Article / 17 May 2017 at 2:11 GMT

Morning Report APAC: Risk-off sentiment drives gold higher

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • The US Industrial Production figure was its strongest in three years
  • Gold flirted with $1240/oz on US domestic woes and USD weakness
  • Copper and iron ore traded comfortably higher on the back of weakening USD
  • After an impressive rally, oil has corrected on possible profit taking

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
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Speeches

  • 2310 – US: Former Fed Chairman Ben Bernanke to speak at conference.

Overnight news, US

  • The fallout from the firing of FBI director James Comey and the connection to Russia gathered momentum yesterday as the New York Times and the Washington Post both reported that President Donald Trump released classified sensitive information to the Russians.
  • The leak later claimed that the information came from the Israelis, which will likely make for a tough trip to the Middle East for Trump next week.
  • US Industrial Production data was very strong; the strongest in three years as 1% m/m vs 0.4% expected.
Overnight news, Europe
  • UK: Inflation data came in at 2.7% y/y versus 2.6% expected while core CPI beat expectations at 2.4%. Inflation in the UK is outstripping wage rises, and hurting consumer consumption.
  • EZ: Eurozone GDP numbers came in in line with expectations at 1.7% y/y. The strong GDP numbers are likely to bring a change in message from European Central Bank president Mario Draghi at the next ECB meeting.
  • German ZEW current situations showed a marked increase from prior month and beat expectations with a 83.9 print.

Foreign exchange

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  • USD continued to sell off aggressively overnight sold off on the Trump issues with the leak of information to Russia and a drop in housing permits. DXY has already reached our target of 98.00. There is a support now until 96, but we should see some consolidation at 98.
  • All currencies rallied against USD and EURUSD broke new highs overnight reaching 1.1100 and there is room to go to 1.1200 now. The only support will be at 1.0825.
  • USDCHF is reaching the lows of the year close to 0.9800. The Swiss National Bank might do some verbal intervention soon but EURCHF remains elevated.
  • Emerging Markets: USDEM traded lower overnight following the global USD selloff but equities look to open on the downside that could trigger USD buying against EM

Foreign exchange volatilities

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  • Funds are buying USD Puts for the next Federal Reserve meeting low delta (June 15).
  • There is strong buying interest in buying gamma in USDCAD for the next Opec meeting.
  • It seems the market is not long enough in EURUSD and is now buying EUR calls.

Rates

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  • Despite domestic woes and negative headlines, US 10 year yield only retreated about 2 basis points despite huge sell off in the dollar index as bonds markets was rather quiet.


Commodities 

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Equities

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  • The Nasdaq once again broke its all-time high as the tech indices lead the market. Both the S&P 500 and Dow Jones were in the red marginally; the S&P 500 managed to recover above the 2,400 level before market closes.
  • In Europe, equities market was led by the FTSE with a 0.9% gain as momentum in Europe continues. Saxo's head of equity strategy Peter Garnry also see “massive interest in European atocks” after interests in the ETF flows and agrees with this sentiment and remains overweight and bullish on European equities.
  • Alibaba stock, which has risen more than 40% in 2017, jumped 2.16% as it closed at $124.02 and made a new record high. China tech stocks were the leader after strong showing from Weibo and Sina. Alibaba has a 18% stake in the former and will be releasing its result before the market opens on May 18.
  • Weibo Corporation, China’s version of twitter, rocketed 24.96% to close at $78.60 after beating its analyst forecasts easily. Average daily user roses in March rose 28% from a year earlier and monthly active users also jumped 30% to 340 million. Weibo, is a spin off from Chinese Internet portal Sina, which also reported earnings release yesterday with an adjusted earnings of 50 cents as it beat consensus estimate of 13 cents. Sina closed $15 higher or 17.85% higher to $99.04.
  • Etsy closed 21.3% higher to $13.73 as it faces pressure from its shareholders who are pushing for sale. This was not the first time this month as we already saw Earlier an activist hedg, Black and White Capital, called for their companies to fix their problems in the company’s operation and governance. With a recent reshuffling of its management, it seems investors are optimistic of a future M&A or improvement in operations despite retail businesses being punished as of late.
Asia-Pacific equities preview

