Article / 11 September 2017 at 2:46 GMT

Morning Report APAC: USD, indices rise as storm passes

APAC Sales Trading Desk / Saxo Capital Markets

  • Japan’s Topix index headed for its biggest gain in more than three months
  • Hurricane Irma, was destructive but didn’t reach the feared Category 5 storm
  • Hang Seng Index was up 1%, while indices in China were also higher

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



1500: EU – ECB’s Coeure speaks in Frankfurt

Overnight news

US: Hurricane Irma hit Florida as a Category 4 storm. The storm's path shifted over the weekend, sparing Miami a direct hit and putting Tampa in the bulls eye, prompting evacuation orders for about 6.4 million people. The system, which has since been downgraded to a Category 2, could cost $192 billion and threatens $2 trillion of property.

Washington: The House of Representatives passed legislation Friday extending the US debt limit and government funding through December 8.

The bill, already approved by the Senate, now goes to President Donald Trump for signature. It also contains $15.25 billion in disaster aid to help with recovery efforts after Hurricane Harvey, and anticipated damage from Hurricane Irma, which is now bearing down on Florida.

Treasury Secretary Steven Mnuchin and Office of Management and Budget Director Mick Mulvaney pressed Republicans to vote for the deal on Friday, but 90 voted against it. House conservatives were reportedly angry the debt-limit extension wasn't coupled with spending cuts.
CPI and PPI surprised on the upside printed 1.8% YoY for CPI (Exp. 1.6%, Prev. 1.4%) and 6.3% YoY for PPI (Exp. 5.7%, Prev. 5.5%).

PI increased driven by higher food prices, while the factory-gate prices also rose, fuelled by rising commodity costs. Inflation remained well below the government’s annual inflation regulation target of around 3% for 2017.

Food prices, the biggest component of the CPI, rose 1.2% month on month, the bureau said.

Vegetable prices rose 8.5% from July as scorching summer and widespread heavy rains fueled transport costs.

Egg prices climbed 13.5% from July while the prices of pork, a staple meat in China, rose 1.3 percent month on month.

Excluding volatile food and energy prices, the core CPI increased 2.2% year on year in August, up slightly from July’s 2.1%. The core CPI has been holding steady at a little above 2% since March.

Analysts said the pick-up in consumer inflation is unlikely to continue because of a high comparative base in September 2016 and the fading effects of seasonal factors during the rest of the year.

PPI growth was boosted by increases in the prices of steel, non-ferrous metals, as well as oil and natural gas. The sector breakdown showed factory reflation was benefiting mainly upstream industries, with downstream industries squeezed. 

Foreign exchange



The strong USD selloff continued until NY close on Friday night. Despite some profit taking seen this morning in Asia, there is nothing preventing a continuation of the selloff.

Volatilities have picked up everywhere but so far the move has been going the opposite direction of what some large US funds thought in July which was a large selloff in the market during September.

Few analysts are trying to pick the bottom in USDCNH. And talking about that, there has been some talk that PBOC will effectively remove a reserve requirement for trading forex forwards starting today.

Financial institutions previously had to set aside cash when buying dollars for clients through currency forwards. The move may slow the pace of yuan appreciation after its biggest two-week surge in at least a decade.

DXY still trades below the support of 92.00 which becomes a good resistance and there is still nothing underneath to stop it. The pain trade is still lower.

EURUSD has confirmed the break above 1.2000 on an overall quiet market after a strong rally seen on Thursday.

GBPUSD is the definition of pain trade. I can’t talk to anyone who is not bearish GBP and the break of 1.3000 last week has hurt a lot of funds. The next level to watch is 1.3267, the previous high of the year.

USDJPY is testing new lows everyday and I still don’t see any reason to be long USD. We are seeing some profit taking this morning in Asia but offers will be there below 109.

Emerging Markets: USDCNH has literally collapsed on Friday on stops to 6.4436 low. PBOC is now trying to slowdown the appreciation pace (see above) and few banks are trying to pick the lows at this level.

The trend is still lower in the graph but it will be interesting to see if the removal of the reserve requirement for the forwards will help quote Corporate offers and the outflows will resume.

Foreign exchange movements


There have been very large correlation trades in the market on Friday. Funds/Banks have been buying USD volatility against selling crosses volatility betting that the correlation to the USD of all the currencies will rise against the USD.

The liquidity in USDCNH Gamma (Short dated) is drying up and remains high with Spot now above 6.5000 again.




US yields inched up following the Fed’s Dudley continuing to emphasise on the gradual removal of monetary easing.

It is expected to extend the move higher today with North Korea not doing anything during the weekend seeing investors unwinding risk-off assets.

Core European yields were higher amid Reuters reporting that the European Central Bank has discussed on the possible reduction of QE scenarios. Peripherals extended their outperformance.







US stock indexes closed mostly lower Friday, finishing a holiday-shortened week with modest losses, as investors traded cautiously ahead of a potential missile test by North Korea and Hurricane Irma’s arrival on the Florida coast over the weekend.

Shares of major insurance companies rebounded on Friday, recovering slightly from the huge losses due to hurricanes. Everest Re Group Ltd.jumped 5%, but was still down 10% over the week. XL Group gained 5.8%, trimming its weekly decline to 5%, while American International and Allstate were up 2.6% and 3.7% respectively.

Equifax plunged 14% after the company late Thursday disclosed that personal data of 143 million Americans, including Social Security numbers, driver’s license numbers and credit card numbers, had been exposed in a hack.

French luxury group Hermes International fell 2.6% after it failed to be admitted to the CAC40 index.

AstraZeneca rallied 0.34% on recent headlines, after announcing its intention to shift almost US$6bn of its R&D budget to cancer despite the failure of a key study they did earlier this year.

