Video

#SaxoStrats
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 / 26 March 2018 at 1:37 GMT

Morning Report APAC: Stocks tumble on heightened trade war jitters

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Trump's tariffs weighed heavily on Wall St at the end of last week
  • Steven Mnuchin is optimistic about reaching deal with China on trade
  • The S&P500 ended down 5.9% for the week, its biggest drop in more than two years
  • Oil surged, on the possibility that the US will abandon its deal with Iran
  • Precious metals were higher, led by gold on the back of safe haven buying
  • Base metals were generally weaker on heightened US/China trade friction
By Saxo APAC Sales Trading


Economic data of the day (Singapore Time)
nnn

 











Speeches (Singapore Time)

  • 2100 – EC: European Central Bank's chief supervisor Daniele Nouy speaks in Brussels.
  • 0030, on Tuesday – US: New York Fed President William Dudley speaks on the future of Financial Regulation.
  • 0430, on Tuesday – US: Cleveland Fed president Loretta Mester speaks on Monetary policy.
  • 0710, on Tuesday – US: Federal Reserve vice chairman Randal Quarles to speak in Atlanta.

Overnight news, trade friction

  • The US tariffs implemented by Trump last week drove the S&P down 5.9% for the week, its biggest drop in more than two years. Gold rallied on a big risk off night 1.7% and US yields were just slightly lower. Trump put levies on at least $50 bn in Chinese imports. Now the trade office has 15 days to come up with a list of products that will face higher tariffs. He also instructed Treasury Secretary Steven Mnuchin to propose new investment restrictions on Chinese companies within 60 days to safeguard technologies the U.S. views as strategic. As he signed the order, Trump told reporters, "This is the first of many."
  • U.S. Treasury Secretary Steven Mnuchin said he’s optimistic that the U.S. can reach a agreement with China that will forestall the need to impose the tariffs that President Donald Trump has ordered on a least $50 bn of goods from that country. “We’re having very productive conversations with them,” Mnuchin said on “Fox News Sunday,” when discussing talks with China. “I’m cautiously hopeful we reach an agreement.”
  • China's Vice Premier Han Zheng appealed for cooperation to make economic globalization "beneficial for all." "A trade war serves the interests of none," Han said at the China Development Forum. "It will only lead to serious consequences and negative impact."
  • The U.S. and South Korea reached an agreement on revising the allies’ six-year-old bilateral trade deal and President Donald Trump’s plan to impose tariffs on imported steel, Treasury Secretary Steven Mnuchin said.

 

Foreign exchange

nnn
 
















  • USD sold off slightly during the equity rout on Friday but it was a rather mild move. USDJPY remains below ¥105 with some selling pressure in crossJPY. TRYJPY is on a very strong downward pressure. We broke the downward channel and accelerated the move lower at 26.49.
  • AUDJPY is get close to the long term support at ¥80.00. NZDJPY will enter in a big consolidation phase around ¥75.
  • Emerging Markets: Surprisingly, USD/emerging markets didn’t react much on the equity selloff and it seems the market is ready to sell USD again. We should see some relief today that we will allow to resume the move lower in USDKRW, USDBRL. USDCNH remains well offered in the whole curve, with 1 year points move below 1000. These level have not been seen since 2014.


Foreign exchange movements

nnn













  • USDJPY and CrossJPY are supported but not really flying, probably because the overall positioning is mild. There are $3bn of expiries today and tomorrow in USDJPY.


Rates


nnn










 
  • US yield curve bull steepened with 2 year yield given up some points amid buying on the back of trade war fears. However, expect $300 bn of treasury issuance to put pressure on treasuries this week.
  • Core European bonds were little changed while peripheral outperformed, led by Spain as S&P has upgraded its sovereign rating from BBB+ to A-, and maintain a positive outlook.

Commodities


nnn
 
































 

 


Equities

nnn

 















US equities

  • The Dow Jones (-424 points) and the S&P 500 (- 55 points) both retreated, as stocks struggled to shake off fears of a global trade war after the US moved to slap tariffs on China and as technology stocks took another hit with Micron's results weighing on chipmakers, though oil prices gave some succour.
  • Once again, giant chip-maker, Micron Technology (MU) hit the market, shares were down nearly 8% back to $54.21. Micron hit a 17-year-plus high of $63.42 on March 13. One thing we don't know is how Micron's per-bit costs for NAND changed during the second quarter. The company stopped disclosing that key metric in its first quarter report, so investors were left in the dark. These issues led at least one analyst, Citi, to downgrade Micron from buy to neutral, concerned that the NAND market could be "rolling over."
  • Amazon's (AMZN) massive market cap puts the spotlight on investors' high expectations for the e-commerce and cloud-computing company. Consider the enormous difference in Amazon and Alphabet's valuation metrics. Amazon currently trades at 327 times earnings and 112 times free cash flow. Meanwhile, Alphabet has price-to-earnings and price-to-free cash flow ratios of 32 and 21 respectively. AMZN’s shares closed at $1495.56.
  • Auto maker Tesla (TSLA) fell 2.45% to 301.54, partially due to their incompetence in making and delivering the Model 3, plus falling demand for the Model S and X, partially due to the extreme valuation, and also due to their horrendous finances that will imminently require a huge capital raise. Psychological level will be drawn to the big $300.

