Morning Report APAC: Trump troubles go global
- Turmoil in Donald Trump’s administration sparks the worst day in eight months
- Equity indexes in Australia and Japan dropped more than 1%
- Treasury yields drop to one-month low as bets on a Federal hike pared
- The yen fell 0.3% to 111.15 in morning trade with the EUR flat at $1.1158
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
2045: EC - ECB's Lautenschlaeger Speaks in Berlin
2050: AS - ECB's Nowotny Speaks in Vienna
0100: EC - ECB's Draghi Speaks in Tel Aviv
Issues for US President Donald Trump in Washington are generating a very strong risk off mood. Equities are down, Treasuries spiked and the market is now pricing an 82% chance of hike in the June meeting compared to 100% few weeks ago and USD collapsed more.
Congress stepped up calls for ex-FBI director James Comey to testify about his reported memo, while some Republicans joined Democratic calls for an independent Russia probe.
House Speaker Paul Ryan voiced support for the president in seeking to tamp down GOP unease over the rising crisis. Trump told Coast Guard graduates "no politician in history" has suffered worse treatment.
The fact that Washington is hearing more the words “impeached” and “obstruction of justice", the market doubts that Trump and the Republican could push forward their pro-growth agenda.
US household debt hit a record high in Q1. The New York Federal Reserve reported that total household debt jumped $149 billion quarter on quarter to $12.725 trillion.
Mortgage balances increased while home-equity lines of credit declined. Automotive loans grew, as did student loans, however credit card debt fell along with other types of debt.
Less than 5% of outstanding debt was delinquent at the end of Q1, more or less changed from Q4. Some 3.4% was at least 90 days late, otherwise known as seriously delinquent.
Big risk off overnight pushed the USD much lower, DXY easily broke the 98.00 support and is now way below the 200 Day Moving Average. There is no strong support before 96.000.
USDJPY collapsed and the move was accelerated at the break of the 100 DMA at 112.82. We are now very close to the pre-French election level at 109.70.
EURUSD has also accelerated its move higher to reach the resistance at 1.1200. The theme of USD lower should accelerated if the Fed decides now to stay on hold.
Emerging Markets: USD and emerging markets have shown the exact opposite move and USD rallied against all the currencies due mainly to outflows in equities and bonds in emerging Markets. USDBRL rallied 1.4% and USDKRW 1% overnight.
Foreign exchange movements
The market got caught in the move lower of USDJPY and is really short Gamma pushing the strong interest from funds to buy short dated puts.
The topside interest to buy EUR call has died down after this move and the market is shifting to be long EUR/Crosses Vega like EURAUD and EURCAD.
US Treasuries surged as odds of a June Fed hike tumbled, with yields falling by 6-11 basis points.
European government bonds saw a sharp rise in line with Treasuries, in a broad risk-off sweep, with yields ended lower by 3bp-6bp in bull-flattening move.
It was bloodshed on US bourses yesterday with the Dow and S&P 500 plunged more than 1.8% while Nasdaq was the worst performer with a 2.57% retreat and closed slightly above the 6,000 level.
European markets finished lower with the CAC-40 leading the region as worst performer as it closed 1.63% lower.
Meanwhile London's FTSE 100 only lost 0.25% which is one of best performing developed market yesterday.
Intel refuted a rumour spread by a technology website saying it is licensing graphics chip technology from AMD. The rumour had pushed up AMD shares by 12% on Tuesday but AMD fell the same amount after being refuted. AMD closed 12.16% lower to $11.20.
Target Corp posted a better-than-expected earnings and revenue results as it closed positively.
Earnings were up close to 20% from a year ago which the company called a sign that its turnaround efforts were taking place. Target was up more than 8% before market trading but only closed 0.94% higher to $55.04.
