Article / 06 September 2017 at 1:27 GMT

Morning Report APAC: Stocks retreat on Wall St lead, crude rebounds

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Gold extended its uptrend on Fed caution on hikes, safe haven demand
  • Copper faltered, with the red metal looking stretched in its upward trend
  • Hurricane Irma has driven up soft commodities like orange juice, sugar and cotton
  • US stocks ended firmly lower, with the S&P 500 snapping a winning streak

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
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Speeches (Singapore Time)

  •   1030 – Australia: RBA’s Alex Heath gives a speech in Tasmania.


Overnight news, US

  • US factory orders in July dropped by 3.3% m/m and final durable goods orders were down by 6.8%, however the underlying indicated moderate improvement ,with capital goods orders excluding aircraft up by 1.0% m/m.
  • The Fed's Lael Brainard admitted weak underlying inflation trends and the fact that the inflation is US has not met the Fed target for a number of years and advocate caution for raising interest rates. Kashkari stays dovish and carried the path Brainard has paved, saying premature rate hike could harm the economy.
  • Hurricane Irma is now a Category 5 storm and could make landfall in Florida. It has driven up soft commodities like orange juice, sugar and cotton.

Overnight news, North Korea

  • Consensus has not been reached among global leaders. Vladminir Putin said he wouldn’t back more sanctions. President Trump tweeted that he would allow “substantially” more American weapon sales to Japan and South Korea for defence. Pyongyang called US calls for more restrictions as coming from a “heinous aggressor”.
 

Foreign exchange

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  • DXY:  further low inflation is giving some Fed memberssecond thoughts about hiking rates further, combined with an international community that can't agree on sanctions against North Korea and you get US Treasury yields dropping 10 basis points, dragging USD lower with it. The big trend in the falling USD continued against most currencies overnight.
  • NZD was the biggest performer, also driven by AUDNZD following the RBA comments yesterday. The market is massively short NZD so we can have more stops coming from here .
  • GBP: that's the other currency to watch after breaking again 1.3000. EURGBP being the best currency pair to sell at these levels.
  • Emerging Markets: Funds were mainly focusing on the squeeze higher of USDCNH. After one month of lower fix and spot very close to to 6.5000, the market is ready to take some profit. USDKRW had noticeably Less flows with the market calming down below the 200 day moving average.


Foreign exchange movements

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  • Vols for all JPY crosses continued to squeeze higher with risk reversal bid on the downside with spot moving lower.
  • USDCAD vols are higher ahead of tonight’s Bank of Canada rate decision. Overnight vols indicates possible 1% move, with about 50/50 of rate hike.


Rates

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  • US Treasuries rallied on safety running amid three triggers: tensions in North Korea, divisions in Washington and Hurricane Irma approaching Florida. Fed speakers are also talking down the possibility of rate hike this year, bringing yields down as well.
  • European bonds closed higher generally, with Bunds first being dragged up by gilts rally heading into a 15 year plus buyback, and later supported by US treasuries on the back of safety demand.

Commodities 

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Equities
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  • US stocks ended firmly lower, with the S&P 500 snapping a six-day winning streak, on heightened tensions between the West and North Korea and worries about a lack of progress on President Donald Trump’s pro-growth agenda.
  • The worst performing sector was Financials, when represented by Financial Select Sector SPDR ETF, XLF, it closed off 2.1%, marking its steepest one-day slide since May 17, when it fell 3.2%, according to FactSet data.
  • United Technologies Corp. plunged 5.7% after the industrial conglomerate announced late Monday it had reached a deal to buy airplane-parts maker Rockwell Collins Inc (+0.30%)  for $23 billion, in the biggest aerospace deal in history.
  • U.S.-listed Cellectis SA tanked 20% after the FDA ordered the French cell therapy specialist to put a cancer-drug trial on hold.
  • Schneider Electric gained 0.3% after the French industrial group reached a deal to take control of British engineering software maker Aveva Group PLC(+26%).


Asian equities preview

Hong Kong analyst views

  • Anhui Conch (914 HK): Anhui Conch H Shares Raised to Equal-weight at Morgan Stanley.
  • Baoxin Auto (1293 HK): Baoxin Auto Upgraded to Buy at Goldman; PT Raised to $HK4.97.
  • Beijing Enterprises (392 HK): Beijing Enterprises Initiated at Bernstein with Market Perform.
  • China Gas (384 HK): China Gas Initiated at Bernstein with Market Perform; PT $HK21.
  • China Life (2628 HK): China Life H Shares Cut to Hold at Hua Tai Securities.
  • China Resources Gas (1193 HK): China Resources Gas New Market Perform at Bernstein, PT $HK29.50.
  • China Taiping (966 HK): China Taiping Cut to Hold at Hua Tai Securities; PT Cut to $HK25.
  • CP Pokphand (43 HK): CP Pokphand Cut to Underweight at JPMorgan, PT $HK0.60.
  • ENN Energy (2688 HK): ENN Energy Initiated at Bernstein with Outperform; PT $HK61.50.
  • Humanwell Healthcare (600079 CH): Humanwell Healthcare Cut to Neutral at Haitong Intl.
  • Kingdee Int’l (268 HK): Kingdee Int’l New Overweight at Citic Securities, PT $HK3.83.
  • Kunlun Energy (135 HK): Kunlun Energy Upgraded to Outperform at Bernstein; PT $HK9.
  • Li Ning (2331 HK): Li Ning Cut to Neutral at Haitong Intl; Price Target $HK6.20.
  • Ping An Insurance (2318 HK): Ping An Insurance H Shares Raised to Buy at Hua Tai Securities.
  • Towngas China (1083 HK): Towngas China Rated New Underperform at Bernstein; PT $HK4.30.

