Article / 02 September 2016 at 2:18 GMT

Morning Report APAC: US payrolls the only game in town

APAC Sales Trading Desk / Saxo Capital Markets


  • South Korea’s won strengthened after US manufacturing data weakens USD
  • Oil showing some early strength in early Asian trading
  • ISM Manufacturing dropped more than expected from 52.6 to 49.4 in August
  • Nonfarm payrolls report key to determining a Fed hike this month

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)


1400 (EUR) ECB’s Hansson Speaks in Tallinn on Brexit Impact for EU

Overnight news

US:  ISM Manufacturing dropped much more than expected from 52.6 to 49.4 in August (expected 52.0). Eleven of the 18 industries surveyed by the purchasing managers’ group indicated some weakening. The Markit US Manufacturing PMI was better at 52.0 (expected 52.1). Softer rates of new order and employment growth were the main factors weighing on the headline index. The ISM Prices Paid also dropped to 53.0 (Exp,54.8) from 55.0.

US: Initial Jobless Claims came in at 263,000 (expected 265,000) ADP Employment numbers rose 177,000 in August (expected 175,000) and July was revised up from 179,000 to 194,000. The four week moving average of claims edged down 1,000 to 263,000. Continuing unemployment claims rose 14,000 to 2,159,000 (expected: 2,145,000)
South Korea:
GDP grew more than expected at 3.3% (exp 3.2%) year-on-year and 0.8% quarter-on-quarter (exp: 0.7%). It is the fastest pace of growth since the fourth quarter of 2014. Private consumption was up 1% q/q; construction investment +3.1% q/q; facilities investment +2.8% q/q; govt spending +0.1% q/q.

Foreign exchange



A poor ISM reading pushed the USD lower on expectation that the economic data won’t be sufficient for the Federal Reserve to raise rates in September. The nonfarm payrolls data tonight will definitely be an important number to watch. DXY failed to break higher and the 200 Day Moving Average is trading back in the range with 95.18 the first support.

USDJPY confirmed the break above the 50 DMA, the next target is the 100 DMA at 105.38 that should serve as good resistance.

GBPUSD remains on the range 1.30/1.35 for the past 2 months. The positioning is on the short side so the risk will be on the topside on any strong USD selling globally.

In emerging markets, USD was overall well offered except for USDBRL which rallied almost 1% after the Brazilian Central Bank kept the Celic Rate unchanged at 14.25% but was less hawkish and showing they are open to easing, depending on how confident it becomes that inflation will fall to the 4.5% target centre in 2017-2018.

Foreign exchange movementsxxx

Vega in AUDUSD is well offered with 1 year volatility failing to break the 11.50 level. Gamma is well supported everywhere due to the NFP number tonight.

The market is already well positioned in the volatility market for USDJPY upside. Expect to see a lot of sellers of Gamma after the number making the Spot very sticky if the number is not very strong.


US Treasury yields erased early gains after weak ISM manufacturing data, retreating from a one-week high to end largely unchanged.

The yield on the 10-year Treasury note ended up 0.2 basis points at 1.570%, after earlier breaking above 1.6% for the first time this week.

The yield on 10-year UK gilts climbed 6 bp to 0.597% after UK Markit/CIPS manufacturing PMI recorded one of its sharpest rebounds.





US stocks ended mostly higher on Thursday, recovering from earlier losses, as investors braced for the August jobs report on Friday.

Auto sales remained solid during August, but momentum seems to be waning compared to a year ago. General Motors (-0.38%) sales fell 5.2% as GM continued on its path to reduce fleet sales.

Ford (-1.27%) sales slumped 8.8%, while Honda (+1.07%) sales dropped 3.8%. Fiat Chrysler (+1.29%) bucked the trend, with sales up 3.1%, mostly on the back of a 12% jump in sales for its Jeep brand.

Campbell Soup declined 6.3% after Q4 earnings per share from continuing operations fell to $0.46 from $0.49 a year ago. Sales inched down 0.4% to $1.69 billion.

Asia Pacific Stocks

Hong Kong
Analyst ratings

-      China Gas (384 HK): Cut to neutral at Mizuho Securities
-      China Resources Gas (1193 HK): Cut to neutral at Mizuho
-      ENN Energy (2688 HK): Cut to underperform at Mizuho


-      CK Hutch(1) and VimpelCom Ltd. won European Union approval for a merger creating Italy’s largest wireless provider. The deal is still subject to Italian regulatory approval. Expect to be completed by Q4. Saw multiple brokers raisie their TPs (range HK$108.8-HK$117).
-      HK Property: around 1,000 units will be up for sale over the w/ends. They are mainly from One Kai Tak(COLI, 300 units), The Papillons in TKO (Chinachem,535) and Grand Yoho (SHKP, 228).
-      Lenovo (992) has held talks with Amazon on potentially using the Alexa voise assistant in icomputers and other devices (CNET)
-      Shenzhou Intl (2313) sold 49% of the issued shares of Maxwin, which engages in retail business of casual and sportswear apparel in China to NetEase(HK)
-      R&F Properties (2777) Aug. contract sales +27% MoM/+49% YoY to RMB5.69b, while Jan-Aug contract sales +37% YoY to RMB40b
-      Nexteer (1316)’s President & COO Laurent Robert Bresson has resigned with effect from August 31, 2016 to pursue other personal interests
-      SMIC (981)’s senior management expects full year revenue growth to increase to 25% from 20% predicted earlier and co will continue to explore car chip market in China.
Analyst ratings
-      Credit Saison (8253 JP): Raised to outperform at Macquarie
-      Nippon Paint (4612 JP): Cut to equalweight Morgan Stanley MUFG
-      Nomura (8604 JP): Raised to hold at Jefferies
-      Rakuten (4755 JP): Rated new buy at Haitong
-      Sanyo Shokai (8011 JP): Raised to neutral at Mitsubishi UFJ Morgan Stanley

-      Ito En (2593 JP): 1Q oper. profit +52% to 6.52b yen
-      Novarese (2128 JP): Polaris Capital tender offer at 1,944 yen/share vs Thursday close of 792 yen
-      Uchida Yoko (8057 JP): Forecasts oper. profit -23% to 2.7b yen for current fiscal year
Analyst ratings
-      CYBG (CYB@AU) cut to neutral from outperform at Macquarie
-      Independence Group (IGO@AU) cut to hold from buy at Bell Potter
-      Mirvac (MGR@AU) cut to neutral vs buy at UBS

-      S&P/ASX 200 index quarterly rebalance
-      Nuplex (NPX@NZ) says Allnex Belgium gets EU antitust clearance for takeover of co.
Source: CIMB / Bloomberg


 Today Asia is far less interested in itself and far more preoccupied with
US numbers, and by proxy what that means for the Fed. Photo: iStock

– Edited by Adam Courtenay

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