Morning Report APAC: Only certainty is volatility amid Brexit risk-off
- Risk-off continues, triggered by
a new Brexit poll and with FOMC coming this week
- Sell-off in Asian equities on low fixed asset investment in China
- VIX spikes, with volatility the only certainty this week
- Gold rallies to four-week high
- Microsoft to pay $26.2 bn for LinkedIn
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8 hours)
1230: JPY – Industrial Production MoM (Prev. 0.3%), YoY (Prev. -3.5%)
1630: GBP – CPI MoM (Exp. 0.3%, Prev. 0.1%), YoY (Exp. 0.4%, Prev. 0.3%), Core YoY (Exp. 1.3%, Prev. 1.2%)
1630: GBP – RPI MoM (Exp. 0.3%, Prev. 0.1%), YoY (Exp. 1.5%, Prev. 1.3%),
1630: GBP – PPI Input MoM (Exp. 0.9%, Prev. 0.9%), YoY (Exp. -5.1%, Prev. -6.5%)
1630: GBP – PPI Output MoM (Exp. 0.1%, Prev. 0.2%), YoY (Exp. 0.6%, Prev. 0.5%)
1700: EUR – Eurozone Indus Prod YoY (Exp. 1.4%, Prev. 0.2%), MoM (Exp. 0.8%, Prev. -0.8%)
2030: USD – Retail Sales Advance MoM (Exp. 0.3%, Prev. 1.3%), ex-autos (Exp. 0.4%, Prev. 0.8%)
Oil: Opec has kept its estimates for world supply and demand in 2016 unchanged in its monthly market report. Disruptions in Nigeria reduced the group’s output to 32.36 mln barrels a day last month, a little below the 32.6 mln average required to satisfy estimated demand in the second half.
Foreign exchange movements
US Treasuries have rallied for a fifth session as the market goes for a flight to quality after the risk-off overnight. The curve is getting flatter, the 2/10 is trading at 90 basis points, the flattest level since 2007.
In Europe, the spread between Bunds and Peripherals is widening on risk-off sentiment. Italy, Spain and Portugal 10-year yields are respectively up 7.2, 7.4 and 12.4 bps while Greek 10-year yields are up 31 bps.
Shares continued to sell off in the UK and US sessions on Brexit worries following the 3.5% drop in the Nikkei. The S&P500 has declined for a third consecutive day and bond yields continued to drift lower.
The VIX, which tracks the implied volatility of the S&P 500 stock index, has spiked up to 20.97 as volatility is the only certainty this week, with FOMC, Bank of Japan and SNB meetings this Thursday.
Investors have also piled into exchange traded funds such as UVXY, which saw its total assets increase by almost $300mln to $853mln recently.
In company news, Microsoft is paying $26.2 bn for LinkedIn, as demand for personal computers have been waning and the company moves towards selling software and services over the internet. LinkedIn shares were up 46% on the day to close at $192.21.
Credit spreads are widening globally on risk-off following the lowest level in fixed asset investments in China and a new poll favouring Brexit.
Hong Kong equity preview
- Shimao Property (813 HK): Cut to neutral at UBS
- Tonghua Dongbao (600867 CH): Rated new outperform at Macquarie
- Future Land (1030 HK): Outlook raised to stable by Moody’s
- CH Mobile (941) signed €1.36bn one-year agreement with Nokia. CH Mobile to deploy Nokia’s AirScale station while Nokia to deliver mobile, fixed, IP routing, optical transport and customer experience management tech.
- Ping An (2318) Jan-May life insurance premium RMB144.2bn, PPTY insurance premium RMB69.9bn.
- CH Pacific Insurance (2601) Jan-May Life insurance premium RMB68.7bn, PPTY insurance premium RMB41.5bn.
- Yanzhou Coal (1171)’s unit to buy Jiutai Energy stake for RMB1.84bn.
- Great Wall Motor (2333): 4.1mln H-shares bought by Capital Group on Jun 8.
- Greenland (337) Jan-May contracted sales up 45% YoY to RMB7.03bn.
- CR Land (1109) May contracted sale RMB8.15bn. They have acquired three land parcels in May, total consideration RMB1.68bn.
- Vanke (2202) to submit restructuring plan before Jun 18. Its A-shares to resume trading as early as early July (Bloomberg).
- MTR (66) entered an agreement for HK$25bn loan syndication.
- Zoomlion (1157) plans to buy back no more than RMB1bn A-shares at no more than RMB5.21 per share.
- Baidu (BIDU) cut second-quarter revenue to US$2.807bn-US$2.823bn, due to a reduction of spending from medical customers.
Alibaba Pictures (1060) to invest RMB1bn in nurturing generation Z movie professionals.
Japan equity preview
- Canon (7751 JP): Issuer rating cut to Aa3 from Aa1 at Moody’s.
COMSYS Holdings (1721 JP): Cut to underperform from neutral at SMBC Nikko.
Hitachi Chemical (4217 JP): Cut to neutral from overweight at Mitsubishi UFJ Morgan Stanley.
Oji Holdings (3861 JP): Raised to buy at Okasan.
Suruga Bank (8358 JP): Downgraded to neutral from outperform at SMBC Nikko.
- Kobe Bussan (3038 JP): Raises full-year operating profit forecast 3.3% to ¥9.3bn, cuts net
income target 60% to ¥2.1bn.
NTT (9432 JP): MOF to sell 59mln of NTT shares today, NTT to buy back 68mln.
Shoei Foods (8079 JP): 1H operating profit ¥2.73bn vs co. forecast ¥2.45bn.
Australia equity preview
- OZ Minerals (OZL AU) raised to outperform vs sector perform at RBC
Gold rallied to a four-week high following the rsik-off mood overnight. Photo: iStock
– Edited by Susan McDonald
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