Morning Report APAC: USD rallies on bullish Fed speeches
- The USD rallied following the two bullish Fed speeches over the weekend
- San Francisco's Fed President said a return to rate hikes 'makes sense'
- US stocks finished lower as investors worried about imminent rate hikes
- Urjit Patel has been named the next Reserve Bank of India governor
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time; GMT+8)
- 2145: EUR: – European Central Bank publishes weekly QE data
San Francisco Federal Reserve Bank President John Williams said a return to rate hikes “makes sense":
- In the context of a strong domestic economy with good momentum, it makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later.
- If we wait until we see the whites of inflation’s eyes, we don’t just risk having to slam on the monetary policy brakes, we risk having to throw the economy into reverse to undo the damage of overshooting the mark. And that creates its own risks of a hard landing or even a recession.
- The broader national economy is in good shape: We’re at full employment and inflation is well within sight of, and on track to reach, our target. Under these conditions, it makes sense for the Fed to gradually move interest rates toward more normal levels.
On Sunday Fed Vice-Chairman Stanley Fischer said the central bank is close to meeting its targets for full employment and inflation. He said this year's pace of job growth, while slower than that seen last year, was "more than enough" for the labour market to continue to improve. "The behaviour of employment has been remarkably resilient," he said, adding that inflation outside of food and energy prices was "within hailing distance" of 2%, the Fed's target rate.
Bank of Japan Governor Haruhiko Kuroda said there’s a "sufficient chance" of more easing at its policy meeting next month. The comments in a Sankei interview appear to move beyond his usual insistence that the Japanese central bank won’t hesitate to add stimulus if needed. There's "technically" room for deeper negative rates, he said, while ruling out helicopter money.
Urjit Patel has been named the next Reserve Bank of India governor. He is the current deputy governor and was an integral part of the monetary policy and liquidity management. This would give continuity to the current RBI policies. However, he has been an inflation hawk and the market was expecting a more dovish name to take over.
- USD rallied following the two bullish Fed speeches over the weekend. DXY was up 0.37%.
- The move higher was quite broad with a special note for the JPY following BoJ governor comments (see above) and the GBP where British Prime Minister Theresa May is still leaning toward the first part of 2017 as the best moment to trigger the start of formal talks over the European Union exit.
- The GBP is following the USD selling and is now trading again at the resistance band 1.3050/1.3070. It will be interesting to see the retail sale numbers today and if there was any negative effect from the Brexit. There is no significant resistance above that before 1.3380.
- In Emerging Markets, the main mover is USDKRW, which bounced hard from the 1090 level to cover the gap realised on August first and breaking above 1120.
Foreign exchange movements
- US benchmark yields were higher in late trading Friday by 3-5 basis points, off session highs reached concurrently with UK and most core Eurozone yields.
- UST 10-year yield rose as much as 5.6bp vs 7.4bp increase for UK 10-year yield; US–UK 10-year spread contracted to 96bp, narrowest since August 5.
- Bund markets stuck in tight range as volume near their lowest levels this year, peripherals slightly wider led by Portugal bonds, ratings company Fitch may comment on Portugal after Europe market hours.
- US stocks finished lower as investors worried about whether the Federal Reserve will raise interest rates sooner rather than later.
- Applied Materials rallied to close up 7.1% after the maker of semiconductor manufacturing tools late Thursday said orders hit a record high in the third quarter.
- Stoxx Europe 600 lost 0.8%, with Italian shares leading the charge lower due to renewed concerns over the country’s banking system.
- Banca Monte dei Paschi di Siena SpA lost 2.6%, closing at a record low. Among other Italian banks falling: UniCredit Spa slumped 6.3%, Banca Popolare dell’Emilia Romagna lost 5.8% and Banca Popolare di Milano gave up 5.3%.
- Other European banks dragged lower include Deutsche Bank dropped 3.1%, Banco Popular Español SA fell 1.7% and Banco Comercial Português SA erased 1.7%.
- BMW AG shares declined 1.9% as Goldman Sachs downgraded its rating to neutral from buy as part of the bank’s review of the auto industry.
- Best Pacific (2111 HK): Rated new buy at Core Pacific-Yamaichi
- Changyuan (600525 CH): Rated new buy at Haitong
- China Unicom (762 HK): Raised to neutral at UBS
- Chow Tai Fook (1929 HK): Rated new buy at Haitong
- Cogobuy (400 HK): Rated new buy at First Shanghai
- HKEx (388 HK): Cut to sell at Haitong
- Kunlun Energy (135 HK): Cut to underperform at Credit Suisse
- Luk Fook (590 HK): Rated new buy at Haitong
- Tianjin Port (600717 CH): Rated new add at Northeast Secs
- Zhejiang Expressway (576 HK): Cut to neutral at JPMorgan
- SHK (16) to start selling first 226 units of its Yuen Long project Grand YOHO this week. Selling price starts from $HK5.28mln
- CH Overseas PPTY (2669) Jan-Jun net profit $HK114mln, up 115% YoY, dividend $HK0.011. Rev $HK1.26bn, +7.69% YoY.
