Article / 08 March 2018 at 1:37 GMT

Morning Report APAC: Potential tariff exemptions give Asia a lift

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian markets were higher in early trade on the back of positive tariff news
  • The White House hinted Mexico and Canada could be exempt from planned tariffs
  • Australia recorded a trade surplus of $A1.1 billion in January 
  • The AUD rose to US78.35¢ after the release of the data, up from US78.26¢
  • Japan expanded at an annualised rate of 1.6% in 2017's final three months

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8hrs)

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Speeches (Singapore Time)

  •   0450 – CA – Bank of Canada deputy governor Tim Lane gives a speech

Overnight news

Tariffs not for everyone

  • A White House spokesperson and two members of US President Donald Trump's cabinet suggested Wednesday that Canada and Mexico might escape new tariffs on steel and aluminium. Commerce Secretary Wilbur Ross told reporters that Trump has "indicated a degree of flexibility."
  • He said, "If we can work something out with Canada and Mexico they will be exempted. It's not inconceivable that others could be exempted on a similar basis."
  • "We're cautiously optimistic on NAFTA," Mnuchin said. "This is part of those discussions. But assuming we get the new NAFTA deal done, they will be exempted."
  • Stocks started the day down 1.4% in the futures market to finish unchanged following the comments above from the White House. VIX seems to settle down now more below 20 level

Canada

  • Bank of Canada kept its rate at 1.25% as expected and indicated it’s in no rush to pursue aggressive interest rate hikes amid growing global trade tensions and softer housing data.

 

Foreign exchange

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  • USD was pretty dead overnight with DXY finishing unchanged. The choppiness in the equity market makes it hard to keep any directional trade for too long. The trend though still favours a USD selloff.  
  • Emerging Markets: Moody’s downgraded Turkey’s debt from Ba2 to Ba1, 2 levels below IG. USDTRY didn’t really react on that and is still trading around 3.80


Foreign exchange movements

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  • USDCAD gamma is still very bid with the realised still very high (spot moving around 1% range each day)
  • Some selling interest in USDJPY volatilities with spot hovering around 105.50/106. There is $1bn expiry today at 106


Rates
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  • European bonds went higher, supported by EUR financial swap issuance. Peripherals outperformed led by Portuguese as risk surrounding Sunday’s Italy election continues to fade.
  • US treasuries were choppy through the whole session as market is trying to gauge the possibility and impact of a ‘trade war’.

 

Commodities 

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Equities

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United States

  • Dow (-82 points) and S&P 500 (-1 points) closed well off session lows after the White House hinted Canada and Mexico could be exempt from tariffs proposed by President Donald Trump.
  • Shares of discount store operator Dollar Tree Inc (DLTR) fell 14.5% to $89.25 on the heels of the company reporting its financial results for Q4. The company posted adjusted earnings per share of $1.89. The company's revenue of $6.36 billion was also 12.8% higher than the figure reported a year earlier. The company fell short of analysts' estimates by 1 cent in earnings per share and $30 million in revenue.
  • Retailer Abercrombie & Fitch (ANF) shares rose nearly 12% after earnings blew past consensus, last traded at $23.89. ANF reported Q4 earnings and sales that beat expectations. Net income for the quarter was $74.2 million, or $1.05 per share, up from $48.8 million, or 71 cents per share, for the same period last year
  • Micron Technology (MU) continued its gain, shares prices were up around 0.5% closed at $53.97. This week, MU rose nearly 10% after Bank of America Merrill Lynch and Goldman Sach analysts upgraded their assessment for semiconductor stocks. The options market has been extremely active following these analyst comments, with a five-to-one ratio of call options to put options.

Europe

  • The main European stock markets closed in positive territory. The UK's FTSE gained 0.16% and Germany's Dax gained 1.09%, and France's CAC was up 0.34%, as the European Union's threat of tariffs on US goods heightened fears of a global trade war.
  • Basic resources, meanwhile, were down 0.2%, amid concerns the Trump administration will proceed with protectionist tariffs on steel and aluminium imports. Fresnillo (FRES), Randgold Resources (RRS) were the worst performers of the sector. Share prices were down 1.7% and 1.5% respectively.
  • Europe's auto stocks were up, as France-based Renault (RNO) once shot up by 8% ($100.70) after Reuters reported that it was in talks with Nissan to sell most of the French government's stake in the car-maker to its Japanese alliance partner. The stock later pared those gains as traders pointed to a denial of the plans by the Renault-Nissan-Mitsubishi alliance. RNO closed off in green, last traded at €94.44 up 5.6%.

Hong Kong

  • Hang Seng Index (HSI) headed south with a high/ low volatility of more than 550 points. At the close, the Hang Seng Index settled at 30,196, down 313 pts or 1%. Full day trading market turnover shrank to $113.259 billion.
  • Three oil giants ended weak, being the worst-performing sector. CHINA SHENHUA (0088.HK) and CNOOC (883.HK) slipped 3.9% and 2.1%, closed at 20.85 and 11.02 respectively. PETROCHINA (857.HK) lost 2%.
  • Avichina (2357.HK) lost its winning streak, bearish block trade of 944,000 shares of 2357.HK occurred at price of HK$5.02 and turnover of HK$4.739mln. The last price was down 0.04, and highest price was $5.09 while the lowest price once hit $4.86. Total volume is 43.935mil shares and total turnover is HK$220.087mil.
  • Chinese banks traded slightly higher as China authority relaxed provision requirements on banks, which may favour Chinese bank stocks in some brokers' views. CCB (939.HK) and ICBC (01398.HK) added 1.5% to 8.02 and 0.7% to 6.80. While smaller cap CM BANK (3968.HK) gained 1.5% too.


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 Japan's economy expanded at an annualised rate of 1.6% in the final three months of 2017, revised up from a 0.5% estimate. Photo: Shutterstock

 
– Edited by Gayle Bryant


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