Article / 21 April 2017 at 1:55 GMT

Morning Report APAC: Rally on Wall Street lifts Asian markets

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Copper made gains on supply concerns, and Rio Tinto's reported lower guidance
  • Oil markets are torn between Opec’s cut prospects and concerns about higher output
  • Agricultural commodities are down;  wheat slumped on favourable US weather
  • USD rallied on Treasury Secretary Steven Mnuchin's tax reform comments
  • The BoJ's highly accommodative monetary policy will be in place indefinitely

By Saxo APAC Sales Trading
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Speeches

  • 1945 – UK – Bsnk of England’s Michael Saunders speaks at event in London
  • 2130 – US – Federal Reserve’s Neel Kashkari participates in Q&A in St. Paul, Minnesota.


Overnight news, France

  • A terrorist attack has shaken the French capital just days before the French presidential election: a known extremist suspect shot a police office in the Champs-Elysees and wounded two others before being shot. The attack was claimed by the Islamic State group.
 Overnight news, US
  • Treasury Secretary Steven Mnuchin said that the Trump administration is aiming to complete the biggest overhaul of the tax code since President Ronald Reagan by end of the year, even if a second attempt to repeal the Affordable Care Act fails.
  • "We’re pretty close to being able to bring forward what is going to be major tax reform.” The Trump administration hasn’t yet said whether it supports the House’s controversial border adjustment proposal to replace the 35% corporate rate with a 20% tax on domestic goods and imports, while exempting exports. Mnuchin said the administration’s tax priorities are to simplify personal taxes, create middle-class tax cuts and make business taxes competitive. He also said the White House’s tax overhaul plan wouldn’t increase the federal deficit.
  • New applications for jobless benefits in the US rose slightly more than expected last week, but a drop in the number of Americans on unemployment rolls to a 17-year low suggested the labour market continues to tighten. Initial claims for state unemployment benefits increased 10,000 to a seasonally adjusted 244,000 for the week ended April 15, the Labor Department said. The increase followed three straight weeks of declines. Claims have now been below 300,000, a threshold associated with a healthy labor market, for 111 straight weeks,  the longest such stretch since 1970.

Overnight news, Japan

  • Bank of Japan governor Haruhiko Kuroda said that the BOJ's ultra-accommodative monetary policy isn't ending any time soon. Asset purchases will continue apace as there's "a long way to go" before the BoJ reaches its 2% price target. Discussing an exit strategy is "premature", he said.
 


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  • USD rallied after Treasury Secretary Steven Mnuchin's comments and the rally in rates. DXY has found a good base just above its 200 day moving that should serve as a support.
  • AUDNZD rallied back on position squaring ahead of the week-end and is now trading in the middle of the range. 1.0600/1.0770
  • Emerging Markets: USD has been fairly muted against EM overnight and USDZAR continues its decline trading now at the 50 day moving average and getting closer to the lows of the year again.

Foreign exchange volatilities

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  • EUR liquidity has gone ahead of the French elections. The market is pricing a move of 1.8%.
  • Funds are still buying GBP upside above 1.3000 for two to three months maturity on concerns that the squeeze has only just started.

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  • OATs (French government bonds) outperformed as risk sentiment improved ahead of weekend French Election, with French/German 2 year spread tightened 3 basis points to 47 bps following recent political risks spilling into the front-end.
  • US Treasuries declined with the 10 year yield extending rebound after Treasury Secretary Steven Mnuchin said a tax reform plan could be released soon.

Commodities 

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  • US stocks were higher on Thursday after strong earnings for several companies lifted the indices. However with French election on Sunday, expect further gains to be sold into the weekend.
  • European markets rose on latest poll that centrist candidate Emmanuel Macron is leading the polls as we go into the first round of French election. CAC 40 was the best performer in European markets with a gain of 1.48%.
  • American Express rose 5.92% and closed at $80.02 after reported a profit of $1.34 per share vs. the consensus analyst estimate of $1.28 per share. Technically, we could possibly see $85 in sight, the top of the rising channel.
  • CSX reported strong earnings per share of 51 cents and beat market consesus at 43 cents per share. The strong set of result together with upbeat forward guidance from the CEO rallied CSX by 5.6% as the new CEO commented that profits will increase by 25% this year. CSX closed at $49.56.

Asia-Pacific stocks

Hong Kong analyst views

  • Agile (3383 HK) raised to Hold at DBS Vickers.
  • Angel Yeast (600030 CH): Rated new buy at Citic Securities.
  • Beijing Capital Dev (600376 CH): Rated new add at Cinda Securities.
  • Chalco (2600 HK): Recommended by Morgan Stanley on planned China cut.
  • IMAX China (1970 HK): Cut to outperform at Daiwa.
  • Meitu (1357 HK): Rated new add at Citic Securities.
  • TravelSky (696 HK) H shares cut to Equal-weight at Morgan Stanley.
  • Xinjiang Goldwind (002202 CH): Rated new buy at UBS.

