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James Kim@Saxo
James Kim, sales trader at Saxo Capital Markets, Australia, examines trading strategies during week 34 in a technical analysis of charts for forex, indices and commodities.
Article / 11 August 2017 at 1:32 GMT

Morning Report APAC: Trump's ramped-up rhetoric weighs on Asia

APAC Sales Trading Desk / Saxo Capital Markets
Singapore










  • Donald Trump has escalated his rhetoric on North Korea again
  • US President says his warning to bring 'fire and fury' may not have gone far enough
  • US equities retreated and spot gold reached its highest level in eight weeks
  • Asian stocks were pressured in early trade and USDJPY fell to eight-week low

 

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
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Speeches

21:40 - US Federal Reserve's Robert Kaplan speaks in Arlington, Texas

23:30 - US Federal Reserve's Neel Kashkari speaks to Independent Community Bankers of Minn


Overnight news

North Korea:  President Donald Trump on Thursday ramped up his rhetoric on North Korea again, saying his warning of bringing "fire and fury" to the isolated nation may not have gone far enough. "If anything, maybe that statement wasn't tough enough," he told reporters at his New Jersey golf club. "The people of this country should be very comfortable, and I will tell you this: If North Korea does anything in terms of even thinking about attack, of anybody that we love or we represent or our allies or us, they can be very, very nervous," Trump said. "I'll tell you why, and they should be very nervous. Because things will happen to them like they never thought possible." 

US:  Initial Jobless Claims increased 3,000 to 244,000 and continuing claims remain below the 2m mark. 

An unexpected decrease in US wholesale prices in July, the first in nearly a year, signals inflation will remain tame: PPI shrank to -0.1% from +0.1%. More than 80% of the July decline in producer prices was due to a 0.2% drop in costs of services, the first in five months. Most of the decrease in services inflation reflected a slump in margins at chemical wholesalers. Price indices also moved lower for equipment wholesalers, apparel retailers.

 








Foreign exchange

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USD: Despite the big fall in equities, USD didn't move much overnight, with the exception of USDJPY, which dropped 0.7%. 

JPY: USDJPY is confirming a break of the support line we had since April 2017, which was a resistance in 2016. There is no major support now until 105 and an escalation of risk-off due to North Korea/Trump will trigger a lot of selling interest in crossJPY, EURJPY having one of the best values to sell at this level. 

NZD: Continues to be well offered following the comments from assistant governor McDermott yesterday indicating again the intervention talk. 

Emerging Markets: There was no risk-off trade in EM, except for obviously USDKRW. Watch out for the EEM ETF tracking the EM equities, which dropped 1.7% yesterday.


Foreign exchange movement

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Cross JPY downside are very bid, with all the funds rushing to buy to hedge the risk-off generated by North Korea .

Volatilities in downside USDCNH are moving up because funds are buying back the short leg of their USDCNH put spreads to keep only the downside move.


Rates
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US Treasury yields across 5-year to 30-year tenors lower with front-end slightly lagging as bull-flattening spurred by flight-to-quality momentum.

Bunds rallied with 10-year yields dragged to session lows in the afternoon, before stalling at 0.40%, while overall core EGB curves continued to bull-flatten as stocks fell.


Commodities 

 

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Equities
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Finally, volatility is back! And more often than not, when volatility, or fear indicators, creeps up we will see stock market indices retreat. The Dow Jones fell below the 22,000 level as tension between North Korea and the US increased. 

Macy's tumbled 10.2% today despite reporting better-than-expected earnings as results failed to convince investors of an improving outlook. Similarly, Kohl's Corporation also fell 5.8% as investors doesn't see top-line sales improvement, which triggered a drop in retail departmental stores.

Nvidia posted its result after the market close and future guidance easily beat analysts' estimate but still resulted in a 7% drop in the share price in after-market trading, as investors expected much more from one of the hottest stocks in the tech sector now. Bubbles in the tech sector?


Asia Pacific Stocks

Hong Kong 

Analyst Ratings: 

  •  Fuyao Glass (3606 CH): H Shares Cut to Hold at Jefferies, PT HK$25 
  •  HKEX (388 HK): HKEX Cut to Hold at China Galaxy, PT HK$246 
  •  Rusal (486 HK): Assumed New Buy At BCS, PT HKD7.3 
  •  Yuexiu REIT (405 HK): New Buy at DBS Vickers, PT HK$5.98 

Preview: 