Hong Kong stocks

  • CCB (939 HK): China Construction Bank Says CBRC Approved Planned Domestic Preference Share Issue.
  • China Minsheng (600016 CH): China Minsheng $450mln3y FRN 3mL+90, $350mln 5y FRN 3mL+100.
  • Cnooc (883 HK): CNOOC Signs PSC With SK for Block 17/08 in South China Sea.
  • Cnooc (883 HK): Pemex Farmouts Draw Interest from 15 companies: El Economista.
  • Galaxy (27 HK): Some 300 Galaxy Casino Workers Protest for Better Benefits: TDM.
  • Great Wall Motor (2333 HK): Great Wall Motor Aug. Total Sales Volume Rises to 73,663 Units.
  • HSBC (5 HK): HSBC Bought Back 2.62mlnShares at Avg 740.69 Pence Each September 5.
  • Lenovo (992 HK): FTC: Lenovo Settles FTC Charges on Laptop Preinstalled Software.
  • Li & Fung (494 HK): Li & Fung Unit to Build GSK Toothpaste Factory in Indonesia.
  • Logan Property (3380 HK): Logan Property to Buy 20.4% of Logan Junjing for 2.02bn Yuan.
  • Kaisa Group (1638 HK): Kaisa Group Aug. Contract Sales Down 13.8% On Year to 2.4bn Yuan.
  • Sunlight REIT (435 HK): Sunlight Real Estate Full-Year Distribution Per Unit Rises 36% Y/y.
  • Longfor Properties (960 HK): Longfor Properties August Contract Sales 12.1B Yuan.
  • China Minsheng (1988 HK): China Minsheng $450mln 3Y FRN 3mL+90, $350mln 5Y FRN 3mL+100.
  • Sinopec (386 HK): EMERGING-MARKET BOND PIPELINE: ADB, Sinopec, GACM, MEXCAT, Egypt.
  • Union Medical Healthcare (2138 HK):Union Medical Healthcare to Buy Billion Energy for $HK113.8mln.
  • Wanda Film (002739 CH): Wanda Film Jan.-August Box Office Revenue Rises 12% on Year.

Japan analyst views

  • Comsys (1721): Upgraded to outperform from neutral at Daiwa.
  • Elecom (6750): Downgraded to neutral from outperform at Daiwa.
  • Hoya (7741): Cut to equalweight from overweight at Morgan Stanley MUFG.
  • KDDI (9433): Initiated at Jefferies with buy.
  • Komatsu (6301): Raised to outperform from neutral at Daiwa.
  • NTT Docomo (9437): Initiated at Jefferies with buy.
  • Yaoko (8279): Upgraded to outperform from neutral at Daiwa.

Japan stocks

  • Changes to Nikkei 300 constituents: Hakuhodo DY Holdings (2433) to replace Avex Group (7860).
  • ABC-Mart (2670): Aug. same-store sales +5.2% y/y.
  • Eisai (4523): Reports data that confirms effectiveness and tolerability of Zebinix.
  • Hiday Hidaka (7611): Aug. same-store sales +2.5% y/y.
  • Hosiden (6804): To sell ¥10bn of CBs outside Japan.
  • Japan Post (6178): To raise basic delivery fees for parcel packages by average 12% from March 1
  • Jins (3046): August same-store sales +2.5% y/y.
  • Mitsui Matsushima (1518): Says strike ongoing at mine in Australia, which it owns through venture with Glencore.
  • Nissan Motor (7201): China August vehicle sales +17.8% y/y.
  • Remixpoint (3825): Says China’s ban on initial coin offerings has no impact on its business; shares fell 11% on Tuesday.
Australasian stocks

  • AGL: Australia Government in Talks to Keep Liddell Plant Open: Malcolm Turnbull.
  • BRU: Buru Will Engage With Western Australia on Fracking Moratorium.
  • CSL: FDA Approves Seqirus Request to Supplement BLA for Flu Vaccine.
  • FSF NZ: Whole Milk Powder Average Price Falls to $3,100 a Ton.


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Crude prices have rebounded following the passing of Hurricane Harvey. Photo: Shutterstock

 
– Edited by Robert Ryan


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