Article / 15 May 2017 at 1:34 GMT

Morning Report APAC: US inflation picture softens

APAC Sales Trading Desk / Saxo Capital Markets
Singapore

 

  • Asian markets were lower at the start following North Korea's latest missile launch
  • The G7 meeting in Italy also highlighted concerns over Trump's protectionist policies
  • US yields dropped across the curve as inflation data is seen to be weakening

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time; GMT + 8hrs)

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Speeches

  • 1300 – NZ – Reserve Bank of New Zealand assistant governor McDermott speaks on forecasting
  • 1750 – EC – European Central Bank's Daniele Nouy to speak at banking union conference
  • 1945 – EC – ECB’s executive board member Peter Praet speaks in Brussels
  • 2315 – EC – ECB’s Ignazio Angeloni speaks in Milan


Overnight news

United States

  • US retail sales grew less than expected at 0.4% (Exp. 0.6%) from an upwardly revised number in March of +0.1%. Core retail sales, i.e. those excluding automobiles, gasoline, building materials and food services, retail sales, and those that correspond most closely with the consumer spending component of gross domestic product, increased 0.2% (Exp. +0.4%) from an upwardly revised +0.7% in March (Exp.: +0.5%).
  • Motor vehicle sales increased 0.7% after three straight months of declines. There were solid gains in sales at building material and electronics and appliance stores. Sales at clothing stores dropped 0.5%. Sales at department stores edged up 0.2%. Sales at online retailers jumped 1.4%. YoY non-store sales leapt 11.9% while department-store sales sank 3.7%.

 

China

  • Chinese President Xi Jinping announced to delegates from more than 100 countries the “project of the century”, pledging $78 billion in international infrastructure spending for his Belt and Road Initiative. Xi touted his plan as a force for peace and free trade around the world as he positions himself and his country as a counterweight to US President Donald Trump.
  • The “road” refers to the maritime trade routes traced by the eunuch admiral Zheng He at the height of the 14th and15th century Ming dynasty influence over Southeast Asia, while the “belt” refers to the silk road through central Asia that flourished during the four-century long Han dynasty two millennia ago and the 7th-10th century Tang dynasty. 


North Korea

  • North Korea fired a ballistic missile, the first test since South Korea elected President Moon Jae-in, who has called for dialogue with Pyongyang. The projectile flew about 700 kilometres (435 miles) before falling into the sea between North Korea and Japan, the South's military said. Moon and Japanese Prime Minister Shinzo Abe condemned the launch, as did the US, which called for stronger sanctions.


Cyber attack

  • The massive global cyber attack may continue to claim victims as people return to work, warned European police agency Europol. Hackers, using a technique purportedly stolen from the National Security Agency, have infected more than 200,000 computers in more than 150 countries with the virus and demanded a ransom. It has affected hospitals, government agencies and companies including Nissan and Renault.

 

Germany

  • Angela Merkel’s Christian Democrats won a decisive victory in Germany's most populous state, North Rhine-Westphalia, handing the Social Democrats a humiliating defeat in the last test before the chancellor seeks a fourth term in September.

 

Foreign exchange

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  • The USD was offered on Friday following the lower-than-expected retail sales numbers and DXY is back in the 200d MA consolidation line.
  • USDJPY dropped following the missile launch from North Korea. The risk-off was well contained but it will be interesting to see how the international community will react.
  • EUR benefited from the USD selling and bounced from the 200d MA, which seems to be a very strong support.
  • Emerging markets: USDBRL had another drop and is not far from the strong support of 3.1000 on strong bond inflows. USD/Asia was supported at the overall low levels. ADXY closed above the 200d MA at 105.26 and now has room to move to the October 2016 levels and higher.


Foreign exchange volatilities

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  • The market is getting active in USDCAD buying volatilities for the next Opec meeting date (May 26). Spot remains high just below the 1.3800 level.


Rates

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  • US yields dropped across the curve as inflation data is seen to be weakening
  • Long-end European government bonds also closed higher, paring earlier drops due to the ECB’s indication of an exit from ultra-loose policy from July. This is boosted by the US inflation data release.