Hong Kong stocks

  • Insurers: CIRC urges implementation of insurance sector supervision.
  • Nuclear: Chinese, Iranian companies to sign pact on nuclear plant project.
  • Steel: U.S. Steel seeks China trade probe as as Trump orders steel imports probe.
  • ASM Pacific (522 HK): Activist seeks support to force ASM Intl to sell unit.
  • Bank of Nanjing (601009 CH): FY net 8.26bn yuan.
  • China Mobile (941 HK): Q1 net income misses estimates.
  • China Overseas Grand Oceans (81 HK): Three-month profit HK$430mln.
  • Cosco Shipping Dev (2866 HK): cuts A-share placement plan.
  • CSC (6066 HK): To apply for A-share offering.
  • Do-Fluoride Chem (002407 CH): Q1 Net 69.1m yuan.
  • Fufeng (546 HK): seeks up to $104mln in top-up placement: Terms.
  • Huayi Brothers (300027 CH): Q1 loss 68.4mln yuan.
  • Leshi (300104 CH): Swings to 337.5m yuan FY loss after audit
  • Merchants Shekou (001979 CH): 1Q Net Income 2.12b yuan.
  • Minsheng Bank (1988 HK): Offers solutions for investors in sub-branch case: News; says fake WMP case not related to bills: News.
  • Originwater (300070 CH): says isn’t target of government suit.
  • Shanghai Mechanical (600835 CH): 1Q net 239mln yuan vs 219mln yuan.
  • Sun Hung Kai & Co. (86 HK): Said to revisit finance unit IPO.
  • Yingde (2168 HK): Appoints new CEO as PAG ups stake to 90.9%.

Japan analyst views

  • Ariake Japan (2815): Cut to neutral from buy at Goldman.
  • Asahi Glass (5201): Raised to outperform from neutral at SMBC Nikko.
  • Ichigo (2337): Cut to neutral from outperform at Daiwa.
  • Kyowa Hakko Kirin (4151): Raised to outperform from neutral at Daiwa.
  • Line Corp. (3938): Cut to neutral from buy at Goldman.
  • Makita (6586): Cut to neutral from buy at Haitong.
  • Meiji Holdings (2269): Cut to neutral from buy at Goldman Sachs.
  • Nomura Holdings (8604): Raised to outperform from neutral at Tokai Tokyo.
  • Sompo Holdings (8630): Rated new buy at Haitong.
  • Takeuchi Mfg (6432): Raised to outperform from neutral at Tokai Tokyo.

Japan stocks

  • Aisin Seiki (7259): Working with Toyota on fuel-cell powertrains.
  • DeNA (2432): To explore opportunities in digital media with Shogakukan.
  • Enplas (6961): Forecasts operating profit -3.6% to ¥4bn for current fiscal year.
  • Drecom (3793): Prelim. full-year net income ¥700mln, beating forecast for ¥500mln.
  • Genky Stores (2772): 9-month net +61% y/y at ¥1.86bn.
  • Hino Motors (7205): Full-year operating profit above ¥70bn, Nikkei says; co. forecast ¥69bn, Bloomberg est. ¥70.5bn.
  • Ibiden (4062): Prelim. full-year operating profit ¥7bn vs co. forecast ¥5bn.
  • REITs: BOJ raises stakes in five Japanese REITs to more than 6% as of April 15.
  • Showa Denko (4004): To release delayed earnings report April 25.
  • Steel: Trump orders Commerce Dept. to expedite investigation on whether steel imports hinder national security.
  • Sumitomo Mitsui Trust (8309): Scraps plan to list asset management subsidiary.
  • Toho Zinc (5707): To conduct 10-to-1 reverse stock split.
  • Urbanet Corp (3242): Raises full-year net forecast to ¥1.4bn from ¥1.27bn.
  • Yaskawa Electric (6506): 4Q operating profit ¥8.8bn vs analyst est. ¥9.9bn; full-year operating profit outlook ¥37bn, in line with estimates.
Australia analyst views
  • Galaxy Resources(GXY): Cut to accumulate from buy at Hartleys; price target $A0.65.
  • Iluka Resources (ILU): Raised to overweight from underweight at JPMorgan; PT $A8.80.
  • NIB Holdings (NHF): Cut to sell from hold at Bell Potter; PT $A5.12.
  • Rio Tinto (RIO): Raised to buy from neutral at Citi; PT unchanged at $A70.

Australia stocks

  • Bank Of Queensland (BOQ): Raised to buy from hold at Bell Potter; PT $A12.65.
  • BHP Billiton (BHP): Shareholders pressing company to examine options further, FT reports
  • Evolution Mining (EVN): Downgraded to hold from buy at Canaccord; PT $A2.45.
  • Fortescue Metals (FMG): China iron ore climbs for second day as sell-off seen “overdone”.
  • Macquarie (MQG): Leads group that bought Britain’s Green Investment Bank for $3bn.
  • Resolute Mining (RSG): Upgraded to outperform from sector perform at RBC; PT $A1.70.
  • Telstra (TLS): Options among the most active in Asia on block trades.

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Crude prices are being pulled in two directions, with hopes of Opec achieving its cuts serving to support prices, and concerns about higher output elsewhere pulling them lower. Photo: Shutterstock


– Edited by Robert Ryan


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