Hong Kong analyst views

  • ASM PACIFIC (522 HK): Cut to neutral at UBS, price target $HK125.
  • Beijing North Star (588 HK): A shares raised to buy at Citic Securities.
  • Belle (1880 HK): Raised to neutral at Mizuho, PT $HK5.80.
  • China Coal (601898 CH): Raised to equal-weight at Morgan Stanley.
  • China Resources Cement (1313 HK): Cut to underweight at Morgan Stanley.
  • Chow Sang Sang (116 HK): Cut to sell at UBS, PT $HK17.
  • Chow Tai Fook (1929 HK): Raised to neutral at UBS, PT $HK9.
  • CK Property (1113 HK): Rated new buy at UOB Kay Hian, PT $HK70.28.
  • HSBC (5 HK): Among seven banks said to be focus of Mexico bond collusion probe.
  • HKBN (1310 HK): Rated new overweight at Morgan Stanley.
  • HKEX (388 HK): Raised to overweight at JPMorgan, PT $HK220.
  • Hutchtel (215 HK): Raised to buy at New Street Research, PT $HK3.43.
  • Kerry Properties (683 HK): Rated new hold at UOB Kay Hian, PT $HK29.56.
  • New World Dev (17 HK): Rated new buy at UOB Kay Hian, PT $HK13.14.
  • Shanghai Pharma (601607 CH): Cut to neutral at UBS, PT 25.16 Yuan.
  • SmarTone (315 HK): Cut to equal-weight at Morgan Stanley, PT $HK12.50.
  • SHK Ppt (16 HK): Rated New Buy at UOB Kay Hian, PT $HK148.87.
  • Wharf (4 HK): Rated new sell at UOB Kay Hian, PT $HK59.23.

Hong Kong stocks

  • Developers: Shanghai new mortgage loans slow in April.
  • Insurers: CIRC to post rules on letter of credit insurance: News.
  • Anta Sports (2020 HK): 4Q17 trade fair order grows at high single-digit y/y.
  • BYD (1211 HK): To increase 500mln yuan investment in new-energy car venture.
  • CAR Inc (699 HK): CAR Inc 1Q Net Income 210.6mln yuan vs 273.9mln yuan a year ago.
  • China Coal (1898 HK): April commercial coal sales 9.72mln tons.
  • Feilo Acoustics (600651 CH): To buy 20% stake in Feilo Malta for €34.5mln.
  • Glencore (805 HK): Attempting to buy Morocco refinery with Carlyle: Reuters.
  • Goldin Financial (530 HK): Adds covenants to $HK7.99b loan in syndication.
  • Henderson Land (12 HK): Wins Hong Kong Murray Road site for $HK23.28bn.
  • PICC Group (1339 HK): Proposes Shanghai IPO.
  • SDIC Power (600886 CH): Mainstream Renewables says judge backs Scottish wind project.
  • Shandong Gold Mining (600547 CH): Scraps share sale funding mine project.
  • Shanghai Fosun Pharma (2196 HK): Seeks up to $209mln in share placement.
  • Shanghai Pharma (2607 HK): Stada says hasn’t received offer.
  • Shanshui Cement (691 HK): Asia Cement announces purchase of $HK102.7mln China Shanshui stake.
  • Shengyun Environment (300090 CH): Wins infrastructure projects in Philippines.
  • StanChart (2888 HK): Standard Life chairman says scope for Lloyds strategic relationship; private bank may miss 2018 goal to add $25bn.
  • VTech Holdings (303 HK): FY Net Drops 1.3% Y/y to $179mln.Japan analyst views

