Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 03 February 2017 at 2:13 GMT

Morning Report APAC: Stock jitters after Trump call with Australian PM

APAC Sales Trading Desk / Saxo Capital Markets

  • Donald Trump has a contentious phone call with Australian PM Malcolm Turnbull
  • US president tweets that Obama deal with Australia on refugees is 'dumb deal'
  • US stocks close lower amid concerns about Trump’s approach to foreign affairs
  • Bank of England leaves rates unchanged but pre-Brexit rise not ruled out
  • GBP drops 1% following more dovish than expected BoE
  • AUD rallies 1% on the back of a strong trade balance


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



2045 – EC: European Central Bank's Vitor Constâncio speaks in Brussels

2215 – US: US Federal Reserve's Charles Evans speaks on economy and policy in Olympia Fields

Overnight news

US: Non-farm productivity grew 1.3% from 3.5% (exp. 1.0%). Productivity has grown at an annual rate of less than 1% in each of the last six years. Output per worker rose at 2.2%. Unit labour costs jumped 1.7% (mkt est: +1.9%) from a downwardly revised +0.2% in the third quarter (prev: +0.7%). For the year unit labour costs rose 2.6%. Hourly compensation per hour rose at a 3% rate, healthy but still slower than the 3.7% increase of Q3. Inflation-adjusted hourly compensation declined at a 0.4% pace, a reversal of the 2.1% advance in Q3. 

Donald Trump has had some contentious conversations, the latest one being with the Australian prime minister, Malcolm Turnbull, about a US-Australia deal on refugees. 

“I love Australia as a country but I have a problem where for whatever reason President Obama said they were going to take probably well over 1,000 illegal immigrants who were in prisons. 1,250, could be 2000, could be more than that, and I said 'Why? Why are we doing this?',” Trump said later of the conversation.

On Thursday, the president took to Twitter to slam the Obama administration for agreeing to take on the refugees in the first place. “Do you believe it? The Obama administration agreed to take thousands of illegal immigrants from Australia. Why? I will study this dumb deal!,” he wrote. 
UK: The Bank of England said that while inflation will breach its 2% price goal as early as this month, the economy has more slack than previously thought. 

After leaving policy unchanged, Mark Carney didn’t rule out raising rates before negotiations to leave the European Union begin, though he emphasised that the process of disentangling was only starting and that consumer spending and investment are likely to decrease as the process gets underway. 

The BoE now sees growth of 2% this year, up from 1.4% in November. That’s set to slow to 1.6% in 2018 and 1.7% the following year, slightly faster than forecast in November.


Foreign exchange



USD was mixed yesterday. The main mover was GBP, dropping 1% following a more dovish than expected BoE. GBP remains above support at the 100-day moving average (1.2467) and should find buying interest there .

AUD rallied 1% yesterday on the back of a strong trade balance (AUD 3.5bn vs exp. 2bn). AUD broke year highs and closed above resistance at 0.7600. This move helped AUDNZD move out of the support zone at 1.0400 to reach the 200-day MA.

Foreign exchange movements



There is still interest in USD puts from the macro funds. The next risk coming will be Janet Yellen's speech in front of the Senate on February 14 and 15.



European bonds rallied following good auction demand in Spain and France. 

Gilts rallied following the more dovish than expected BoE. 

In the corporate bond space, Apple is going to the bond market, becoming the second cash-rich tech company to sell debt this week despite prospects of a US repatriation-tax holiday. The iPhone maker may sell debt in up to nine parts in six different maturities up to 30 years. Microsoft sold $17bn in bonds on Monday.  








Overall, US stocks closed lower after bouncing around as concerns about President Donald Trump’s approach on foreign affairs, amid spats with key allies and trade partners, cast a pall over the market.

Facebook Inc. retreated 1.8% after opening above $133 after posting stronger-than-expected fourth-quarter earnings, and advertising revenue soared 53% year-over-year. 

Philip Morris International Inc. gained 3% to beat expectations as revenue rose 9.1% in the latest quarter, helped by a big boost from the Asia-Pacific region. 

European stocks slipped, with Deutsche Bank AG leading the slide, down 5.2% (their worst session in fourth months) after posting a worse-than-expected fourth-quarter net loss of €1.9bn ($2.05bn) after taking €1.6bn in litigation charges. 

Reckitt Benckiser rose 4.1%. The maker of Lysol and Vanish has confirmed it’s in talks to buy babyfood maker Mead Johnson Nutrition Co. (up 21.41%) in a deal worth $16.7bn. 

