Morning Report APAC: Turkish turmoil eases, NZD hit after CPI data
- Turkish president Erdogan arrested 6,000 people including generals and judges
- US retail sales rose faster than expected to 0.6% month-on-month
- NZ CPI printed lower than expected this morning at 0.4% quarter-on-quarter
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
0545: NZD – CPI QoQ 2Q (Act. 0.5%, Exp. 0.5%), CPI YoY (Act. 0.4%, Exp. 0.5%)
1615: GBP – BOE's Weale Speaks in London: Brexit Impact on Monetary Policy
Turkey: A coup attempt by military forces in Turkey failed. At least 290 people died in Ankara and Istanbul and 1,400 were wounded. Turkish president Recip Erdogan arrested 6,000 people including generals and judges.
The Turkish Central Bank promised unlimited liquidity to lenders and measures to support the lira to prevent a massive sell-off
US: Retail sales rose faster than expected to 0.6% month-on-month (expected 0.1%) during June to a seasonally adjusted $456.98 billion, from a downwardly revised gain of 0.2% in May (previously: +0.5%).
Most categories enjoyed sales grow last month, led by a 3.9% spike in sales at building supply stores, the largest one-month increase since April 2010. Sales of motor vehicles and automotive parts inched up 0.1%.
Sales at restaurants and bars dipped 0.3% and clothing store sales dropped 1.0%. Sales ex-autos, gasoline, building materials and food services - those which, correspond most closely with the consumer spending component in of GDP - shot up 0.5% (market estimate: +0.3%).
CPI climbed 0.2% MoM (exp. 0.35). Core CPI also rose 0.2% as expected and Core year-on-year rose 2.3% (exp. 2.3%), matching the highest level since May 2012.
Industrial Output rose 0.6% MoM (exp. 0.3%) helped by a jump of 2.4% in utilities output. Manufacturing activity in NY retreated to 0.55 (Exp. 5.0) from 6.01 in June. The University of Michigan sentiment dropped to 89.5 (exp. 93.5)
New Zealand: CPI printed lower than expected this morning at 0.4% quarter-on-quarter (expected 0.5%) and 0.4% year-on-year (exp: 0.5%) and remains below the range of what RBNZ targets. The market is now pricing a 71% chance of rate cut at the August 11 meeting.
UK: Trade Secretary Liam Fox said he has started lining up deals to be put in place once Britain leaves the bloc. He is preparing deals based on a timeline of Britain triggering Article 50 of the Lisbon Treaty by the end of the year, which would start formal exit negotiations with the EU in time to leave by January 1, 2019.
Key US data surprised on the upside on Friday pushing the DXY higher 0.5% and EURUSD closer to the 1.1000 support. NZDUSD dropped 1% continuing the move from last week and due to a lower than expected CPI print pushing the chance of a cut higher in the August meeting (see above news).
GBPUSD found good selling interest close to 1.3500 as expected and should remain the case until the Bank of England August meeting where the market is expected a 25 basis points rate cut and a QE expansion of GBP 50 billion.
The coup in Turkey was announced 30 minutes before the NY close pushing USDTRY much higher from 2.8761 the low to 3.0500 (up 5.8%) but opened today below 3.000 at 2.9725 following the failure of the coup.
There are been several Long USD stops triggered this morning after the open below 3.0000 and some profit taking. We should see more volatility once London comes in.
Foreign exchange movements
USDJPY vols opened higher with spot trading at the 50 Day Moving Average resistance and the market being worried of an escalation of risk off following the Turkish coup.
Hedge Funds are buying quite aggressively downside EURUSD for the next European Central Bank meeting this Thursday. Not much to read in that flow except that the buy side always likes to play that side
Broad wave of selloff in government bonds, pushed yields up by the most in six weeks, after improving economic data along with a record-setting rally in equities prompted investors to sell government debt.
The two-year note yield shed 0.6bps to 0.667%. The 10-year bond yield gained 1.4bps to 1.551% to log the biggest weekly increase since 2 June.
In Europe, the yield on the benchmark 10-year German bond rose 3.6 basis points to negative 0.065%.
The S&P 500 index was down 0.09% as it slipped 2.01 points to close at 2,161.74 for a weekly gain of 1.5%. The Dow Jones Industrial Average DJIA, closed slightly higher at0.05% as it added 10.14 points to finish at 18,516.55, climbing 2% for the week.
The Nasdaq Composite Index COMP was down 0.09% and shed 4.47 points to 5,029.59 but finished the week 1.5% higher. All three indexes advanced for a third week in a row.
European stocks were mixed following the terror attack on Nice that killed at least 84 people. The UK's FTSE 100 closed 0.2% higher at 6669.24 while the France CAC index was down 0.4% lower.
On earnings, Citigroup closed at $44.33, down 0.27% after the bank reported second-quarter results that beat estimates. Wells Fargo sank 2.5% and closed at $47.71. The bank posted a drop in second-quarter profit, but the results were in line with expectations, disappointing investors.
Airline stocks were affected due to growing terrorist attacks and threats as Delta Air Lines sank 2.44%, United Continental Holdings was down 0.88% and Southwest Airlines shed 0.02% as airline stocks were getting hit in the terror aftermath.
Asia Pacific stocks
- AIA raised to outperform at Daiwa Securities
- China Mobile assumed buy at Jefferies, pt HK$106.80
- China Telecom assumed buy at Jefferies, pt HK$4.40
- China Unicom assumed hold at Jefferies, pt HK$9
- Maanshan Iron & Steel removed from conviction list at Goldman
- Sinopec Kantons raised to buy at Goldman Sachs
- Trina Solar cut to market perform at Cowen
- Anton Oilfield (3337 HK) received about 503m yuan of new orders in 2Q
- China Railway Group (390 HK) proposes to issue USD notes
- China Telecom (941 HK): To gradually end roaming fees this yr
- Founder Securities (601901 CH): Debt rises 140.5b yuan in 1H
- Hanergy TFP (566 HK): Appoints Lin Qi as executive director
- Kaisa (1638 HK): Says PwC resigned as auditor; sees shrs resuming in Jan.
- Shanshui Cement (691 HK): Modifies timeline on purchase of 2020 bonds; China’s top court to hear appeal Monday
- Sihuan Pharma (460 HK) expects lower 1H profit vs yr earlier
- Sundiro (000571 CH): To Buy 50% of Uruguay food co.
- Winsway (1733 HK) says Cao Xinyi becomes chairwoman, resigns as CEO
- Zijin Mining (2899 HK): says 1H profit fell 68% Y/y
Japan: Closed today.
- Fantastic Holdings (FAN AU) cut to neutral from overweight at JPMorgan
- 2Degrees Mobile Set to Abandon IPO Plans, Australian Says
- Propertylink to Lodge IPO Prospectus on Monday, AFR Says
Information sources: CIMB / Bloomberg
week, but the reprisals have just begin. Photo: iStock
– Edited by Adam Courtenay
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