Morning Report APAC: Shares gain on Japan, Europe stimulus hopes
- Asian stocks rose to a three-month high after positive US earnings surprises
- The USD strengthened across the board overnight - except versus GBP
- USDJPY continued to trend higher, with US yields on a tear higher
- JPY and New Zealand’s dollar slid to six-week lows in early Asian trade
- Japan reportedly considering a 20 trillion yen ($187 billion) stimulus program
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time: GMT + 8)
- 0645 NZ Net Migration SA
- 0930 AU NAB Business Confidence
- 1100 NZ Credit Card Spending
- 1230 JN All Industry Activity Index
- 1400 JN Machine Tool Orders
- 1445 FR Business Survey Overall Demand
- 1445 FR Business Confidence
- 1445 FR Manufacturing Confidence
- 1445 FR Production Outlook Indicator
- 1445 FR Own-Company Production Outlook
- 1630 UK Retail Sales Ex Auto Fuel MoM Jun
- 1630 UK Retail Sales Ex Auto Fuel YoY Jun
- 1630 UK Retail Sales Inc Auto Fuel MoM Jun
- 1630 UK Retail Sales Inc Auto Fuel YoY Jun
- 1630 UK Public Finances (PSNCR) Jun
- 1630 UK Public Sector Net Borrowing Jun
- 1630 UK PSNB ex Banking Groups Jun
- 1945 EU ECB Main Refinancing Rate
- 1945 EU ECB Deposit Facility Rate
- 1945 EU ECB Marginal Lending Facility
- 1945 EU ECB Asset Purchase Target
- 2030 US Chicago Fed Nat Activity Index Jun
- 2030 US Initial Jobless Claims
- 2030 US Continuing Claims
- 2030 US Philadelphia Fed Business Outlook
- 2030 US FHFA House Price Index MoM May
- 2030 US Bloomberg Economic Expectations
- 2030 US Bloomberg Consumer Comfort
- 2200 US Existing Home Sales Jun
- 2200 US Leading Index Jun
- 1125: GBP – Bank of England governor Mark Carney, China’s Li, IMF’s Lagarde speaking in Beijing
- NZ: It's crunch time. In this morning’s economic update the Reserve Bank of New Zealand indicated that further easing will likely be required. While we expect the RBNZ will ease at the August meeting, the statement was not as dovish as it could have been. The statement tied the OCR outlook more explicitly to the NZD, noting: “The high exchange rate is adding further pressure to the dairy and manufacturing sectors and, together with weak global inflation, is holding down tradeable goods inflation. This makes it difficult for the Bank to meet its inflation objective. A decline in the exchange rate is needed.”
- UK: The BoE’s July Agents’ Summary of Business Conditions noted watchfulness on the part of firms post Brexit. It noted: “A majority of firms spoken with did not expect a near-term impact from the result on their investment or staff hiring plans. But around a third of contacts thought there would be some negative impact on those plans over the next twelve months. As yet, there was no clear evidence of a sharp general slowing in activity”.
Latest gains have followed comments from Bank of England member Kristin Forbes that the BoE needs to see more evidence of Brexit’s negative impact to cut rates. Forbes says this is not a ‘Lehman moment”.
USDJPY continued to trend higher, with US yields on a tear higher. This grind higher in USDJPY could continue into the Bank of Japan and the 106.85/107.32 region on a weekly closing basis has meaning.
Also note Kyodo headlines making the rounds – claims that the Japanese government is eyeing a JPY20tn stimulus package. That’s double what some market participants had been expecting.
EURUSD showed resilience at 1.1000, and this did not go unnoticed. Flows may help to explain this recent price action but looking forward to Thursday’s European Central Bank meeting, downside risks remain.
The NZD can’t wait until the RBNZ’s assessment. AUDNZD has not budged and on the Reserve Bank of New Zealand's report, short-term risk is likely most concentrated in cross’s downside should it read hawkish.
USDTRY reached a record high of 3.0973 following the S&P’s decision to downgrade it from BB+/stable to BB/negative and announcement of a new 3m state of emergency.
There was no spillover in G10 like recent days but developments from here remain firmly on investors’ radar. Key now: further rating agency decisions and what else President Erdogan’s government decides to do.
Foreign exchange movements
US Treasury prices declined, pushing yields higher, in a day marked by an increased appetite for risky assets. The yield on the 10-year note rose to 1.582%, but is still down nearly 0.7 percentage points this year.
The European Central Bank is also expected to leave its policy unchanged during its first rate setting meeting since Brexit today, but many market participants are anticipating hints of fresh stimulus.
The Nasdaq rose 53.56 points, or 1.1%, to 5,089.93. The Dow had since rose for a ninth day and posted its seventh consecutive all-time record high close.
In Europe, the FTSE 100 added 31.62 points, or 0.5%, to 6,728.99 and In Frankfurt the Dax jumped 160.77 points, or 1.6%, to 10,142.01.
Morgan Stanley's earnings fell but still beats estimates. Profits fell 14% in the second quarter, the bank said Wednesday, reflecting difficulties investment banks have had due to market volatility before and after Britain's vote last month to leave the European Union. Morgan Stanley closed 2.1% higher to 28.78.
German business software maker SAP spiked 5.7% after it posted a 73% surge in Q2 net profit, as it was boosted by lower restructuring costs and growth in its cloud-services business.
HSBC rallied 1.7% despite news that Mark Johnson, HSBC’s global head of foreign-exchange cash trading, was arrested at JFK Airport and charged with front-running a customer order.Asia Pacific Stocks.
Asia Pacific equities
- Citic Securities (600030 CH) rated new ’buy’ at Haitong
- Cosmo Lady (2298 HK) cut to ’neutral’ at Haitong
- Guangzhou Auto (2238 HK) cut to ’sell’ at Daiwa Securities
- New World Dev (17 HK) Raised to ’outperform’ at Credit Suisse
- Ajisen China (538 HK) expects 1H profit to rise by at least HK$500m
- Avic Real Estate (000043 CH) plans asset sale to China PolyGroup Citic Bank (601998 CH) investment chief can’t be contacted:
- Citic Securities (600030 CH): Rated new buy at Haitong
- HKEX (388 HK) to wait before making London-HK connect plans after Brexit
- HSBC (5 HK) bankers are first individuals charged in currency probe
- ICBC (601398 CH) executive director Wang resigns due to job change
- Midea (000333 CH) has 86% of robot-maker in $4.4 billion bid
- Muyuan Foodstuff (002417 CH): 1H net 1.07b yuan vs 46.8m yuan
- L’Occitane (973 HK) bought back 1.5m shares for HK$23.2m Wednesday
- Sundart Holdings (1568 HK) to raise HK$800.3m from top-up placement
- 361 Degrees (1361 HK) 2Q core brand same-store sales growth 7%
- ZTE (000063 CH) banks on basketball as it shoots for No.3 in American phones
- Itochu (8001 JP): Raised to neutral at Macquarie
- Kyocera (6971 JP): Cut to reduce at BNP Paribas
- 3pm: Nissin Electric (6641 JP)
- 3pm: CyberAgent (4751 JP)
- 3:30pm: Chugai Pharmaceutical (4519 JP)
Equities information source: Bloomberg
– Edited by Adam Courtenay
This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter
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