Morning Report APAC: Sales tax delay talk gives Tokyo stocks a lift
- Oil pared earlier gains after touching $50/barrel for the first time this year
- Low US output, and supply problems in Nigeria and Venezuela are factors in oil's rise
- The Australian dollar is below its 200 day moving average
- The chance of Fed rate hike in June is just 28%, and sits at 51% for July
- Gold is now trading at its 100 day moving average, after dropping 6.2% this month
- Industrial metals rallied after oil soared; zinc has had its biggest gain for two weeks
- SA wheat climbed, corn traders turned bullish and sugar hit a 22-month high
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time: GMT plus 8 hours)
- 0730: JPY – Natl CPI YoY (Act. -0.3%, Prev. -0.4%), Ex Food and Energy (Act. -0.3%, Prev. -0.4%)
- 0830: TWD – Taiwan GDP YoY Q1 (Exp. -0.80%, Prev. -0.84%)
- 2030: USD – GDP Annualised QoQ 1Q (Exp. 0.9%, Prev. 0.5%),
- 2030: USD – GDP Price Index (Exp. 0.7%, Prev. 0.7%), Core PCE QoQ (Exp. 2.1%, Prev. 2.1%)
- 2200: USD – Univ. of Michigan (Exp. 95.4, Prev. 95.8)
- US: Durable goods orders rose sharply in April (up 3.4% from 1.9%, expected: 0.5%) driven by an acceleration in aircraft orders, the production outlook improved much more modestly. Civilian aircraft orders, which rose 109.1% after being virtually unchanged in March (0.3%) and falling -45.6% in February. Excluding this, orders rose nearly in line with expectations (0.4% vs. 0.1% in March). Core orders (non-defense capital goods excluding aircraft) fell -0.8% vs. -0.1% in March and have now declined in five of the last six months.
- US: Pending home sales rose 5.1% (Exp 0.7%) confirming the recent good data in the housing market.
- UK: GDP was in line with expectation at 0.4% QoQ and 2.0% YoT (Exp. 2.1%). The GDP numbers were driven by British consumers spending (up 0.7%). The gain helped to offset falling exports and business investment.
- JAPAN: Japanese Prime Minister Shinzo Abe has decided to delay the sales tax increase due to the global economic slowdown and the impact of last month’s Kumamoto earthquake. Japan had planned to raise the tax to 10% from 8% in April 2017 to help cut its debt.
- BREXIT: See below for details of the the impact of the impending UK vote on currencies and equities.
The US dollar was offered against Asian currencies the whole session yesterday but stabilized in the New York time zone.
The demand we have seen and heard from funds is still for a big move higher in USDJPY.
US yields slipped already before the mixed durable good numbers. The 7 year auction was strong, awarded at 0.5 basis points below pre-auction market yield. This marked the first time in a year that the 2 year, 5 year and 7 year auctions in one week were all awarded below this level, indicating persistent strong demand for US treasuries.
The chance of rate hike dropped below the 30% level in June to 28% and is at 51% for July
Spreads between the Bunds and Peripherals widened overnight with the Bunds down 0.6 basis points and Italy, Spain, Portugal, Greece yields up 2, 3.4, 5.8 and 5.6 basis points respectively. Spanish bonds moved mainly on signs of weakness in the country’s banks.
Spain’s Banco Popular Espanol SA plunged to the lowest point in 26 years on Thursday in the stock market, after the bank announced a €2.5 billion ($2.8 billion) share sale to repair its balance sheet.
US stocks were in consolidation mode overnight, pausing to digest a strong two-day advance, as oil backed away from $50 and as a soft core durable goods report saw Fed fund futures reduce the likelihood of a June rate hike.
Retailer Abercrombie & Fitch Co. (-15.7%) reported a Q1 net loss of $39.6mln, or $0.59 per share (Market est: loss-$0.51). Total revenue declined 3% to $685.5mln (market est: $709mln). Executive Chairman Arthur Martinez attributed the decline to “traffic headwinds, particularly in international markets and in our U.S. flagship and tourist stores.”
