Morning Report APAC: BoK surprises with rate cut as RBNZ holds
- Reserve Bank of New Zealand maintains its benchmark interest rate at 2.25%
- NZD rose to its highest level since June 2015
- Bank of Korea unexpectedly cut its benchmark rate to 1.25% from 1.50%
- Oil advanced for a fourth day on falling US inventories
By Saxo APAC Sales Trading
0500: NZD – RBNZ Official Cash Rate (Act. 2.25%, Exp. 2.25%)
0900: KRW – BOK 7-Day Repo Rate (ACT. 1.25%, Exp. 1.50%)
0930: CNY – CPI YoY (Exp. 2.2%, Prev. 2.3%)
0930: CNY – PPI YoY (Exp. -3.2%, Prev. -3.4%)
1400: EUR – Germany Trade Balance (Exp. 22.8B, Prev. 26.2B)
1400: EUR – Germany Current Account Balance (Exp. 21.0B, Prev. 30.4B)
1400: EUR – Germany Exports MoM (Exp. -0.8%, Prev. 1.9%), Imports MoM (Exp. 1.3%, Prev. - 2.3%)
2030: USD – Initial Jobless Claims (Exp. 270k, Prev. 267k), Continuing Claims (Exp. 2,171,000, Prev.
0910: NZD – RBNZ's Graeme Wheeler at Parliament Select Committee
1500: EUR – ECB's Mario Draghi speaks at Economic Forum in Brussels
US: The pace of hiring by US employers slowed to near a two-year low during April. The Job Openings and Labour Turnover Survey showed that the pace of hiring fell to 3.5% from 3.7% in March. The number of people hired fell to 5.1m from 5.3m in March and 5.5m in February. In contrast, job openings increased 118,000 to a seasonally adjusted 5.788m (exp. 5.675m).
New Zealand: The RBNZ maintains the benchmark interest rate at 2.25%. The bank says:
- further policy easing may be required
- housing inflation is adding to financial stability concerns
NZD is higher than appropriate
- inflation will strengthen on expected NZD depreciation
NZD strength is holding down tradeables inflation
- there are many uncertainties around outlook
- bank will continue to closely watch data flow
South Korea: Bank of Korea unexpectedly cut its benchmark rate to 1.25% from 1.50% as concerns rose that the government’s push to restructure indebted companies is putting pressure on the economy.
Brazil : Brazil's central bank BCB keeps rates on hold at 14.25%.
US sovereign bond prices were higher on Wednesday after the release of labour turnover and services data, as the US Treasury Department auctioned $20 bn in 10-year notes at a high yield of 1.702%. The bid-to-cover ratio, an indicator of demand, was 2.70, above a 10-auction average of 2.62. The US 10-year yield traded lower overnight, reaching a low of 1.7005 after trading at a high of 1.7125 at the open of the US equity markets. The US dollar continued to decline overnight, with the DXY hitting a low of 93.41.
It is interesting to note that the S&P is about 10 points away from its all-time high of 2030 points, and this could provide a ceiling on the index as we move into this weekend.
The rally seen in Treasuries over the past two days has pushed lower the CDS indices, doing some catch -up. The main mover has been the Itraxx Europe.
HK Equity Preview
Closed for the Dragon Boat festival public holiday.
Japan Equity Preview
- JPMorgan new coverage
- Askul (2678 JP): Overweight
- DeNA (2432 JP): Overweight
- Gree (3632 JP): Underweight
- Nexon (3659 JP): Underweight
- Nintendo (7974 JP): Overweight
- Rakuten (4755 JP): Overweight
- Square Enix (9684 JP): Overweight
Asia Pile Holdings (5288 JP): Rated neutral plus at Iwai Cosmo Securities
Hitachi Chemical (4217 JP): Raised to outperform at SMBC Nikko
Japan Hotel REIT (8985 JP): Raised to buy at UBS
Marubeni (8002 JP): Cut to equalweight at Morgan Stanley
Sojitz (2768 JP): Raised to equalweight at Morgan Stanley
Tohoku Electric (9506 JP): Raised to outperform at SMBC Nikko
Ihara Chemical Industry (4989 JP): Lowered operating profit forecast for full year ending Oct. 2016 by 19.6% to ¥3.7bn
Japan Airlines (9201 JP): Maintains no int’l fuel surcharge for tickets in Aug-Sep
Suzuki Motor (7269 JP): Executives including CEO Osamu Suzuki and COO Toshihiro Suzuki to attend 5:30pm news conference today; executive VP Honda to resign, Nikkei reports
Tokyo Rakutenchi (8842 JP): Reported operating profit fell 22.3% y/y to ¥300m in Q1 ended April 30
Australia Equity Preview
Fisher & Paykel Healthcare (FPH NZ) raised to neutral vs sell at UBS
Woodside Petroleum (WPL AU) cut to underperform at Credit Suisse
Kathmandu (KMD NZ) rated new buy at Canaccord Genuity
South32 (S32 AU) raised to outperform vs neutral at Exane BNP Paribas
Source: Bloomberg / CIMB
We should see some offers for NZD at 0.7200, once the clean-up of short positioning is finished. Photo: iStock
– Edited by Susan McDonald
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