- Aoyuan (3883) Jan-Jun contracted sales RMB 10.5bn, up 73.5% YoY, meeting 62% of FY target. The company is confident in meeting the target but will not increase the target.
- Yuexiu PPTY (123) Jan-Jun net profit RMB 974mln, down18.7% YoY, div $HK0.029. Rev RMB 5.1bn, down 23.33% YoY. Contracted sales RMB 16bn, up 39.5% YoY, meeting 62% of FY target.
- BJ Capital (2868) Jan-Jun net profit RMB 520mln, up 3% YoY. Rev RMB 4.9bn, down 9.9%. Land reserve 11.59m square metres as of June.
- Central CH (832) Jan-Jun net profit RMB 255mln, down 19.7% YoY. Rev RMB 2.55bn, down 34.5% YoY.
- CKI (1038) denied commenting on the rumour of the sale of its 75% stake in the Centre at $HK34.8bn. But Victor Li said the company can sell any building apart from CKC and Hutchison House. Besides, CKI’s Ausgrid deal was blocked by the Australian govt. The company said the ruling is based on “reasons beyond the obvious” that are unrelated to the co.
- Road King Infra. (1098) Jan-Jun net profit $HK218mln, rev $HK4.3bn.
- Vanke (2202) Jan-Jun net income RMB 5.35bn, up 10.3% YoY. Rev RMB 74.8bn, up 49% YoY.
- CIRC denies that it has requested Evergrande (3333)’s Hui Ka Yan to buy 51% stake in Vanke.
- Guotai Junan (1788) Jan-Jun profit attri.shrholders. $HK547mln, down 10.6% YoY, div $HK0.03.
- Haitong (665) Jan-Jun net profit $HK810mln, down 61.9 % YoY, div $HK0.075. Rev $HK2.45bn, down 40.79% YoY, of which brokerage RMB 1.17bn, corp financing RMB 631mln, institutional eqty RMB 282mln.
- Huatai Sec (6886) Jan-Jun net profit RMB 2.84bn, down 57.43% YoY. Rev RMB 11.58bn, down 45.6% YoY.
- BK of Chongqing (1963) Jan-Jun net profit RMB 2.03bn, up 10.45% YoY. Rev RMB 4.89bn, up 14.69% YoY. Net interest inc RMB 3.93bn, up 15.1% YoY. Net interest margin 2.26%.
- BK of Qingdao (3866) applies for listing in SZ, to issue no more than 1b A-shrs.
- Qingdao Port (6198) Jan-Jun net profit RMB 1.2bn, up 10.4%YoY. Rev RMB 4.12bn, up 15.7%YoY.
- Meitu said to plan raising up to $1bn in its HK IPO in 4Q.
- Shenguan (829) Jan-Jun net profit RMB89m, down 41%. Rev 431m, down 1.1% YoY.
- Dongwu Cement (695) Jan-Jun net loss RBM 4.3mln, vs loss of RMB 14.1mln last year.
- China Everbright (165) said seeking to buy Liverpool stake
- China Highspeed (658) 1H net income RMB 576mln, up 9.9% YoY
- Huadian Fuxin (816) 1H net income RMB 1.45bn, up 23.9% YoY
- Kingsoft (3888) 2Q net loss 807.6mln yuan vs 94mln yuan profit year ago
- WH Group (288) 1H net $466mln before fair value adjustment
- Zhaojin Mining (1818) 1H net up 13% YoY to 254.6mln yuan
- Zhuzhou CRRC (3898) 1H net 1.29bn yuan, up 5.7% YoY
- FamilyMart (8028 JP): Downgraded to neutral at Haitong
- Lasertec Corp (6920 JP): Raised to buy from neutral at Ichiyoshi
- Ono Pharmaceutical (4528 JP): Raised to neutral at UBS
- Insurance Australia Group (IAG@AU) cut to underperform at Credit Suisse
- Spark NZ (SPK@NZ) raised to buy vs neutral at New Street Research
- Medibank Private (MPL@AU) cut to underperform at Credit Suisse
- Woodside Petroleum (WPL@AU) raised to sector perform at RBC Capital
- Commission extends its appraisal of proposed NZME/Fairfax NZ merger to March 15, 2017
- Origin Energy (ORG@AU) said to start Australian wind farm sale next week
- Bluescope (BSL@AU) full-year earnings
- GWA Group (GWA@AU) full-year earnings
- Northern Star (NST@AU) full-year earnings
- NIB Holdings (NHF@AU) full-year earnings
- Growthpoint (GOZ@AU) full-year earnings
- Japara (JHC@AU) full-year earnings
- APN Outdoor (APO@AU) first-half earnings
- Fortescue (FMG@AU) full-year earnings
- Seek (SEK@AU) full-year earnings
- Spark Infra (SKI@AU) first-half earnings
- UGL (UGL@AU) full-year earnings
- Auckland Airport (AIA@NZ) July traffic statistics
- Automotive Holdings (AHG@AU) halted for placement
Source: CIMB / Bloomberg
– Edited by Gayle Bryant
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