  •  Baoshan Steel (600019 CH): Xinjiang BA Yi to Buy Assets From Parent in Restructuring 
  •  BOE Tech (200725 CH): BOE Tech Plans 6b Yuan Investment in TFT-LCD Project in Wuhan 
  •  Chalco (2600 HK): Guinea, Chinalco in Talks on Infrastructure of Simandou Project 
  •  Country Garden (2007 HK): Country Garden Jan-July Contract Sales 333.9B Yuan 
  •  Dongfeng Motor (489 HK): Dongfeng Group July Vehicle Sales Volume 228,904 Units 
  •  Fosun International (656 HK): Fosun, Shanghai Pharma Are Said to Bid for KKR-Backed Arbor 
  •  Glencore (805 HK): Glencore Slashes Debt as It Positions for M&A in Commodities 
  •  Glencore (805 HK): Glencore Looking at Different Opportunities in U.S. Agriculture 
  •  Greenland Holdings (600606 CH): Greenland Holding $500m 3Y Bond 4.9% 
  •  Henan Pinggao Electric (600312 CH): Henan Pinggao 1H Net 350.2m Yuan vs 541.6m Yuan Year Ago 
  •  HSBC (5 HK): HSBC Says 2017 Second Interim Dividend Payable Sept. 20 
  •  HSBC (5 HK): HSBC Bought Back 3.58m Shares at Avg 751.88 Pence Each Aug. 10 
  •  Huaxia Bank (600015 CH): Huaxia Bank 1H Net 9.84b Yuan vs 9.83b Yuan Year Ago 
  •  Huiyuan Juice (1886 HK): China Huiyuan Juice Sells $150m 6.5% Senior Notes Due 2020 
  •  Jiangsu Protruly (600074 CH): Jiangsu Protruly 1H Net 368.3m Yuan vs 336.2m Yuan Year Ago 
  •  Leshi Internet (300104 CH): Compal Unit Scraps Plan to Invest in Leshi Zhixin 
  •  MTR (66 HK): MTR First-Half Underlying Profit Rises 15% Y/y to HK$5.85 Bln 
  •  PCCW (8 HK): PCCW First Half Net Income HK$1.29 Bln 
  •  PCCW (8 HK): Hony Capital, Foxconn Ventures, Temasek Invest in PCCW Unit 
  •  Ping An Bank (000001 CH): Ping An Bank First Half Net Income 12.6 Bln Yuan 
  •  Risesun (002146 CH): Risesun 1H Net 1.68b Yuan vs 1.3b Yuan Year Ago 
  •  Semiconductor Manufacturing (981 HK): SMIC in Pact for $1.22B Cash Contribution to Joint Venture 
  •  Shanghai Electric (600021 CH):Shanghai Electric Is Said to Be Among Bidders for Eolia 
  •  Shanghai Fosun Pharma (600196 CH): Jilin Yatai Unit to Buy Assets From Fosun Pharma, Other Company 
  •  Wharf (4 HK): Wharf PT Raised to HK$100 at Citi on Privatization Expectation 
  •  Zhangze Electric (000767 CH): China Regulator Fines Zhangze Electric on Antitrust Violations 

Australia

Analyst Ratings: 

  •  Incitec Pivot (IPL): Raised to neutral at Credit Suisse, PT A$3.29 
  •  Northern Star (NST): Raised to buy at Canaccord, PT A$5.50 

Preview:

  •  Trading ex-div.: Scentre Group, Tabcorp, Westfield 
  •  Alliance Aviation (AQZ): New buy at APP Securities, PT A$1.52 
  •  ANZ (ANZ): Said to hire 6 banks for potential A$1bn hybrid: AFR 
  •  Commonwealth Bank (CBA): May face fines from HKMA tied to Austrac investigation: AFR 
  •  Crown Resorts (CWN): Packer sells Crown shares taking voting stake to 48.46%: Filing 
  •  Fortescue (FMG), BHP Billiton (BHP), Rio Tinto (RIO): Iron ore rises for 3rd time in four sessions, rises to highest since April 6. 
  •  Macquarie Group (MQG): Said to charge $25,000 for MiFID research access 
  •  National Australia Bank (NAB): 3Q trading update; NOTE: FY16 3Q unaudited cash earnings from continuing ops ~A$1.6bn 
  •  News Corp (NWS): Fourth quarter revenue misses estimates 
  •  REA Group (REA): FY results expected; NOTE: FY17 adj. net income est. A$252.4m (13 analysts) 
  •  South32 (S32): Chief Technology Officer Ricus Grimbeek leaving company 
  •  Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil drops after failure to hold $50 even as stockpiles shrink 
  •  Bank of New York Australia ADR Index -1.9%, biggest one-day fall since June 20 
  •  BHP Billiton ADR -1.8% to A$25.78 equivalent, 1.1% discount to last Sydney close 
  •  Rio Tinto ADR -1.7% to A$57.62 equivalent, ~11% discount to last Sydney close 
  •  Companies trading above 20/50/200 DMAs, Bollinger upper band with RSI above 70: MIN, CAR, IFL, WSA 
  •  Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: JHX, TME, SKC, MYX


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'Things will happen to them like they never thought possible,' said Trump of North Korea. Photo: Shutterstock

 

– Edited by Susan McDonald


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