Commodities  

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Equities

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  • US markets were mixed as the Dow and S&P 500 closed weaker while the Nasdaq continues to outperform against its peers. European stocks finished higher on Friday with FTSE 100 leading the region, up 0.66%, while Germany's Dax and France's CAC 40 were up 0.47% and 0.41% respectively.
  • JC penny added to the list of underperforming retailer woes with a 13.99% drop on Friday as earnings released on Friday were disappointing, showing a quarter net loss that widened to $180 million, or 58 cents/share, from a loss of $68 million, or 22 cents/share, in the same period a year ago.
  • General Electric hit a 52-week low on Friday after the company's stock was downgraded to "sell" from "hold" by analysts at Deutsche Bank who said that the company will be forced to cut its current 24 cents/share dividend and lower its earnings guidance in the coming years. General Electric closed 60 cents lower to $28.27.
  • Snap recovered 6% from its Thursday selldown after its earnings release, with some analysts citing a buying opportunity after the recent price discount. Snap's improving monetisation abilities will be the key driver for the social media platform as it closed $1.09 higher to $19.14.


Asia Pacific equities

Hong Kong 

Analyst ratings

- AAC Technologies (2018 HK): Cut to Underperform at Macquarie, PT HK$75

- Biostime Int’l (1112 HK): Raised to buy at Daiwa, PT HK$26.20

- CRRC (1766 HK): New accumulate at Guangfa Securities, PT HK$8.20

- Pacific Textiles (1382 HK): Cut to neutral at Haitong Intl, PT HK$9.16

- Power Assets (6 HK): Cut to neutral at Macquarie, PT HK$73.70

- Sands China (1928 HK): Vegas Sands upgraded at Barclays

- VTech Holdings (303 HK): Raised to buy at Haitong Intl, PT HK$120

Preview

- Airlines: China in talks with US, France for more air rights, CAAC says

- Banks: April new loans 1.1t yuan; est. 815b yuan; banks’ end-April wealth products value rises on month

- Developers: HKMA sees rising potential risk in bank lending to developers, tightens construction financing to contain mortgage risk; Hong Kong existing home prices rise 0.53% on week: Centaline

- Energy: China crude build at Shandong ports linked to import quotas: EA; China said to plan 6% cap on gas distributor investment returns; CNPC to ink $20b of deals; gas storage with Gazprom: chairman

- Steel: NDRC plans more M&A, reorganization in steel sector

- AAC (2018 HK): Denies violating rules for disclosing connected parties; says “dubious accounting” allegations “groundless”

- BOE Tech (200725 CH): Flexible AMOLED plant starts production in Chengdu

- Bocom (3328 HK): Bocom Intl sets IPO offer price at HK$2.68/shr

- China Everbright (165 HK): Airasia, China Everbright in JV to develop carrier: Bernama

- China National Building, Agbank (601288 CH): Plan 30b yuan debt-equity swap

- China Resources Cement (1313 HK): Expects 6-mo. profit to rise significantly

- China Vanke (2202 HK): To hold shareholder meeting on June 30

- Evergrande (3333 HK): Hengda Real Estate in 10 project pacts

- Geely Auto (175 HK): Proton’s owner said to discuss Geely’s offer next week

- Glencore (805 HK): Belarus President Lukashenko meets Glencore executives

- ICBC (1398 HK): May invest in Czech steel maker Vitkovice: CTK

- Melco Int’l (200 HK): Bought back 3.82m shrs for HK$66m May 12

- Mingfa Group (846 HK): Plans to issue up to $220m 11% bonds due 2020

- Ping An (2318 HK): Life insurance Jan-Apr gross premium income 184.6b yuan

- Siasun Robot (300024 CH): In investment alliance with Johor Corp.: Bernama

- Shanshui Cement (691 HK): Fails to repay bond due Friday

- Sunac China (1918 HK): Unit to buy developer for 10.3b yuan

- Tianjin Capital (600874 CH): To buy equipment to upgrade sewage plants

- TVB (511 HK): Considers legal implication of SFC ruling; to resume trading

- Yue Yuen (551 HK): 3-month net $124.5m vs $95.3m year ago

- Zhoushan Port (601018 CH): Denies report on Jakarta investment

- ZTE (763 HK): ZTE, Forthnet to sign 500m euro investment accord


Japan

Analyst ratings

- Gurunavi (2440): Cut to neutral at Okasan

- Hitachi (6501): Raised to overweight at JPMorgan

- Line (3938): Cut to underweight at MUFJ-MS

- Mitsubishi Estate (8802): Cut to neutral at Iwai Cosmo

- Renesas (6723): Raised to outperform at Macquarie

- Rohto Pharma (4527): Raised to neutral at Daiwa

- Yusin Precision (6482): Cut to neutral at Mito

Preview

- Asatsu-DK (9747): 1Q net income increases to 1.5b yen from 51m yen a year earlier