- Huaneng Renew (958 HK): Rated new buy at China Securities, PT HK$3.22
- PetroChina (601857 CH): Cut to hold at Jefferies, PT 7.75 Yuan
- Sa Sa Int’l (178 HK): Raised to buy at Haitong Intl, PT HK$4
- Shanghai Mechanical (900925 CH): Raised to outperform at Credit Suisse
- Wanda Cinema Line (002739 CH): New buy at Haitong Intl, pt 68 yuan
- Developers: Shanghai to stop approval of some commercial property projects; Hong Kong govt to study feasibility of housing in country parks
- Electric vehicle makers: China gives initial OK to some 2016 NEV subsidies
- Energy: CNPC says LNG imports may rise to 60bcm by 2020
- China Machinery Eng (1829 HK): Signs $1.6b Argentina rail project
- CRRC (601766 CH): Wins bid in Canada valued at ~350m yuan: Caixin
- GCL-Poly (3800 HK): 1Q polysilicon sales fall 43% Y/y
- KWG Property (1813 HK): Debt rating cut to B+ by S&P
- Meitu (1357 HK): MSCI says shrs not included in index due to lock-up period
- MTR (66 HK): China Railway Corp. denies joint rail bid plan: Caixin
- Sundart (1568 HK): Unit to acquire Sundart Beijing, Dalian, Shanghai
- Techtronic (669 HK): IRobot bid to block rival vacuums to be probed at ITC
- Tencent (700 HK): Results top all estimates after breakout hits; has no timetable for listing of music unit: ETnet
- TVB (511 HK): Applies for review of whitewash waiver
- Xingfa Aluminium (98 HK): Shareholders reject privatization plan
- Hitachi Construction (6305): Raised to neutral at Credit Suisse
- Hitachi Kokusai Electric (6756): Cut to neutral at Mizuho
- Olympus (7733): Cut to neutral at MUFJ-MS
- ANA Holdings (9202): To conduct 10-to-1 reverse stock split, change round lot to 100 shares from 1,000
- Citizen Watch (7762): Swiss watchmaker Frederique Constant, owned by co., aims to boost annual production to 250,000 units from 150,000 in five years
- Forside (2330): Seeks ~594m yen from sale of shares, warrants
- Japan Display (6740): JOLED says it’s a month away from mass production milestone
- Sojitz (2768): Japanese unit of Philip Morris, distributed by co., applies to the Finance Ministry to raise prices of 4 brands in Sept.
- Solxyz (4284): To sell treasury shares to Toyota Tsusho
- CC-Amatil (CCL): Cut to sell at Goldman
- Vita Group (VTG): Cut to hold at Canaccord, PT A$1.04
- Australia’s S&P/ASX 200 drops below 50-day moving avg: Chart
- DuluxGroup (DLX): Cut to underweight at JPMorgan, PT A$6.20
- Fortescue (FMG), BHP Billiton (BHP), Rio Tinto (RIO): Iron ore rises 1.7%, most in 3 weeks, according to a price index compiled by Metals Bulletin
- Galaxy Resources (GXY): Annual meeting scheduled
- Goodman Group (GMG): Scheduled to host business update call; NOTE: Co. in Feb. forecast FY17 operating EPS A$0.431
- James Hardie (JHX): FY results expected; NOTE: Co. in Feb. forecast FY adj. operating profit $245m-$255m
- Newcrest (NCM), Northern Star (NST), Evolution (EVN), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), OZ Minerals (OZL): Gold rallies as Trump’s ‘toughest time’ in office batters dollar
- Origin Energy (ORG): ATCO in running for Darling Downs Pipelines: AFR; LNG exporters under fire see Australian gas crisis overblown
- ResMed (RMD): Renews patent infringement case vs F&P Healthcare
- Webster (WBA): Sees prelim. cotton yield falling to 10.5 bales/hectare
- Westpac (WBC): Trading ex-div.
- Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Santos (STO): Oil rises as U.S. supply decline signals OPEC’s making progess
- Bank of New York Australia ADR Index -2.5% to lowest since Nov. 18
- BHP Billiton ADR -1.9% to A$23.83 equivalent, 1% discount to last Sydney close
- Rio Tinto ADR -0.9% to A$53.95 equivalent, ~12% discount to last Sydney close
- Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: MMS, GNC, RWC
- Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: WFD, GXL, HVN
– Edited by Adam Courtenay
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