Article / 06 October 2016 at 2:49 GMT

Morning Report APAC: Strong US data, USDJPY continues to rise

APAC Sales Trading Desk / Saxo Capital Markets


  • US ISM non-manufacturing composite hit highest level since October 2015 
  • ISM new orders showed biggest month-on-month jump since April 2009 
  • Strong US data pushed up the probability of a rate hike in December 
  • USDJPY continued to rise, up 0.6% overnight at 103.50
  • Oil price moved to nearly $50 a barrel for the first time since June 

By Saxo APAC Sales Trading

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



19:30: EUR – European Central Bank's account of the monetary policy meeting

22:50: EUR – ECB’s Ignazio Angeloni speaks in Amsterdam 

23:35: CAD – Bank of Canada’s Carolyn Wilkins speaks at University of Quebec 

Overnight news

US : ISM Non-Manufacturing Composite rose to 57.1 from 51.4 (exp. 53.0), the highest level since October 2015. Measures of employment and orders led the advance. 

The ISM new orders gauge climbed to 60 from 51.4 in August, showing the biggest month-on-month jump since April 2009 as demand rebounded from an almost three-year low. 

The trade balance widened to minus $40.7bn (exp. minus $39.2bn). Imports rose 1.2% and exports increased 0.8%. Of the $2.6bn overall increase in imports, $1.2bn came from charges for the use of intellectual property, reflecting payments to broadcast the 2016 Summer Olympic Games. Imports of crude oil, by volume, reached the highest level since January 2014. The export growth was underpinned by continued strong shipments of soybeans. Exports of capital goods were the lowest since September 2011. 

Factory orders unexpectedly increased during August by 0.2% (exp. -0.2%). Core capital goods, a key measure of business confidence and spending plans, rose 0.9%.  

Federal Reserve speech

Fed Vice Chairman Stanley Fischer said central banks worldwide are confronting historically low level of rates, which may leave economies more vulnerable to shocks, hurt financial stability, and reflect “deep-seated” problems. “We could be stuck in a new longer-run equilibrium” characterised by sluggish growth and repeated reliance on unconventional monetary policy, if forces behind shifts in savings/investment prove persistent.


Foreign exchange



USDJPY confirmed the break higher in the weekly and daily charts two days ago and continues to rise, up 0.6% overnight at 103.50. The first resistance will be the pre-non-farm payrolls number at 104.50.

GBPUSD continued to slide but we saw some profit-taking below 1.2700 as the market is slightly long gamma at this level. We should continue to see sellers on rallies in the 1.2850/1.2880 range.

NZDUSD broke the 0.7200 support and is now trading at the 100-day moving average, mainly on stops in AUDNZD. The main resistance in AUDNZD is at 1.0718, the 200-day MA.

In emerging markets, the currency to watch is USDSGD, trading now at the 200-day MA at 1.3706. A break of this level will bring the pair to May highs at 1.3830. USDMXN is consolidating just above the 19.0000 level.

Foreign exchange movement


The interbank market has been very active in EUR downside out to three months, probably paid by a large fund.

The market is long gamma at this level and we are now seeing some sellers in the interbank market.




Rates for the peripherals continue to rally and Spain's 10-year yield now trades above 1% following the sell-off in bunds and talks about ECB quantitative easing tapering. In any case, all analysts believe that the QE will go on after March 2017. 

While bunds are being sold off following a report that ECB is building tapering consensus, adding to this week’s supply pressures, contracts may find support from net negative issuance in the remainder of the month.

The strong data overnight in the US is putting pressure on Treasuries and the probability of a rate hike in December has increased to 62.1%. 







US stocks gained some ground to close higher as the oil price moved to nearly $50 a barrel for the first time since June and service sector PMI data was reported in US. The S&P 500 bounced 9.24 points to 2,159.73, with financials and energy leading the way.

Constellation Brands Inc. surged 1.7% after it reported adjusted second-quarter EPS of $1.77, better than market estimate of $1.65, as net sales spiked 17% amid strong beer sales. 

Japanese casualty insurer Sompo Holdings Inc. announced it would buy property and casualty insurance provider Endurance Specialty Holdings Ltd. for $6.3bn, with $93 a share indicating a premium of about 40% over Endurance’s three-month average share price. Endurance's price surged 4.4% in reaction to the news.

European stocks lost ground for the first day in seven as investors responded negatively to the mere possibility of ECB slowing the bonds purchase. The Stoxx 600 slipped 0.55% to 344.20. In London the FTSE 100 declined 0.6% to 7,033.25. 

Deutsche Bank rallied another 2.8% after Moody's issued a "stable outlook" on the German banking system, quoted solid operating conditions in Germany helping to balance the effect of the low-yield environment on the country's banks. 

Dutch insurer and asset manager NN Group rose 3.4% after it made an offer to buy local rival Delta Lloyd NV for €2.4bn. NN offered €5.30 a share for Delta Lloyd, a 29% premium to Delta Lloyd’s closing price Tuesday. In reaction to the offer, Delta Lloyd surged 28%. 

