSD is testing again the 100 Day Mean Average at 1.1229. If we manage to break higher, the next target will be 1.1400.
The uptrend channel in AUDUSD that started on July 15 is still in place and we are trading at the bottom of that channel. The top of the trend is at 0.7825.
In emerging markets, The USD selling remains in place. Despite concerns over the strong rally of BRL, the government doesn’t seem to have much tool to stop it.
USDPHP 1M broke the strong support of 46.70 and is aiming for 46.00 as a first target (see our Trade View sent yesterday)
Foreign exchange volatilities
The volatilities are quite stable since last week except USDCNH gamma which is offered due to a heavy positioning on the long side.
Chinese regulators have asked corporate bonds issuers to tighten internal examinations as part of efforts to step up risk control, the Securities Times said, citing unidentified managers at brokerages.
Chesapeake Energy is seeking a $1 billion five-year secured loan as a step toward refinancing its $9 billion of debt, hiring Goldman Sachs, Citigroup and Mitsubishi UFJ to arrange the borrowing. It will use some of the funds to back tender offers to buy back up to $500 million of its bonds.
Bloomberg: The biggest underwriters of sterling-denominated corporate notes see few signs that record-breaking August issuance will slow because the Bank of England’s plan to buy company debt is driving down borrowing costs.
More overseas borrowers may also enter the market as average yields on investment grade sterling notes plumb record lows versus equivalent dollar bonds.
The busiest August ever has already seen 3 billion pounds ($3.9 billion) of corporate bond sales, an almost five-fold jump from the whole of July and the biggest monthly tally in more than a year.
US Treasuries retreated as investors turned their focus to Wednesday’s minutes from the July Federal Open Market Committee meeting and comments due from Federal Reserve officials that could shed some light on the outlook for US interest rates.
The 10-year bond yield is rising 4.4 basis points to 1.558%.
Benchmark German 10-year bund yields increased four basis points, to -0.069% amid the lowest trading volume in a month.
Spreads with peripherals narrowed, with Italy’s 10-year bond yield rose two basis points to 1.06% and the yield on similar-maturity Spanish debt increased two basis points to 0.94 percent.
A Bloomberg survey showed that the 10-year bund yield will rise to zero by year's end and reach 0.4% by the end of 2017 as central banks provides shield.
This compares with forecasts of zero and 0.5% in last month’s survey. The average yield over the past five years is 1.16%.
The DJIA, S&P 500, and Nasdaq Index all closed at record highs on Monday for the second time since 1999, lifted by a further rise in oil prices and an upbeat housing market gauge.
Shares of energy companies led S&P 500 gainers, such as Chesapeake Energy and Transocean, which closed up 9.6% and 5.4% respectively.
Real estate investment trust Mid-America Apartment Communities fell 4.9% after it confirmed plans to buy Post Properties (+9.42%) in a deal valued at $4 billion.
Under the terms of the agreement, each share of Post common stock will be converted into 0.71 shares of newly issued MAA common stock.
Twitter jumped 6.8% following an unconfirmed report by The New York Times that said the social networking platform is in talks with Apple (+1.2%) for an app on Apple TV streaming a number of National Football League games.
Germany’s Dax 30 index gained ground and turned flat for the year, boosted by Volkswagenrally after KBA, Germany’s federal motor transport authority approved technical remedies for 460,000 vehicles with diesel engines.
Asia Pacific stocks
- China State Const Intl (3311 HK): Cut to neutral at Credit Suisse
- China Longyuan (916 HK): Raised to buy at Daiwa
- China Mobile (941 HK): Buy reinstated at BofAML
- China Telecom (728 HK): Buy reinstated at BofAML
- China Unicom (762 HK): Buy reinstated at BofAML
- Shanghai Fosun Pharma (600196 CH): Raised to buy at Phillip
- Wheelock(20) interim net profit -29.3% YoY to HK$5.7bn; core profit -19% YoY to HK$5.1bn
- Evergrande(3333) bought 235.8mn of Vanke’s A-share from Aug 8 to Aug 15 for ~RMB5.46bn
- West China Cement(2233) 1H net loss was RMB113.5mn vs profit of RMB2.43mn yr ago
- Nexus Capital: bought 18mn Vanke H-shares at avg HK$20.5 each, boosting stake to 8.84% from 7.46%
- China Southern Air(1055) carried 3.1% more passengers in Jul
- China Telecom(728) Gogo in pact with China Telecom Satellite to offer in-flight connectivity service on China flights
- Harbin Bank(6138) 1H net profit +15% YoY to RMB2.4bn
- China Shenhua(1088) Jul commercial coal production was 23.6mn tons vs restated 24.3mn tons yr ago
- China Life(2628) Jan-Jul premium income +23.5% YoY to RMB312.6bn
- China Taiping(966) Jan-Jul premium income +20% YoY to RMB77.9bn
- Best Pacific(2111) interim net profit +39.3% YoY to HK$192mn
- Sunny Optical(2382) interim net profit +51.2% YoY to RMB465mn
- Eternity Inv(764) issued profit warning, expecting to record a loss of HK$152mn-HK$162mn for 1H
- Tencent(700) has started marketing a $3.5 billion loan to lenders to back its purchase of a majority stake in Supercell Oy from SoftBank Group Corp.
- China Everbright(257) targets to spin off Greentech by year-end
At Jefferies: Buy: Aeon Delight (9787 JP); Secom (9735 JP); Sohgo Security Services (2331 JP)
Hold: Temp Holdings (2181 JP);
- DeNA (2432 JP): Raised to outperform at Mito
- Kawasaki Kisen (9107 JP): Cut to underperform at SMBC Nikko
- Mizuho (8411 JP): Downgraded to neutral at Haitong;
- Rohm (6963 JP): Cut to neutral at Macquarie; Sony (6758 JP): Outlook to positive at Fitch
- Taikisha (1979 JP): Cut to neutral at Daiwa
- TonenGeneral Sekiyu (5012 JP): Cut to neutral at Daiwa
- JB Hi-Fi (JBH@AU) cut to equal weight vs overweight at Morgan Stanley; cut to underperform vs outperform at Credit Suisse
- National Australia Bank (NAB@AU) cut to hold vs add at Morgans
- Aurizon (AZJ@AU) cut to equal weight vs overweight at Morgan Stanley
- G8 Education (GEM@AU) raised to buy vs hold at Wilsons
- BHP Billiton (BHP@AU) full-year earnings
- Heartland Bank (HBL@AU) full-year earnings
- Challenger (CGF@AU) full-year earnings
- SCA Property (SCP@AU) full-year earnings
- Mirvac (MGR@AU) full-year earnings
- InvoCare (IVC@AU) first-half earnings
- Domino’s Pizza (DMP@AU) full-year earnings
- Viva Energy REIT (VVR@AU) launches A$836.7m loan to general syndication
Sources: CIMB / Bloomberg
US crude was at a one-month high amid speculation Opec could stabilise prices. Photo: iStock
– Edited by Adam Courtenay
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