Royal Dutch Shell PLC was up 1.6%, as fourth-quarter cash flow from operations jumped nearly 70% to $9.2bn, which appears to be enough to cover Shell’s cash dividend payments for the period. Fourth-quarter and annual profit at Shell dropped.

Asia-Pacific stocks

Hong Kong

Analyst Ratings:

  •  China equities cut to neutral at Nomura 
  •  Jiangxi Copper (358 HK): Raised to buy at Argonaut Securities 
  •  PetroChina (857 HK) cut to underperform at Macquarie 
  •  Sinopec (386 HK) cut to neutral at Macquarie 


  •  Alibaba (BABA US): Swatch in talks with co. for Olympics e-commerce deal 
  •  China Environmental Technology (1237 HK): Expects net loss for 2016 
  •  Country Garden (2007 HK): Bought back HK$4.21m shares on Feb. 2 
  •  Guosen Securities (002736 CH): 2016 net income 4.56bn yuan 
  •  Imperial Pacific (1076 HK): Jan. temporary casino VIP games rolling $5.59bn 
  •  JAC (600418 CH): To produce cars in Mexico: Xinhua 
  •  South China Holdings (413 HK): Co. seeks HK$800m loan 
  •  Toutiao said to buy Flipagram for less than $50m: Bus. News 
  •  UTour Group (002707 CH): Terminates plan to buy Beijing Huayuan 
  •  Xinwei: Said in talks to buy UK’s Doncasters: Sky 
  •  Yingde Gases (2168 HK): Directors Sun, Strutt to set up independent website


Analyst Ratings:

  •  Japan Petroleum Exploration (1662): Downgraded to neutral from outperform at Macquarie 
  •  Japan Real Estate Investment (8952): Downgraded to underperform from hold at Jefferies 
  •  Konami Holdings (9766): Raised to outperform from neutral plus at Mito Securities; PT at 6,000 yen 
  • (2371): Downgraded to underweight from neutral at Cantor Fitzgerald 
  •  Sohgo Security (2331): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley 
  •  Tokai Rika (6995): Downgraded to neutral from buy at Ichiyoshi Research 


  •  ABC-Mart (2670): Jan. same-store down 1% 
  •  Daicel (4202): 9-month operating profit down 2.6% to 48.1bn yen 
  •  Fast Retailing (9983): Jan. domestic Uniqlo same-store sales down 2.5% y/y 
  •  Fujimi (5384): Lifts full-year net profit forecast 18% to 3.3bn yen 
  •  Kagome (2811): Forecasts 2017 operating profit up 5.1% to 11.5bn yen 
  •  Kao (4452): Full-year net income up 20% y/y to 126.6bn yen, beating co’s forecast for 120bn yen 
  •  KDDI (9433): Lifts full-year operating profit outlook to 910bn yen from 885bn yen 
  •  Kobe Steel (5406): Forecasts net loss of 40bn yen on China venture loss; slashes full-year operating profit forecast 89% to 5bn yen 
  •  Line Corp. (3938): Launching paid chat for businesses, competing with services such as Slack and HipChat; SoftBank to begin selling Line Works from April 
  •  Mazda Motor (7261): Cuts full-year operating profit outlook to 130bn yen from 150bn yen; hopes Abe-Trump meeting will improve trade environment 
  •  Murata (6981): Samsung to use co’s batteries in Galaxy S8 phones, Korea Economic Daily reports 
  •  Nihon Kohden (6849): Cut to underperform from neutral at Daiwa 
  •  Olympus (7733): Raises full-year operating profit outlook to 76bn yen from 72bn yen 
  •  Omron (6645): Raised to outperform from neutral plus at Iwai Cosmo Securities; PT 5,700 yen 
  •  Ono Pharma (4528): Opdivo gets FDA accelerated approval in bladder cancer 
  •  Panasonic (6752): Lifts full-year operating profit forecast 8.2% to 265bn yen; US unit Avionics being investigated by US Department of Justice and SEC 
  •  Rohm (6963): Lifts full-year operating profit outlook to 29bn yen from 24bn yen 
  •  Sony (6758): Cuts full-year net profit outlook to 26bn yen from 60bn yen in second reduction 
  •  Sumitomo Electric Industries (5802): Raises full-year operating profit forecast 8% to 135bn yen 
  •  Yamada Denki (9831): 9-month operating profit up 8.9% to 46.9bn yen


'I love Australia as a country,' said Trump, after a contentious phone conversation with the country's prime minister, Malcolm Turnbull. Photo: Shutterstock


– Edited by Susan McDonald

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