Article / 08 August 2016 at 1:40 GMT

Morning Report APAC: Strong NFP report boosts USD and equities

APAC Sales Trading Desk / Saxo Capital Markets


  • The US nonfarm payroll number beat expectations, posting 255,000 
  • Following the report, the USD rallied broadly, with DXY up 0.57%
  • USDCAD was the main mover, it was higher following poor employment data
  • The S&P 500 and Nasdaq closed at fresh record highs on Friday 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT+8)

Overnight news

United States

  • Nonfarm payrolls rose a seasonally adjusted 255,000 (Mkt est: 180,000) following upward revisions to both June (292,000 vs. 287,000) and May (24,000 vs. 13,000). Job gains were broad-based. Professional and business services, healthcare, finance, food services, construction, manufacturing and government all added jobs. Professional and business services, a high wage sector, alone added 70,000 jobs, the most since October. The mining sector continued to shrink.
  • The unemployment rate remained at 4.9% (Mkt est: 4.8%). The labour-force participation rate edged up to 62.8% from 62.7%. The broader "U-6" measure of unemployment and underemployment, including Americans who are working part time because they can’t find full-time jobs, tickled up to 9.7% from 9.6%. Wages for private-sector workers matched their strongest annualised pace of growth in seven years. Average hourly earnings for private-sector workers rose $0.08 cents, or 0.3% MoM (Mkt est: up 0.2%), to $25.69. YoY average hourly earnings jumped 2.6% (Mkt est: up 2.6%). The average workweek last month edged up 0.1 hour to 34.5 hours, the most since January.
  • The US trade deficit jumped 8.7% MoM to a seasonally adjusted $44.5bln (Mkt est: deficit-$43.2bln), the widest in 10 months. Imports rose 1.9% while exports crept up 0.3%. Exports expanded on the back of higher sales abroad for food, consumer goods such as antiques and artwork, and capital goods such as civilian aircraft. Imports grew due largely to higher oil prices, but also due to increased purchases of consumer goods like pharmaceuticals and cellphones. Capital goods purchases also increased. 


  • The reserves edged down $4.1bln to $3.2tln as expected last month. The reserves are stable around $3.2tln since January this year suggesting that capital-outflow pressures have eased. 


  • Thai voters approved a new constitution backed by the junta, in the first ballot since Prime Minister Prayuth Chan-Ocha took power in a 2014 coup. Some critics warn that the charter, which boosts the military’s influence over future elected governments, will ultimately create political turmoil.

Foreign exchange



The USD rallied broadly following the strong nonfarm payroll report, DXY rallied 0.57%.

USDCAD was the main mover higher following poor employment data (minus 31.2k vs up 10.0k). The 50d MA remains a good support at 1.2981 with the major resistance to break being at the 200d MA at 1.3315.

USDJPY bounced from the lows and 100 remains the strong support. We should see good selling interest at the short-term resistance of 102.80/102.90. IMM data show that the market has increased its long JPY positions since the fiscal stimulus was announced (to $5.1bln from $4.2bln)

Foreign exchange movements


Volatilities were market lower after the NFP numbers with no specific flows overnight.

A large trade though was printed in the broker’s market on Friday with a buyer of $1bln of USDJPY 103.50 in 2 months.


  • Bloomberg: Singapore seen at risk of cascading oil service bond defaults following the default of Swiber Holding. Oil-related firms face $S1.4 billion ($1 billion) of Singapore dollar bonds maturing through 2018, with $S325 million due by the year end. The pain is part of a broader global trend in which smaller, independent oil and gas companies have stumbled. US firms Halcon Resources and Atlas Resource Partners LP filed for bankruptcy at the end of July.
  • The nearest-term bond repayment among oil and gas-related firms that have outstanding Singapore dollar bonds is on Perisai Petroleum Teknologi Bhd’s $S125 million notes that mature in October. The Malaysia-listed offshore drilling and construction firm had 36 million Malaysia ringgit ($8.9 million) of cash and bank balances as of March 31, according to company results. The firm’s $S125 million 6.875% notes due 2016 were quoted at a bid of 75 cents.
  • Ezra Holdings, whose services for the oil industry include making wellhead platforms, had $1.2 billion of total group borrowings and debt securities as of May 31, according to its financial statements. The group had $43.6 million in cash and cash equivalents.
  • Ezra’s S$150 million 4.875% bonds due 2018 fell to about 70 cents on the dollar Friday, the lowest since at least November 2014, 
  • US Treasuries yield rose on July’s job report as it proved and beat expectations. However, the unemployment rate came in slightly below expectations as it missed estimates by 0.1% at 4.9%. The two-year note leapt 7.9 basis points to 0.722% and the 10 year bond yield spiked to 8.7bps to 1.589%. Expectations of a hike in September also rose to 26% following the strong labour data. Most sovereign bonds yield also rose on Friday.
  • We have the Reserve Bank of New Zealand cash rate decision on Thursday morning, at 0500. With the RBNZ’s August 11 rate cut close to a 100% probability of a 25bps cut, the market will be more concerned about the bank’s forward guidance on Thursday and how much the RBNZ is willing to cut to revive inflation. CPI data is a concern as the data last month missed the forecast by the RBNZ at 0.6% and the market’s 0.5% prediction. In its economic update last month, the recent strength of the NZD also makes it difficult for the bank to meet its inflation objective.
  • The Reserve Bank of Australia Governor, Glenn Stevens speaks Wednesday at 1105 and enters his final month as governor.