European equities

  • European stock markets closed sharply lower on Friday, as heightened fears of a trade war shook global markets.The FTSE fell 30 points and Germany's Dax closed down 213 points.
  • The specialty pharmaceutical company Indivior tanked 21% shortly after the opening bell after a U.S. court ruled in favor of a competitor. However, the maker of opioid addiction treatment Suboxone Film quickly recovered most of its losses after the group said it would fight the ruling. Shares of Indivior were 6.2% lower to GBp 382.80.
  • GlaxoSmithKline (GSK) was trading higher after it pulled out of the bidding for Pfizer's consumer health business. The company followed hot on the heels of Reckitt Benckiser, which withdrew its interest earlier in the week. Shares of GlaxoSmithKline were up almost 3.3% on the news, last traded at GBp 1,315.60.

Hong Kong equities

  • The Hang Seng Index (HSI) opened down 1,140 points but the decline gradually narrowed. At close, the benchmark index closed down 761 points or 2.5% at 30,309. Attention was all on Tencent (700.HK) as substantial shareholder – Naspers dumped 2% stake on Friday which tracked 19 billion shares at HKD 405.00 (7.8% discount), share closed below its 100 day moving average ($422.54), last printed $420.00, down 19.40 points, or 4.4%.
  • In corporate news, Petrochina (857.HK), said at the press conference that the company will keep on expanding unconventional gas development, with production targets of tight gas. Company also said that the group's dividend payout reached 104% last year, and that the company will maintain flexible dividend policy in future in accordance with cash flow and operation condition etc. after balancing shareholders' return and long-term development needs of the company. Is share price was down 0.16 points to $5.37.
  • Exports mirrored the same pattern due to China-US trade wars worries. Li & Fung (494.HK) plummeted 10.2% on the turnaround into annual loss, share price closed at $3.87. Additionally, Techtronic Ind (669.HK) and Man Wah (1999.HK) respectively shrank 5.2% and 4.2%.


nnn


 A trade war with the US would pose a threat to prosperity in China, where reforms and export success have helped lifted many millions out of poverty. Photo: Shutterstock

 
– Edited by Robert Ryan


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

All material contained herein is provided for your general information. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets Pte. Ltd. (“SCM SG”). Any expression of opinion (which may be subject to change without notice) is personal to the presenter and/or author; they do not reflect the view or opinion of SCM SG or its affiliates, neither do they constitute an endorsement of SCM SG’s view or analysis of the same.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. SCM SG does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment based on any commentaries or information provided here.
For further information, please click here.  


Saxo Capital Markets Pte Ltd ("Saxo Capital Markets") is a licensed subsidiary of Saxo Bank A/S, an online trading and investment specialist. Saxo Capital Markets serves as the APAC headquarters and holds a capital markets services licence under the Monetary Authority of Singapore; and a commodity broker licence issued by the International Enterprise Singapore. Clients can trade Forex, CFDs, Stocks, Futures, Options and other derivatives via SaxoWebTrader and SaxoTrader, the leading multi-asset online trading platforms.
Trading risks are magnified by leverage - losses can exceed your deposits. Trade only after you have acknowledged and accepted the risks. You should carefully consider whether trading in leveraged products is appropriate for you based on your financial circumstances. Please consider our Risk Warning and General Business Terms before trading with us. Please see full General Disclaimer.

Thousands of serious traders receive free news and analysis from Saxo Capital Markets each day. Saxo Capital Markets never sends these emails unsolicited; they are sent following acceptance of your membership and subscription request by Saxo Capital Markets at saxomarkets.com.sg. If you do not wish to receive any emails from Saxo Capital Markets in the future, please reply to this email with the word "UNSUBSCRIBE" in the subject header.

Copyright | Disclaimer | Risk Warning | Privacy Policy | Contact Us
Samsung Hub | 3 Church Street | # 30-01 | Singapore 049483
Company No. 200601141M

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.com permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Tradingfloor.com and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Tradingfloor.com is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Tradingfloor.com or as a result of the use of the Tradingfloor.com. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail