Article / 26 February 2018 at 2:06 GMT

Morning Report APAC: Stocks rise across the region

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian equities rose following on from strong postings from US stocks
  • Trump’s steel tariffs are also in focus, with US Steel surging 
  • Stocks advancing this morning in Japan, Australia and South Korea 
  • The S&P rallied 1.6% on Friday on the lowest volume of the year

 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
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Speeches

  • 1800: EC – ECB’s Coeure speaks in Frankfurt 
  • 2100: US – Fed’s Bullard speaks on economy and monetary policy 
  • 2200: EC – ECB president Draghi speaks in Brussels 
  • 0200: UK – BOE’s Cunliffe speaks at event at Warwick University 
  • 0415: US – Fed’s Quarles gives assessment of US economy 


Overnight news

 XI Jinping staying longer:  It was more or less expected, China's Communist Party proposed repealing the presidential term limits enshrined in the country's constitution. His second mandate was supposed to finish in 2023, now, it will be as long as necessary to put in place all the reforms such as deleveraging and financial instability. 

US tariffs: Trump favours a 24% tariff on steel imports and he is also considering as much as 10% tariff on aluminium imports. These tariffs could spark retaliation from countries like Canada, Australia and China. 

For info, exports from China to the US reached 1.18 million tonnes last year. China produces a total of 800 million tonnes of steel each year, equal to about half of global output. 

Equities rise: The S&P rallied 1.6% on Friday on the lowest volume of the year, erasing the loss of the week. The 10 year yield dropped to 2.87% tightening the spread 2s-10s by 4.3 basis points. 









Foreign exchange

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Very light moves in the forex space on Friday with most currencies fairly unchanged except USDCAD lower 0.6% helped by Oil and Commodities. 

Emerging Markets: USD was offered against most EM. USDBRL dropped despite Fitch’s move to cut Brazil’s rating and Ibovespa is rising to a record. 

USDMXN is back at the strong support of 18.50. Expectations of a rate hike in April are increasing to 56% .

Foreign exchange movements

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Not much interest overall in the volatility space. The positioning in USDJPY is very balanced.
NAFTA talks are creating some bidding interest in USDCAD volatility but nothing extraordinary .
 
Rates

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Bunds surged on Friday as month-end extension flows is supporting the price, peripherals underperformed with spread widened on uncertainties surrounding Italy election.

US treasuries bull flattened as Fed’s monetary policy report didn’t surprise the market but maintained the tone of gradual hikes amid a tight labour market.

Commodities  

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Equities
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US: Dow (+347 points) and S&P 500 (+ 43 points) closed higher with gains in technology stocks helping claw back some of the week's losses and a pullback in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year. 

Shares of Hewlett Packard Enterprise (HPE) and HP Inc (HPQ), the two companies created from the split of Hewlett Packard Co in 2015, were among the biggest gainers in the tech sector following their strong results. 

HPE also announced a plan to return $7 billion to shareholders. Both HPE and HPQ rose 10.5% to 18.14 and 3.4% to 22.13, respectively. 

Consumer goods provider General Mills (GIS) announced it will be acquiring Blue Buffalo Pet Products (BUFF) in an $8 billion cash deal, causing Blue Buffalo shares to surge 17.2% and General Mills stock to slump 3.6%. Blue Buffalo also announced fourth-quarter sales were up 14.2% and adjusted earnings per share increased 51.4%, with both figures coming in above analysts' expectations.

Europe: European stocks closed slightly higher, with retail and automotive in red as investors reacted to earnings and waited for a report from the Federal Reserve. UK FTSE 100 (-7 points) and CAC (+8 points) while DAX closed off lower (-21 points). 

On earnings, RBS closed 4.9% lower to GBP 268.40 despite posting its first full-year profit in a decade. The state-owned lender reported a loss in its fourth-quarter of 583 million pounds ($812.5 million). 

UK-based global investment company, Aberdeen Standard Life's (SLA) shares swung, finishing the day roughly 2.5% lower closed at 376.10. 

The insurer's stock had been trading higher earlier in the day on the announcement of the sale of its insurance business for £3 billion ($4.18 billion) to Phoenix Group. 

Hong Kong: Hang Seng Index (HSI) once rallied to 420 points to peak at 31,386, concluded 301 points higher, weighed by Chinese property. Country Garden (2007.HK) rallied 6.2% and closed at 15.04, and became the best performer of blue chips. 

Other developers like China Overseas (688.HK) , China Res Land  (1109.HK) and China Vanke (02202.HK) jumped 1.8%-2.2% respectively with the positive industry sentiments.
 
Cement stocks rallied on Friday, as Bank of America Merrill Lynch reported that they were highly positive on cement industry outlook this year due to extremely low supply, considering the industry trend for 2017-19 will be similar to 2010-12. 

Conch Cement (914.HK) as industry top pick lasted traded at 42.50; BBMG (2009.HK) benefited from concept of Xiong'an New Area and Conch Venture (586.HK) core profit after tax may see growth above 50% this year.

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 Back in business: US equities markets showed significant gains on Friday. Photo: Shutterstock

 

– Edited by Adam Courtenay


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