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


  • 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)


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


  • 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


  • 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.



  • 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.








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%.


 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

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