Morning Report APAC: US fiscal uncertainty weighs on Asian sentiment
- Crude made gains due to inventory drawdowns, rig evacuations
- A Fed official again said he does not favour hiking rates until inflation picks up
- Iron ore prices eased as steel futures fell sharply in China
- Arabica coffee had its eight straight decline; this is its longest slump since 2013
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
0100 – Italy: Bank of Italy governor Ignazio Visco speaks in Rimini
Overnight news, US
- Markit PMI data showed strength in the services sector (56.9) but missed on manufacturing expectations (52.5)
- US EIA data showed another drawdown in crude inventories. Tropical storm Harvey forced evacuations of platforms in the Gulf of Mexico. Crude traded 1.5% higher on the day.
- Fed’s Robert Kaplan reiterated – for the fifth time in two weeks – that he is in favour of not raising rates again until evidence of further inflation pressures picks up. He has cited technology developments and labour market slack as reasons for persistently low inflation.
Overnight news, Europe
- Markit PMI data in Europe was strong, with particular strength noted in the German manufacturing sector with a healthy 59.4 print.
- Mario Draghi’s speech in Lindau, Germany, gave few clues as to what the governing council is thinking on monetary policy and fewer clues as to what his speech in Jackson Hole will entail.
- Bundesbank president Jens Weidmann said he saw no reason to extend quantitative easing into 2018, adding that strength in the euro reflects the economy recovery.
- USD: generally weaker across the board with a couple of exceptions. USD traded softer on government shut down fears post Trumps Phoenix speech.
- NOK: Biggest mover in the G10 currencies as the oil rally added upside pressure to NOK.
- NZD: wilted under growth forecast reductions and cross selling pressure. NZDUSD has formed a classic head and shoulders pattern that shows a weaker NZD may be in store.
- Emerging Markets: High yielding currencies outperformed their low yielding peers as the USD weakened. MXN underperformed following Donald Trump's Phoenix speech, which threatened to terminate the North American Free Trade Agreement.
Foreign exchange movements
- CNH back end vols remain quite bid, with funds buying. Downside USDCNH is increasingly becoming a trade that the smart money is looking at.
- Jackson Hole volatility has been remarkable stable.
- USDJPY saw increased buying of downside strikes below ¥108 in the short dates; ¥108.1 is the 2017 low.
- US yields were lower as treasuries were rallied overnight on the back of concerns over debt ceiling uncertainty. Weak home sales data in July weighed further on yields.
- Core European yields were taking the spit over from US under risk off move, and headed lower. BTPs continued to struggle following the resumption of supply.
- US stocks closed lower Wednesday on light volume, returning some of the solid gains from the previous session as investors turned cautious ahead of Jackson Hole meeting and VIX turned up 7.93% to 12.25.
- Lowe’s ended down 3.7% after the home-improvement retailer reported adjusted earnings, missing estimates by 4cps with adjusted quarterly profit of $1.57/share.
- Intuit Inc. dropped 1.9% after the financial software provider late Tuesday reported earnings that beat forecasts (adjusted quarterly profit of 20cps, 3cps above estimates), but also said its Chief Financial Officer R. Neil Williams will step down in January and will be replaced by Intuit finance executive Michelle Clatterbuck.
- WPP PLC shares slumped 11% after the world’s largest advertising company releasing disappointing interim results and cut its forecast for growth for 2017, citing major slowdowns in key industries such as consumers-goods and retail.
- Fiat Chrysler extended its gains for another 5.8% on broker upgrades from Morgan Stanley and Jefferies and despite the firm issuing a statement denying it had been approached by China's Great Wall Motor regarding its Jeep sport utility business.
Asian equities preview
Hong Kong analyst views
- Guangzhou Auto (2238 HK): H Shares Raised to Outperform at Bernstein.
- Health & Happiness H&H (1112 HK): Health & Happiness H&H Cut to Outperform at Daiwa; PT $HK30.
- Rusal (486 HK): Raised to Buy at BCS, price target $9.31.
- Xtep Int’l (1368 HK): Downgraded to Hold at HSBC; PT Lowered to $HK3.20.
Hong Kong stocks
- Airlines: China to Allow More Airlines to Operate International Flights.
- Casinos: Macau Casinos May Move as Island Takes Direct Hit From Typhoon.
- Beijing Shiji (002153 CH):1H1 Net 182.5mln Yuan vs 175.7mln Yuan Year Ago.
- China Coal (1898 HK): 1H Net 2.28bn Yuan vs 225.1mln Yuan Year Ago.
- China Merchants Bank (600036 CH): Repo Rates Rise as PBOC Drains Funds for Third Day: Inside China.
- China Oilfield Services (2883 HK): First Half Loss 369.5mln Yuan.
- China Oilfield Services (2883 HK): Executive Director Dong Weiliang Resigns.
- GD Power Development (600795 CH): H1 Net 1.69bn Yuan vs 3.67bn Yuan Year Ago.
- Guangzhou Auto (2238 HK): First Half Net Income 6.18 bn Yuan.