Sears Holdings Corp. (+6.6%) reported a Q1 adjusted EPS loss of $1.86 from $2 a year ago.
US Foods Holding Corp. (+8.3%) rallied in its trading debut. The second largest IPO of the year priced at $23 per share, towards the top end of the $21 to $24 range, and raised $1.02bn.
Hong Kong Equity Preview
- Baoshan Steel (600019 CH): Raised to buy at Everbright
- Daye Special Steel (000708 CH): Raised to buy at Everbright
- Lenovo (992 HK): Cut to neutral at JPMorgan
- Wuhan Steel (600005 CH): Raised to ’buy’ at Everbright Secs
- AgBank (1288 HK): Party Head Zhou Mubing may be named chair in July: News.
- Agile Property (3383 HK): Buys residential site in Suzhou.
- Baoxin Auto (1293 HK), China Grand Auto (600297): Says SAFE condition not invoked.
- Cathay Pacific (293 HK): Names James Tong acting Dragonair CEO.
- China New Way Investment (711 HK): SFC criticizes co..
- Citic (267 HK): Increases holding in Citic Bank to 64.62%.
- Cnooc (883 HK): Seeks negotiations with Husky, Primeline on dispute: Yang
- Dushanzi Tianli (600339 CH): Plans to buy CNPC’s project construction asset
- Global Bio-Chem (809 HK): Mulls Hong Kong acquisition.
- Gome (493 HK): Q1 net 134mln yuan vs 293mln yuan yr earlier
- HC Intl (2280 HK): CEO bought 200,000 shrs of co.
- Lenovo (992 HK): Q4 net $180m; est. $184.9mln.
- Shenzhou International (2313 HK): In talks to sell retail business
- SHK Prop (16 HK): HK$15b contract sales so far this yr: SCMP
- Tingyi (322 HK): Q1 net falls 46% Y/y to $58mln.
- Wanda Commercial (3699 HK): Buyout offer said delayed by regulatory issues: Reuters; Co. says privatization “still Proceeding”: Sina.
- Xining Special Steel (600117 CH): Says debt risk controllable with govt support.
- Yongda Auto (3669 HK): Receives exchange approval to spin off auto group.
- Zhejiang Shibao (1057 HK): Ends purchase of 51% stake in Tedrive Steering.
- ZTE (000063 CH): Plans to open 23 flagship stores.
Japan Equity Preview
- Cosmo Energy (5021 JP): Raised to buy at Nomura.
- Mitsui Fudosan (8801 JP): Credit rating raised to A2 from A3 at Moody’s.
- Relia (4708 JP): Raised to outperform at SMBC Nikko.
- Santen Pharma (4536 JP): Raised to buy at Citibank.
- Sojitz (2768 JP): Raised to outperform from neutral at Daiwa.
- Toshiba (6502 JP): Raised to equalweight at JPMorgan.
- West Japan Railway (9021 JP): Raised to buy at UBS.
- Yamato Holdings (9064 JP): Downgraded to underperform from neutral at SMBC Nikko.
- Aisin Seiki (7259 JP): Forecasts oper. profit ¥ 175bn for current FY under IFRS; may not compare with Bloomberg est. ¥ 190.7bn.
- Citizen Holdings (7762 JP): To buy Swiss watchmaker Frederique Constant; no terms
- NCXX (6634 JP): To sell ¥ 300mln in convertible bonds
- Takata (7312 JP): Rose by daily limit after reported to be in talks with KKR on restructuring; earlier co. said it had hired Lazard.
- Top REIT (8982 JP): To be acquired by Nomura Real Estate Master Fund (3462 JP).
Australia Equity Preview
- Medibank Private (MPL AU) raised to neutral vs sell at UBS.
- GrainCorp (GNC AU) cut to neutral at Credit Suisse.
- South32 (S32 AU): Colombia nickel union says workers at Cerro Matoso complex will vote for a strike.
Source: Bloomberg / CIMB
– Edited by Robert Ryan
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