Tesco soared 9.8% after Britain's largest retailer reported a 60% spike in first-half profit and raised its margin target to between 3.5% and 4% by the end of FY’20, up from 2.18% previously.

Saxo round-up

Asia-Pacific stocks

Hong Kong

Analyst Ratings: 

  •  Bank of East Asia (23 HK), NWS (659 HK): Agree to sell Tricor to Permira’s Trivium for HK$6.5b 
  •  Kerry Properties (683 HK): Gets Beacon Hill site for HK$7.27b 
  •  Fosun Intl (656 HK): Said near buying 55% of Brazil Hospital for BRL1b: Valor 
  •  Melco (200 HK): Submits proposal for Cyprus casino with Hard Rock consortium 
  •  New World Development (17 HK): Sells Optimum Result unit 
  •  StanChart (2888 HK): Appoints CFO for Africa, Middle East 


  •  Kerry PPTY (683) won the bid for luxury residential land in Beacon Hill with HK$7.269bn, equivalent to ~HK$21,200psf. Market forecasts, after completion, selling px could hit above HK$40,000psf. 
  •  K Wah (173) says HK property market has been positive in the past few months and expects some regions may post a larger growth in price, such as Kai Tai. 
  •  New World Dev (17) sold its Optimum Result at a consideration of HK$285m. One of the main assets of Optimum Result is a property in Kowloon Bay. 
  •  Modern Land (1107) Sep contracted sales at RMB1.907bn, up 90.44% YoY. 
  •  Country Garden (2007) bought back 16.9m shares on Oct 5. 
  •  Fantasia (1777) 9mth sales RMB9.518bn, up 16.41% YoY. Gross floor area sold was 997,600 sqm. 
  •  Anhui Conch (914) short interest climbed to 14.5% of its outstanding shares on Oct 3, highest since Feb 2015 and highest among HK stocks. 
  •  Cosco Group and China Shipping said to merge 11 shipbuilding yards into a single entity (WSJ) 
  •  BEA (23) sold its Tricor to buyout firm Permira for HK$6.5bn, and expects to book HK$3.1bn profit vs its FY16 NP forecast of HK$3.9bn. 
  •  Dah Sing (2356) launched a club deposit saving plan with 1.3% p.a. interest rate, which is higher than demand deposit. 
  •  Shun Tak(242) said to sell 5 luxury houses in Stanley for HK$1.5bn 
  •  Rici Health (1526) debut today, grey market closed at HK$2.43, down 5% from listing price. 
  •  Honmagolf (6858) debut today, grey market closed at HK$10, same as listing price. 



Analyst Ratings: 

  •  Daikokutenbussan (2791 JP): Cut to neutral at Storm Research 
  • (2371 JP): Raised to hold at Cantor Fitzgerald 
  •  Nissan (7201 JP): Cut to neutral at UBS 
  •  Ryohin Keikaku (7452 JP): Raised to outperform at Macquarie 


  •  ABC-Mart (2670 JP): Q2 oper. profit down 9% to 9.68bn yen; trims full-year target 1.5% 
  •  Aeon (8267 JP): Q2 oper. profit up 6% to 39.5bn yen; boosts 1H dividend 1 yen/share to 15 yen; maintains forecasts 
  •  Aeon Delight (9787 JP): 1H oper. profit 8.51bn yen, in line with guidance 
  •  Aeon Fantasy (4343 JP): 1H oper. profit 1.69bn yen vs co. forecast 1.47bn yen 
  •  Askul (2678 JP): To buy back up to 1.9% of shares for 5bn yen 
  •  Ryohin Keikaku (7453 JP): 2Q oper. profit up 28% to 8.34bn yen; maintains forecasts; to spend up to 4.8bn yen on buyback 
  •  San-A (2659 JP): 1H oper. profit 8.08bn yen vs co. forecast 7.31bn yen 
  •  United Super Markets (3222 JP): 1H oper. profit 6.96bn yen vs co. forecast 7.2bn yen 
  •  Welcia Holdings (3141 JP): 1H oper. profit 11.6bn yen vs co. forecast 9.45bn yen 


Analyst Ratings: 

  •  Aristocrat Leisure (ALL AU) cut to sell vs hold at Morningstar 
  •  Bendigo & Adelaide (BEN AU) cut to hold vs buy at Morningstar 
  •  Vicinity Centres (VCX AU) raised to buy vs hold at Morningstar 
  •  Nine Entertainment (NEC AU) cut to neutral vs buy at UBS 


  •  Evolution Mining (EVN AU) Chairman Jake Klein speaks at Melbourne Mining Club, 12:30pm Melbourne 
  •  BHP Billiton (BHP AU) petroleum chief Steve Pastor says oil & gas markets improving more quickly than minerals 
  •  Arrium (ARI AU) to receive final bids on Australian unit in Dec. 
  •  Syrah Resources (SYR AU) aims to appoint new CEO this year

Source: CIMB / Bloomberg

 Oil prices jumped after US crude inventories posted their fifth weekly drop. Photo: iStock

– Edited by Susan McDonald

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