  • The S&P 500 and the Nasdaq Composite rallied to fresh record high closes Friday following the NFP report.
  • Merck & Co. surged 10.4% after rival Bristol-Myers Squibb's (down 16%) late-stage trial of a cancer treatment failed to meet its primary endpoint. Bristol-Myers said its drug, Opdivo, wasn’t significantly better than chemotherapy in a study of patients with newly diagnosed lung cancer. In contrast Merck’s immunotherapy, Keytruda, prolonged survival in a separate study of patients with newly diagnosed lung cancer, compared with chemotherapy. Merck hasn’t yet released the full results of that study.
  • Cloud computing company Rackspace Hosting (up 10.2%) soared following reports it is in talks with one or more private equity firms about a possible takeover deal that could be worth more as much as $4bln.
  • European stocks posted their best performance in three weeks Friday on the back of solid corporate earnings and the lingering tailwinds of the Bank of England’s increased stimulus initiatives.
  • German fashion house Hugo Boss soared 7.4% after it beat forecasts for Q2 operating profit.
  • Royal Bank of Scotland was spanked 7.2% after it reported a wider H1 loss on surging litigation provisions and more restructuring costs and abandoned plans to turn its Williams & Glyn unit into a standalone bank.

Asia-Pacific shares

Hong Kong analyst ratings 

- China Pacific Insurance Group (601601 CH) rated new buy at Haitong International

- China Vanke (000002 CH) raised to neutral at Macquarie

- Sino Land (83 HK) cut to hold at Daiwa Securities

- Wanda Cinema Line (002739 CH) cut to reduce at Nomura

Hong Kong preview

- Shui On (272) expects six-month net profit to drop significantly YoY

- Country Garden (2007) Jan-Jul contracted sales RMB149.4b

- Sunac (1918) Jul contracted sales at RMB9b, +70% YoY. Jan-Jul at RMB65.1b.

- Shimao PPTY (813) Jan-Jul contracted sales RMB39.6b, +11% YoY.

- Future Land (1030) Jan-Jul contracted sales RMB33.5b. The figure for Jul is RMB5.41b.

- Vanke (2202) said they had never told the media about Evergrande (3333) buying its A-shrs.

- Agile (3383) Jan-Jul contracted sales RMB32b. Jul pre-sales at RMB3.58b.

- Everbright Sec (601788 CH) offers 680m shrs in HK listing at HK$11.8-13.26 a piece.

- CH Everbright (165)’s unit bought 34.1m Jiabao shrs for RMB501.1m.

- CR Power (836) to set up coal-fired powerplant JV in Hebei. Investment amt at RMB3b.

- CR Cement (1313) Jan-Jun net profit -83.17% YoY at HK$258m. Sales -15.58% YoY at HK$11.3b. Intertim div HK$0.015.

- Allied Cement (1312) expects Jan-Jun loss, vs profit last yr due to cement price drop.

- BAIC Motor (1958) Jan-Jul sold 992,171 vehicles, +16.33% YoY. Jul sold 29,078 vehicles.

- Guangzhou Auto (2238) Jan-Jul sold 863,038 vehicles, +29.7% YoY.

- Fosun (2196) announced to jointly set up brain specialist hospital with inv of RMB219m.

- Alibaba (BABA) said they didn’t prepare to invest in media website Netflix.

- Orient Sec (8001) Jul unconsolidated NI at RMB130.9m. Unconsolidated sales at RMB280.4m.

- New Universe (436) Jan-Jun net profit HK$42.5m, +6.7% YoY.

- Parkson Group (3368) issued profit warning, expecting 6-mth net loss to widen

- Wanda Cinema (002739 CH) Jan-July box-office rev. +31% YoY


Japan analyst ratings 

- Gurunavi (2440 JP): Cut to neutral at Okasan

- (2371 JP): cut to underperform at SMBC Nikko

- Meiji Holdings (2269 JP): Raised to outperform at Iwai Cosmo

- Tokyo Ohka Kogyo (4186 JP): Raised to outperform from neutral at Iwai Cosmo


Australia analyst ratings

- Ramsay Health Care (RHC AU) cut to neutral vs outperform at Credit Suisse

- Sonic Healthcare (SHL AU) cut to underperform vs neutral at Credit Suisse

- Ansell (ANN AU) raised to buy vs neutral at UBS

Australia preview

- Bendigo & Adelaide Bank (WLD AU) Full-year profit, est. $A415.6mln

- Fortescue Metals (FMG AU): MMK may sell remaining stake in company by end of Q3, MMK CFO says

Source: CIMB / Bloomberg


 On the move ... a strong US nonfarm payroll number fuelled a rise in equities
and the US dollar. Photo: iStock

– Edited by Gayle Bryant

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