Morning Report APAC: Trump adviser resignation leads Asia lower
- Asian markets were lower after news of another White House resignation
- Chief economic adviser Gary Cohn is the latest to leave the Trump administration
- The USD fell against the yen on the resignation news
- South Korea said North Korea was open to talks with the US on denuclearisation
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8hrs)
- 0930 – US – Federal Reserve's Robert Kaplan speaks at energy conference
- 2100 – US – Fed’s Raphael Bostic speaks on the economic outlook
- 2120 – US – Fed’s William Dudley speaks in Puerto Rico
More tariffs and trade war
- Gary Cohn is resigning as US President Donald Trump’s top economic adviser, leaving his post as the administration prepares to impose steep tariffs on steel and aluminium that Cohn has opposed.
- “It has been an honor to serve my country and enact pro-growth economic policies to benefit the American people, in particular the passage of historic tax reform,” Cohn said in a statement released by the White House on Tuesday. “I am grateful to the president for giving me this opportunity and wish him and the administration great success in the future.”
- The immediate reaction of the market on this news has been S&P Futures down 1.3% and a USD selloff.
- More about Tariffs (Bloomberg): Under the most severe scenario being weighed, the US could impose tariffs on a wide range of Chinese imports, from shoes and clothing to consumer electronic. The Trump administration could combine the tariffs with restrictions on Chinese investments in the US, which are reviewed for national-security risks by Treasury’s Committee on Foreign Investment in the US. The administration is looking at ways to enforce reciprocity with China on foreign investment, meaning the US would only allow takeovers in sectors that US companies can access in China.
Good news from North Korea
- North Korea said it was open to denuclearise if the regime's safety was guaranteed. Trump said that “Possible progress being made in talks with North Korea. For the first time in many years, a serious effort is being made by all parties concerned.”
- This is definitely a big move forward in the negotiations with North Korea and the market reacted well on the news before the announcement departure of Cohn.
- The USD major trend lower resumed sold off overnight but for opposite reasons: risk on and positive talks in North Korea, and risk off after Cohn’s resignation. We talked about it and the only intelligent answer on why the USD rallied last week was a clean-up of positioning only. Nothing else makes too much sense otherwise.
- After a brief selloff EUR is back to the medium trend higher above the 1.12340 support but we should stay in the 1.2200/1.2500 range for the time being.
- USDJPY is back to the sticky 105.50 after rallying the past two days. We still have a lot of options expiring at this level this week.
- Emerging Markets: USD never really stopped selling against EM the past week and continued even faster overnight with USDBRL down 1%, USDKRW close again to the lows of 1060.
Foreign exchange movements
- The move in USDJPY triggered a lot of buying in gamma and back at 105.50 on risk off
- The trade war should be very negative for CAD and there was a lot of buying interest at the break of 1.2900 in spot
- Gilts were sold off after Prime Minister Theresa May said a Brexit deal is close and market concerns are slightly eased.
- Bunds first being bid in risk off move, and paired gains as Italy BTP slumped in reaction to the election result.
- US treasuries were range bounding in the earlier session as investors were waiting for pricing of CVS’s $40bn bond sale. It paired the gains into the close as Trump was reported to be open for tariff changes spurred rally in risk assets. However this morning Trump stands firmly on the tariffs and says he will widen the tariffs to China as well, has driven futures to dip lower.
- The Dow (+9 points) and S&P 500 (+7 points) closed slightly higher, as the prospect of talks between North Korea and the United States and increasing resistance to President Donald Trump's proposed metals tariffs encouraged risk appetite among investors.
- Qualcomm Inc (QCOM) fell 2.9% to 62.14 as Broadcom Ltd (AVGO) continued to woo the US company’s investors to agree to a hostile takeover. Department of Treasury is looking into the company’s request to review Broadcom’s bid amid concerns over potential national security risks. Shares of AVGO were up 1.6% to 250.96.
- In retail, Target Corporation (TGT) fell around 4.5% to 71.79 after the big-box retailer reported lower-than-expected profit for the holiday quarter. TGT sales increased 10% year over year to $22.8 billion, including a 3.6% jump in comparable-store sales. On the bottom line, that translated to adjusted earnings of $1.37 per share, above the midpoint of the company's guidance.
- Memory-chip maker Micron Technology (MU) is on a bullish noted. Shares prices were up 1.71 and closed at 53.74 making an upside breakout for further gains. Looking at the daily bar chart of MU, we can see that MU made that test of the rising 200-day line and a few weeks latter broke out to a new high. Prices are bullishly positioned above the rising 50-day line and the 200-day average. Upcoming earnings report on March 22 will be a good one, according to Goldman Sachs analyst, but there are some twists and turns, an options strategy to play the upside as an alternative can be considered.
- Europe ended slightly higher despite Italy uncertainty and US tariff concerns. FTSE up 30 points and Dax was up 23 points. Autos stocks came under pressure during trade after President Donald Trump threatened European car makers with a tax on imports if the EU moved to retaliate over his plan to impose a tariff on steel and aluminium imports.
- In auto-sector news, autos were one of the top performers, rising 1.24% following comments from German automaker Volkswagen (VOW3), who said that its deliveries rose 5% last month. The stock rose 2.25% to EUR 157.00.
- Food & Beverage was one of the worst-performing sectors, with online food ordering group Just Eat (JE), ending down 12.5% to £744.80. The company sank after it released results that disappointed the markets, announcing a core earnings outlook that came in below consensus.
- Hang Seng Index (HSI) spiked over 730 points after midday trading to hit peak at 30,620. At close, the benchmark index leaped 624 pts or 2.1% to 30,510 points.
- Three oil giants ended the weak trend and outperformed the market. CNOOC (883.HK) snapped a five-day decline and reclaimed above the 100-day moving average line ($11.2) and last traded at $11.26, with a gain of 4.4% after it topped the highest point of $11.36, facing pressure near the 10-day moving average line.
- Petrochina (857.HK) elevated above the 250-day moving average and rebounded 2.7% to $5.38. Sinopec Corp (386.HK) snapped the five-day drop and last traded at $6.25, up 2.3%.
- China Military budget grew for the first time in five years to 8.1%. Riding on the news thematic play stocks like Avichina (2357.HK) once reached above the highest level of $5.04 which was recorded last October and topped at $5.13, over a nine-month high. The stock last traded at $5.01, up 12%, with a volume soaring to 104 million shares, over a 2.5-year high.
- Blue-chippers almost all rose. Tencent (700.HK) went up 3.2% as Tencent's chairman Ma Huateng said the company would consider A-share listing when the conditions become ripe.
– Edited by Gayle Bryant
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.
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