Article / 28 March 2017 at 2:18 GMT

Morning Report APAC: US equities and dollar hit by Trump doubts

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • US Federal Reserve's Evans says two 2017 rate increases may be appropriate 
  • USD continues to be offered after the US healthcare bill was pulled
  • US equities are lower as doubts rise over Trump's fiscal policies


By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)
d

 






Speeches

   

1500 - EC - European Central Bank's Benoit Coeure speaks in Frankfurt

1900 - EC - ECB's Jozef Makuch speaks in Bratislava 

2210 - CA - Bank of Canada Governor Stephen Poloz speech in Oshawa 

2310 - CA - Bank of Canada Governor Stephen Poloz press conference


Overnight news

 US Federal Reserve: Chicago Federal Reserve President Charles Evans said he believed two 2017 interest-rate increases may be appropriate given uncertainty surrounding the outlook for inflation and government spending:

“To the extent that I gain more confidence in the forecast I have, that would be a good indicator that I could perhaps support three.”

“Two might be the right number if there’s a little bit more uncertainty.” 

“I still think that one of the larger uncertainties is whether or not inflation is going to get up to 2% sustainably in the US, and so I don’t want to get out ahead of these rate increases, but I thought that it was perfectly acceptable to get one in in March.”

Evans highlighted how hard it is to estimate the quantum and timing of any fiscal stimulus that may be undertaken by the Trump administration. “We probably got ahead of ourselves and thought that some of it would be showing up in 2017 in our first forecast,” Evans said. “This last one in March, we moved much more of it to 2018.”

 


Foreign exchange

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USD continues to be offered after President Trump failed to pass the US healthcare bill and amid uncertainties regarding the rest of his policies. DXY dropped just above the 200-day moving average at 98.685, which should now be the support.

USDJPY has been settling down just above the 110 level and we could have a short-term squeeze to get rid of the weak short before resuming the trend lower and attempt to test the 200-day MA at 108.28.

GBPUSD is now trading well above the support at the 100-day MA and is aiming for the 200-day MA at 1.2693 before Article 50 is triggered.

Emerging Markets: The main mover was USDZAR, up 4% on the back of President Zuma calling back Finance Minister Pravin Gordhan and his deputy from an investor roadshow in the UK and US. The delegation was meant to meet with credit-rating agencies and investors this week.This decision is sparking concern South Africa's president is planning a cabinet reshuffle.


Foreign exchange movements


v

 

Banks have been buying topside EURUSD 1-week or 2-week dates following the spot move. Not much to read into that in terms of positioning.

There have been sellers of USDJPY gamma following the few days of consolidation ahead of the 110 level.

Rates

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US yields dropped across the curve as doubts increased over the Trump administration in implementing its fiscal policies (especially on tax reform) which drove yields to such a high level. 10-year yields broke and are now trading below the 100-day MA.

What happened in US markets spilled over to Europe as well, with core bonds rising and curves flattening. Profit taking emerged in Spain after LTRO II extension bid faded.



Commodities 

 

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Equities

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The Dow Jones and S&P 500 closed lower, after early steep losses, as investors evaluated the recent stumbling blocks for Trump and prospects for his ambitious economic agenda. Nasdaq recovered to close up 0.2% even though declines and gainers were in a 1:1 ratio.

United Airlines shares rose 0.7%, recovering after the airline was in focus after a social-media storm after it stopped two girls wearing leggings from boarding a flight.

Snap Inc. rose 4.8% after analyst coverage with a predominantly positive stance. RBC analysts initiated shares at overweight with a $31 price target, while JP Morgan initiated the Snapchat parent at neutral with a $24 price target. 

G-III Apparel Group, best known as the parent company of brands such as GUESS, DKNY, Calvin Klein, Tommy Hilfiger and Levi's, dropped 14.1% and reported an adjusted Q2 loss of $0.16 (est -$0.10). The traditional brick and mortar retail stalls have been struggling with earnings, and outlook seems to be uncertain due to raise in e-commerce. 

The FTSE 100 was the worst performer, down 0.59%, while Germany's Dax was down 0.57%. France's CAC was the best performer with only a 0.07% loss. 

Risk-off trade hit mainly European banks, Lloyds Banking Group PLC dropping 1.6%, UBS Group fell 0.6% and Société Générale declined 0.4%. Miners and oil companies were not spared, with shares of metals giant Glencore PLC down 4.4% and energy heavyweight Royal Dutch Shell PLC gave up 0.3%. 

The EU has finally approved the merger of The Dow Chemical Company (up 1.4%) and Dupont, leading to two industrial giants separated into three publicly traded companies with three areas of focus on agriculture, material science and the production of specialty products. Analysts expect the synergy in the merger to have about $3bn in cost savings.


