Morning Report APAC: Trade concerns weigh on Asia
- The Nikkei was down 0.9% as the yen firmed
- Fears are growing over US tariffs and political tension between UK and Russia
- US retail sales disappointed for a third consecutive month
- US stocks ended the day lower
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
2345 – EC – European Central Bank’s Sabine Lautenschläger speaks in Florence
0645 – AU – Reserve Bank of Australia’s Guy Debelle gives speech in Sydney
US stocks down: Retail Sales were disappointing for a third consecutive month, down 0.1% month on month (exp. +0.3%) and ex autos up 0.2% (exp. +0.4%). The decline was broad-based and instills doubt that consumer inflation will accelerate on a sustained basis. US 10-year yields are back to 2.80%, which is a short-term support. The pain trade will definitely be for lower rates as a lot of funds are positioned for a break of 3% quickly. Equities followed negatively after the data, ending the day down 1% for the Dow Jones and down 0.57% for the S&P 500.
European Central Bank: Mario Draghi said the European Central Bank would avoid surprising investors with sudden changes to its stimulus plans, stressing that inflation is still too low and US trade policies and a stronger euro are concerns.
Comments from new White House economic adviser Larry Kudlow that President Trump would support a strong USD, and from Mario Draghi regarding the strong EUR and DXY, rallied FX markets late in the NY session. However, overall it was a very choppy market, and one that is more and more uncorrelated to the equity market.
Emerging Markets: It was the same story for EM, with mainly USD selling interest for carry purpose but in small sizes at this level.
Foreign exchange movements
The Dow was down 248 points and S&P 500 down 15 points), as market sentiment was dented by concerns over prospects of a global trade war following the firing of Rex Tillerson as US Secretary of State and reports of new tariffs targeted specifically at China.
Jewelry retailer Signet Jewelers Ltd (SIG) fell 20%, and last traded at 38.22 (a new 52-week low) after the company unveiled a three-year restructuring plan. It will close more than 200 stores this fiscal year but open new ones outside shopping malls, as one of the biggest mall-based chains combats slumping sales at its existing locations.
Health Care Select Sector SPDR (XLV) reversed to a loss. UnitedHealth Group (UNH) was one of the Dow's biggest gainers early before falling nearly 0.5%. XLV remains in potential buy range after retaking its 50-day moving average on Friday. It is forming a new base with a 91.89 buy point. Keep in mind that the broader market has been volatile lately. The fund undercut its 200-day line during the early February market correction. For now, it appears to be in an uptrend.
European stock markets closed slightly lower, after a choppy trading session as trade war fears weighed. UK's FTSE was down 6 points and Germany's Dax closed higher, up 16 points. Meanwhile, European Central Bank President Mario Draghi said that monetary policy would remain prudent despite stronger confidence that inflation is moving towards the central bank's target.
The basic resources sector finished the day up almost 1%, on the back of strong industrial production data in China. A number of London-listed miners consequently rose, with Antofagasta, Glencore and Anglo American all closing up 1.8% or more, last traded at £946.20, £383.55 and £1,789.40, respectively.
British grocer Morrisons (MRW) saw its full-year profit rise 11%, beating analyst expectations. Despite the positive results and news that it would pay a special dividend, shares sank 4.86% to £215.30. Reuters cited investor concern over a fall in free cash flow, as one reason for the drop in shares.
Hong Kong equities
The Hang Seng Index (HSI) closed at 31,435 points, retreating 166 points with hefty selling pressure after midday. Attention drifted towards newly listed B & S Intl Holdings (1705.HK) as this counter closed at $3.98, nearly 3 times up against the listing price of $1.
Country Garden (2007.HK) went up 1.7%, last printed at 15.22, and became the best-performing blue-chipper of the day. Morgan Stanley expected an upward trend for the stock in the next 30 days.
Great China (141.HK) disposed of all its 43% interests in Samstrong (which holds a 43% interest in an investment property in Shanghai) and loan for a total consideration of around HK$448 million. The estimated gain is approximately HK$192 million. The share price broke above the 250-day MA (HK$1.03) and once reached HK$1.18. It was last at HK$1.1, soaring 66%, presenting an overbought situation.
CGN POWER (1816.HK) announced that the total on-grid power generation of the nuclear power generating units from January to December 2017 amounted to approximately 137,700 GWh, representing an increase of 19.16% over the corresponding period last year. The share price remained muted, last traded at 2.12, while analysts remain neutral.
European gilts gained on safety demand over potential political risks between UK and Russia. Photo: Shutterstock
– Edited by Susan McDonald
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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