- Credit Saison (8253): Full-year net income +61.5% y/y to 42.3b yen, beats its forecast by 9.7%

- Dai Nippon Printing (7912): Full-year net income -25% y/y to 25.23b yen, misses its forecast by 9.9%; to buy back as much as 2.44% of shares for 15b yen

- Harmonic Drive Systems (6324): Full-year net income jumps to 19.73b yen from 5b yen a year earlier; misses its forecast by 3.7%

- Hitachi (6501): Net income outlook for this FY at 300b yen vs. analyst estimate for 273.3b yen

- Hokuetsu Kishu Paper (3865): Full-year net income +39% y/y to 10.38b yen, beats its forecast by 30%

- Inpex (1605): Full-year net income at 46.2b yen, missing analyst estimate for 47.4b yen

- Meiji Holdings (2269): Full-year net income -2.9% y/y to 60.79b yen; beats its forecast by 7.6%

- Mitsui Fudosan (8801): Full-year net income +12% y/y to 131.82b yen, beats its forecast by 5.5%

- Nexon (3659): Scraps dividend payment plan after 1Q net misses forecast

- Nissin Electric (6641): Full-year net income +66% y/y to 14.16b yen; beats its forecast by 29%

- Recruit Holdings (6098): Sees operating profit above analyst estimates this FY, plans interim payout and stock split

- Resona Holdings (8308): Forecasts net income of 150b yen for this FY, below analyst estimate for 172.3b yen; raises dividend

- Sanrio (8136): Sees operating profit of 10.8b yen this FY, topping analyst estimate for 8.2b yen

- Sega Sammy Holdings (6460): Sees operating profit of 20b yen this FY vs. analyst estimate for 33.5b yen

- Shiseido (4911): 1Q net income declines 49% y/y as sales rise

- Showa Shell Sekiyu (5002): Swings to 1Q net profit of 14.09b yen from loss of 6.94b yen a year earlier

- Solekia (9867): Swings to full-year net profit of 141m yen from loss of 198m yen a year ago, beats its forecast by 28%

- Sosei Group (4565): Swings to full-year net income of 9.8b yen from loss of 1.43b yen a year ago; misses its forecast by 25%

- Sumitomo Electric Industries (5802): Full-year net income +18% y/y to 107.56b yen, beats its forecast by 17%

- Suzuki Motor (7269): Forecasts operating profit drop this FY after 4Q beat; raises dividend

- Toshiba (6502): Hon Hai said to seek at least $15b loan for Toshiba chip bid

- Toppan Printing (7911): Full-year net income -7.7% y/y to 32.54b yen; beats its forecast by 36%

- Toyo Tire & Rubber (5105): 1Q net income climbs to 5.88b yen from 61m yen a year earlier

- Yamaha Motor (7272): 1Q operating profit at 37.3b yen vs. analyst estimate for 38.1b yen


Australia

Analyst ratings

- AGL Energy (AGL): Cut to neutral at Credit Suisse, PT A$28

- MyState (MYS): Cut to hold at Shaw and Partners, PT A$4.70

- Origin Energy (ORG): Cut to neutral at Credit Suisse

- Qube Holdings (QUB): Cut to hold at Morgans Financial, PT A$2.74

Preview

- Gas export boom loser set to win from Australia supply crunch

- ANZ Bank (ANZ), Commonwealth Bank (CBA), Macquarie Group (MQG), National Australia Bank (NAB), Westpac (WBC): Aussie bank chief says whole industry should pay toward levy

- Aurizon (AZJ): UBS running auction for Intermodal unit: AFR

- BHP (BHP): Plans to drop Billiton from name, launches TV ad campaign

- Crown Resorts (CWN): Extends 2019 notes tender offer close date to May 16

- Fortescue (FMG): Iron ore rises 1.7%, second gain in eight sessions, according to price index compiled by Metals Bulletin

- Orocobre (ORE): Bearish bets near record after target cut: Chart

- Rio Tinto (RIO): Boosts share buyback instructions to max. $300mln


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Slow pace ... the US CPI increased 1.9% in the year to April, the smallest gain
since October 2015. Photo: Shutterstock


– Edited by Gayle Bryant


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. 


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