Asia Pacific Stocks
Hong Kong
Analyst Ratings: 
  • PICC P&C (2328 HK): Cut to underperform at Macquarie 
  • Weichai Power (2338 HK): Raised to buy at Haitong 
Preview:
  • Developers: Govt is too worried about property market, state researcher says 
  • Bright Dairy (600597 CH): FY net income beats analyst estimates. 
  • Cathay Pacific (293 HK): Signs code-share agreement with Lufthansa 
  • China Quanjude (002186 CH): To buy Sunshine Kitchen stake 
  • China Shenhua (1088 HK): Chairman Zhang resigns; Ling takes on duties 
  • CK Property (1113 HK): Has spent HK$1.27bn in three buybacks since March 23 
  • CRRC (601766 CH): Wins L.A metro contract worth up to $647m: Reuters 
  • Cofco Meat (1610 HK): 2016 net income jumps to 951.9m yuan 
  • Gome (493 HK): FY net income misses est. 
  • Guangzhou Auto (2238 HK): Plans to invest 4.69bn yuan in new-energy car unit 
  •  Huishang Bank (3698 HK): Board seeks to suspend review of A-share offering 
  •  Kaisa (1638 HK): Can tap overseas debt market if needed: senior consultant 
  •  Recon Wenyuan (002692 CH): Plans to buy 51% in A&T Media for $97.2m 
  •  Shandong Gold (600547 CH): FY net higher than year earlier 
  •  Sinopec (386 HK): Says Aramco invited it to become cornerstone investor 
  •  SMIC (981 HK): 2016 net income rises 48.6% to $376.6m 
  •  Yingde Gases (2168 HK): Aberdeen Asset sells 155.49m shares amid PAG offer 
  •  Zhengzhou Yutong (600066 CH): FY net rises from year earlier 
Japan
Analyst Ratings: 
  • Access (4813): Rated new outperform at Iwai Cosmo 
  •  Rakuten (4755): Raised to buy from hold at Morningstar 
  •  United Arrows (7606): Rated new buy at UBS 
Preview:
  • Ebara (6361): Targets at least 8% ROIC for fiscal 2019 
  •  Idemitsu Kosan (5019), Showa Shell (5002): To team up in oil refining, Nikkei says 
  •  Inpex (1605): To sell entire 35% stake in South Natuna Sea Block B project in Indonesia 
  •  Iwasaki Electric (6924): Cuts full-year operating profit forecast 35% to 850m yen 
  •  Kansai Electric (9503): To set up Singapore LNG trading unit in April 
  •  Kusuri no Aoki (3549): March same-store sales fall 4.8% y/y 
  •  Kyowa Hakko Kirin (4151): Tivantinib doesn’t meet primary endpoint of in Phase 3 trial in hepatocellular carcinoma 
  •  Nichirei (2871): Full-year operating profit likely 30bn yen vs co. forecast 28bn yen, Nikkei says 
  •  Riso Kyoiku (4714): Full-year current profit likely 2.5bn yen vs co. forecast 28bn yen vs co. forecast 2.1bn yen, Nikkei says 
  •  Showa Denko (4004): Applies for an extension to deadline for submitting 2016 earnings 
  •  Skylark (3197): Co.’s largest shareholder Bain Capital to sell part of its stake; prices 21.4m shares at 1,635 yen each vs yesterday close 1,719 yen 
  •  SoftBank (9984): Likely to invest $1.2b-$1.5bn in combined Snapdeal-Flipkart, Times of India reports 
  •  Sumitomo Precision Products (6355): Sumitomo Corp (8053) raises stake to 27.75%, acquiring additional shares from NSSMC (5401) 
  •  Torikizoku (3193): President Tadashi Ohkura to sell 200,000 of his shares to Suntory Liquors 
  •  Toshiba (6502): Westinghouse Chapter 11 filing may come as soon as today, Nikkei reports 
  •  Yume No Machi Souzou Iinkai (2484): 1H operating profit likely 350m yen vs co. forecast 260m yen, Nikkei says 
Australia
Analyst Ratings: 
  • Independence Group (IGO): Raised to buy at Argonaut, PT A$4.12 
  •  Metcash (MTS): Cut to underweight at JPMorgan, PT A$2.10 
  •  OZ Minerals (OZL): Raised to hold at Morningstar 
  •  Seven West (SWM): Cut to hold at Morningstar 
Preview:
  •  Global sustainable investments grow 25% to $23tn 
  •  Aurizon (AZJ), BHP Billiton (BHP), Evolution Mining (EVN), Resolute Mining (RSG): Thousands evacuated as cyclone moves toward Australian coast 
  •  Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): Credit cards provide fresh fodder for Australian bond investors 
  •  Downer EDI (DOW): Chairman Michael Harding may face pressure to step down in wake of Spotless bid, capital raising: Australian 
  •  Evolution (EVN): Evolution says preparing Mt Carlton Gold Op for Cyclone Debbie 
  •  Fortescue (FMG), Rio Tinto (RIO): Iron ore hammered as futures YTD advances turn to dust 
  •  Macquarie (MQG): Said in talks for Hindustan Power solar assets: Mint 
  •  Macquarie Telecom (MAQ), Vocus (VOC): Bell Potter seen building book to buy Macquarie Telecom stake: AFR 
  •  Mantra (MTR): Marriott Intl may be considering offer for Mantra of ~A$1bn: Australian 
  •  Myer (MYR): Myer soars as block trade spurs short covering, deal speculation 
  •  Newcrest (NCM), Northern Star (NST), Evolution (EVN), Saracen (SAR), Regis Resources (RRL): Trump stumble propels gold toward key level in haven revival 
  •  Orocobre (ORE): To invest $160m over three years in Argentina 
  •  Quintis (QIN): Says abides by Australian law; Glaucus unfounded allegations 
  •  Myer (MYR): Myer soars as block trade spurs short covering, deal speculation 
  •  St Barbara (SBM): Board approves Gwalia extension project 
  •  Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil falls as traders shrug off Opec-led pledge to mull extension  



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United Airlines caused a social-media storm after it stopped two girls wearing leggings from boarding a flight. 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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2y
AlexF AlexF
From UBS CIO Therefore, we still see the market's focus slowly shifting away from politics
and toward a strong European economy versus an overly USD-rich investor
positioning. We thus see strong arguments in favor of a higher EURUSD and
expect it to rise to 1.12 in three months, 1.15 in six months, and 1.20 in 12
months.

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