Japan analyst views

  • Isetan Mitsukoshi Holdings (3099): Cut to neutral from overweight at MUFJ-MS.
  • Japan Aviation Electronics (6807): Rated new neutral at Storm Research.
  • Amada (6113): Raised to outperform from neutral at Credit Suisse.
  • KDDI (9433): Cut to neutral plus from outperform at Iwai Cosmo.
  • Mitsubishi Nichiyu Forklift (7105): Raised to buy from neutral at Ichiyoshi Research.
  • Tokyo Electron (8035): Raised to overweight from neutral at MUFJ-MS.
  • United Urban (8960): Cut to underperform from neutral at Credit Suisse.
  • Hitachi Kokusai Electric (6756): Raised to overweight from neutral at MUFJ-MS.

Japan stocks

  • Asahi Diamond (6140): Forecasts operating profit -37% to ¥1.66bn for current fiscal year.
  • Fancl (4921): Forms distributorship agreement with China Sinopharm International.
  • Gakkyusha (9769): Seeks ¥1.88bn from sale of shares, equity warrants.
  • Kansai Electric Power (9503): To restart Takahama No. 4 reactor on Wednesday.
  • Nippon Yusen (9101): To conduct 10-to-1 reverse stock split.
  • Software: Japan planning measures to combat cyberattacks, Nikkei reports.
  • Sumitomo Chemical (4005): Forecasts operating profit +23% to ¥165bn for current fiscal year.
  • Toshiba (6502): Japan Securities Finance restricts short sales; group cos. have reduced deposits held at parent, Nikkei reports.
  • Yahoo Japan (4689): Yahoo! Inc. announces modified Dutch tender to buy back $3bn of its shares.

Australia analyst views

  • A2 Milk (A2M): Cut to neutral at UBS, price target $NZ3.45.
  • AusNet Services (AST): Cut to neutral at JPMorgan, PT $A1.85.
  • Fortescue (FMG): Raised to add at Morgans, PT $A5.95.
  • Medibank Private (MPL): Cut to underperform at Credit Suisse.
  • NetComm (NTC): Raised to buy at Canaccord, PT $A2.10.
  • NIB (NHF): Cut to underperform at Credit Suisse, PT $A5.50.
  • Sonic Healthcare (SHL): Cut to underweight at JPMorgan.

Australia stocks

  • ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): Australia banks to face competition regulator inquiry into fees, rates: Daily Telegraph.
  • BHP Billiton (BHP): Studying shale sale as activist Elliott demands review.
  • CYBG (CYB): Falls most in a month in U.K. as 1H profit disappoints; Cut to neutral at Credit Suisse, price target $A5.25.
  • DuluxGroup (DLX): 1H results expected; NOTE: Company in November forecast FY17 profit above FY16.
  • Fonterra (FSF): Whole milk powder average price rises to $3,312/t.
  • Healthscope (HSO): Considers sale of medical centres business: AFR.
  • National Australia Bank (NAB): Plans $3.5bn debt offer in four parts.
  • Newcrest (NCM), Northern Star (NST), Evolution (EVN), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), OZ Minerals (OZL): Gold rallies for a fith day as USD falls on Trump’s Russia-leak flap.
  • Paladin Energy (PDN): Reports alternative restructuring proposal to cut debt.
  • Santos (STO): Australia gas crisis overblown amid export scrutiny.
  • Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil rally stalls as market awaits signs U.S supply glut easing.
  • Bank of New York Australia ADR Index -1.3%.
  • BHP Billiton ADR +1.1% to A$24.30 equivalent, 1.2% premium to last Sydney close.
  • Rio Tinto ADR +3.2% to A$54.48 equivalent, 9.6% discount to last Sydney close.


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The Opec meeting on May 25 will be closely watched, to see whether the cartel can extend its output curbs in a bid to prop up flagging crude prices. Photo: Shutterstock

 

– Edited by Robert Ryan


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