- Guotai Junan Sec (601211 CH): 1H Profit Rises 25% to HK$673.5m From Year Earlier.
- Inner Mongolia BaoTou Steel Union (600010 CH): Baotou Steel H1 Net 587.7mln Yuan vs 27.5mln Yuan Year Ago.
- Maanshan Steel (600808 CH): First Half Net Income 1.64bn Yuan.
- SDIC Essence (600061 CH): SDIC Essence Holdings H1 Net 1.27bn Yuan vs 1.61bn Yuan Year Ago.
- Samsonite (1910 HK): First Half Net Income $83.4 Mln vs $82.4mln Year Ago.
- Shandong Weigao (1066 HK): Weigao Group H1 Net Income 650.1mln Yuan vs 385.5mln Yuan Year Ago.
- Shui On Land (272 HK): First Half Underlying Profit 1.49bn Yuan.
- Sinopec (386 HK): Sinopec Shanghai H1 Net 2.58bn Yuan vs 3.1bn Yuan Year Ago.
- Yunnan Baiyao Group (000538 CH): Yunnan Baiyao H1 Net 1.57b Yuan vs 1.39bn Yuan Year Ago.
Japan analyst views
- Cosmo Energy (5021): Cut to neutral from overweight at Mitsubishi UFJ Morgan Stanley.
- Goldcrest (8871): Cut to underperform from neutral at SMBC Nikko.
- Hitachi Construction (6305): Raised to buy from neutral at Nomura.
- Mitsui Fudosan (8801): Raised to outperform from neutral at SMBC Nikko.
- Nippon Electric Glass (5214): Raised to outperform from neutral at Daiwa.
- Nomura Real Estate (3231): Rated new neutral at SMBC Nikko.
- Nomura Research Institute (4307): Downgraded to neutral from overweight at JPMorgan.
- NTT Data (9613): Raised to overweight from neutral at JPMorgan.
- Sumitomo Mitsui Trust (8309): Raised to buy from hold at Morningstar.
- Toei (9605): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley.
- Tokai Carbon (5301): Cut to neutral from buy at Okasan.
- Tokyo Steel (5423): Cut to neutral from overweight at JPMorgan.
- Tokyo Tatemono (8804): Rated new neutral at SMBC Nikko.
- Tokyu Fudosan (3289): Rated new outperform at SMBC Nikko.
- Chemicals: Japan to slap new tariff on China-made polyethylene terephthalate.
- Denka (4061): FDA approves co.’s diagnostic reagent for small, dense low-density lipoproteins-cholesterol.
- Kansai Paint (4613): Kansai Plascon unit to acquire 90% stake in Sadolin Group of Kenya for $100mln.
- Mandom (4917): To conduct 2-for-1 stock split on October 1.
- Mitsubishi Heavy (7011): MRJ made unscheduled landing due to engine problem.
- Mizuho Financial (8411): Jean-Yves Korenian, head of corporate acquisition finance for Asia-Pacific ex-apan, has left, according to people familiar.
- NTT Docomo (9437): Ventures arm invests in U.S. startup Petametrics.
- Screen Holdings (7735): Forms tie-up with Haoneng Technology to build high-end lithium ion battery manufacturing equipment.
- Sharp Corp (6753): Credit rating lifted to BB- from B+ at R&I, outlook stable.
- Shimamura (8227): August same-store sales rise 2.4% y/y.
- Shizuoka Bank (8355): To buy back as much as 1.65% of shares for ¥10bn.
- Yashima Denki (3153): Cuts full-year net income forecast 21% to ¥1.45bn.
Australasian analyst views
- BHP: BHP’s New Chairman Heralds Era of Tougher Focus on Spending.
- EBO NZ: Ebos Says FY Revenue, Profit Increased, Sees Further Growth.
- NAB: NAB Is Said to Weigh Wealth Unit Options, Including Sale: AFR.
- MEL NZ: Meridian Energy Full Year Net Income $NZ197mln.
- NZR NZ: NZ Refining First Half Net Income $NZ35.2mln.
- KGN: Kogan Founder Is Said to Sell Down Stake at $A3/Share: AFR.
- VCT NZ: Vector Says Operating Earnings Will Be Little Changed in FY2018.
- CCL: CC-Amatil Raised to Neutral at UBS, PT $A8.60.
- CWY: Cleanaway Cut to Neutral at JPMorgan, PT $A1.36.
- MMS: McMillan Shakespeare Raised to Equal-weight at Morgan Stanley;Cut to Neutral at Credit Suisse, PT $A15.75.
- QUB: Qube Cut to Neutral at UBS, PT $A2.80.
- RFF: Rural Funds Cut to Hold at Wilsons, PT $A1.91.
- SUN: Suncorp Raised to Overweight at JPMorgan, PT $A13.75.
- VOC: Vocus Cut to Hold at Morningstar.
- WTC: WiseTech Cut to Underperform at Credit Suisse, PT $A6.
- WOR: WorleyParsons New Buy at BofAML, PT $A15.
– Edited by Robert Ryan
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