Also, CEO Pascal Soriot suggesting that the lack of progress in negotiations (Brexit) made it impossible for him to sign a public letter of support for the British governments strategy.
Asia Pacific Stocks
Hong Kong
Analyst Ratings:
-          Yechiu Metal Recycling (601388 CH): New Buy at SWS, PT 7 Yuan
-          BYD Electronic (285 HK): BYD Electronic Cut to Underweight at JPMorgan, PT HK$16
-          Anhui Jianghuai Auto (600418 CH): Tesla Challenger NIO to Start Selling First Model in Mid Dec.
-          Anxin (600816 CH): Anxin Trust Plans to Sell up to 6.8B Yuan of Preferred Shares
-          China National Building (3323 HK): CNBM, Sinoma Entered Merger Pact
-          Kweichow Moutai (600519): CH Kweichow Moutai Sees Strong Growth Along Belt and Road: Xinhua
-          HSBC (5 HK): HSBC Bought Back 3.14M Shares at Avg 727.42 Pence Each Sept. 8
-          Nanshan Aluminum (600219 CH): Nanshan Aluminum Seeks Up to 5B Yuan for Indonesian Project
-          Prada (1913 HK): Prada First Half Net Income Misses Estimates
-          Prada Warns Turnaround to Take Longer Than Expected
-          Qingdao Haier (600690 CH): Qingdao Haier Plans to Sell up to 5.64B Yuan Convertible Bonds
-          Tencent (700 HK): Tencent CEO Ma’s Charity Sells HK$645m Shares: HK Economic Times
-          Wanhua Chem Group (600309 CH): Wanhua’s Borsodchem Takes EUR79m MFB Loan Using Chinese Funding
-          Wharf Holdings (4 HK): Wharf Holdings Ratings May Be Cut by Fitch

Analyst Ratings:
-          Daikin Industries (6367): Cut to neutral from buy at Goldman
-          Kinden (1944): Cut to neutral from outperform at Daiwa
-          Komatsu (6301): Raised to buy from neutral at Goldman
-          Kubota (6326): Cut to neutral from overweight at JPMorgan
-          Kura (2695): Cut to neutral from buy at Ichiyoshi Research
-          Lasertec (6920): Raised to neutral from underperform at Credit Suisse
-          Mitsui & Co (8031): Raised to overweight from equalweight at Morgan Stanley MUFG
-          Nomura (8604): Raised to neutral from underperform at SMBC Nikko
-          Shikoku Electric (9507): Rated new neutral at Okasan Securities
-          Shimadzu (7701): Raised to outperform from neutral at Daiwa
-          Shimizu (1803): Raised to outperform from neutral at Credit Suisse
-          United Super Markets (3222): Rated new neutral at Okasan Securities

-          Ateam (3662): Full-year operating profit 4.1b yen vs co. forecast 3.8b yen; forecasts OP of 4.7b yen for current FY
-          Canon (7751): To invest ~23b yen in Miyazaki plant for digital cameras
-          Freebit (3843): 1Q operating profit -54% to 244m yen
-          Honda (7267): To launch electric car for China market in 2018
-          Itokuro (6049): Raises operating profit full-year forecast 15% to 1.74b yen
-          Kanamoto (9678): 9-month operating profit +14% to 12.1b yen
-          Miraial (4238): Forecasts full-year operating profit +77% to 830m yen
-          Nippon Kayaku (4272): Chugai files patent infringement suit against co. over Herceptin biosimilar
-          Nippon Parking Development (2353): Full-year operating profit 3.1b yen vs co. forecast 3b yen; forecasts OP of 3.5b yen for current FY
-          Ono Pharma (4528): Japan Health Ministry approves Opdivo for stomach cancer, Kyodo reports; Opdivo-Yervoy combo cut death risk 37% compared with Pfizer’s Sutent in some kidney cancer patients
-          Poletowin Pitcrew (3657): 1H operating profit 1.12b yen vs co. forecast 997m yen
-          Tsubaki Nakashima (6464): Carlyle selling stake worth 41b yen

Analyst Ratings:
-          None
-          Companies trading ex-dividend today: Blackmores, Caltex Australia, Downer EDI, Noni B, Orora, Qube, Reliance Worldwide, Retail Food Group, Sandfire, Steadfast Group
-          AGL Energy (AGL AU): Australia Keeps Pressure on AGL to Extend Life of Liddell Plant
-          ANZ Bank (ANZ AU): China’s Export Engine Slows as Imports Maintain Steady Gains
-          BHP Billiton (BHP), Rio Tinto (RIO) and Fortescue (FMG): Iron ore fell 1.7% to $74.36/t
-          Commonwealth Bank (CBA): Said to eye global bond market this week: AFR
-          Independence Group (IGO AU): Electric Vehicle Metal Demand Boom Still to Hit Nickel Market
-          NAB (NAB AU): Australian Banks May Exit Wealth Management Without Being Forced
-          Newcrest (NCM AU): Newmont, Newcrest Lead Attack on Australia Gold Royalty Hike
-          Northern Star (NST), Evolution (EVN), Saracen (SAR), Regis Resources (RRL), Resolute Mining (RSG), OZ Minerals (OZL): Gold Hits Highest in a Year on Korean Threat as Dollar Drops
-          Tatts Group (TTS), Tabcorp (TAH): Tatts Chairman Boon optimisticholders will approve deal: AFR
-          Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Beach Energy (BPT), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil Tumbles as Irma Imperils Demand in Gasoline-Thirsty Florida
-          Whitehaven Coal (WHC): Trade fight looms as China curbs coal imports: AFR

Hurricane Irma was downgraded to a storm, sparing Florida its worst. Photo: Shutterstock

– Edited by Adam Courtenay

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