Oil has hit a 15-month high on the back of optimism over the Opec deal which needs to be sorted out by November 30. But, with a record long position building across the combined benchmarks, a disappointment could leave some exposed. Full report to come within the hour....
Article / 14 June 2016 at 2:16 GMT

Morning Report APAC: Only certainty is volatility amid Brexit risk-off

APAC Sales Trading Desk / Saxo Capital Markets

  • 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%)

Overnight news

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


Very volatile overnight to remain more or less unchanged but the risk-off continues, triggered by a new Brexit poll and with FOMC coming this week. USDJPY is almost touching the lows of the year and traded at the 105 handle. USDJPY moved 4.2% lower in June. 

USD is bid against all emerging markets currencies. China's fixed asset investment slowed to a 15- year low, which triggered a flight to safety and a sell-off in Asian equities. 

USDCNH is attempting to break above 6.6000. USDBRL bounced hard from the lows of the year, from 3.4000, to rally 3.6% in two days.

Foreign exchange movements


All volatilities traded higher overnight on risk-off moves, with more uncertainty around the Brexit vote. The overall liquidity is poor and the market is trying to cover anything it can around Brexit. The risk of contagion around the vote is also pushing other volatilities higher, such as EUR and CHF.



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

Analyst views:

  • 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

    Equity preview:

  • 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

Analyst views:

  • 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.

Equity preview:

  • 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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