Article / 01 August 2016 at 2:08 GMT

Morning Report APAC: USD sold off as GDP disappoints

APAC Sales Trading Desk / Saxo Capital Markets


  • US GDP came in much lower than expected at 1.2% for Q2; 2.5% was expected
  • The USD was lower against all major currencies
  • The BoJ is set to announce 'bold' fiscal stimulus on Tuesday 
  • The biggest mover was USDJPY following the BoJ meeting


By Saxo APAC Sales Trading

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



  • 0915: USD – Federal Reserve's William Dudley speaks in Bali

Overnight news

United States

  • GDP came in much lower than expected at 1.2% for Q2 while the market was expecting 2.5% and was revised down for Q1 to 0.8% from 1.1%
  • Inventories fell for the first time in almost five years and business investment continued to wane. The only bright spot was the 4.2% gain in household purchases in Q2
  • The University of Michigan’s consumer-sentiment index dropped to 90.0 (Mkt Exp: 90.2) from 93.5 in June 


  • The Bank of Japan is expecting to announce “bold" fiscal stimulus on Tuesday but the market was disappointed by the BoJ not acting on Friday except by boosting the ETF purchases. 

South Korea

  • The June’s current account surplus widens to a record high $12.2bn. Trade surplus was at a record high mainly due to cheaper oil prices; S. Korea imports more oil-related goods than it exports, so a drop in oil prices improves balances, an official BOK member said.


  • Chinese central bank will study ways to combine Macro Prudential Assessment with prevention of off-balance-sheet business risks as such risks have become “non-negligible”. 

Foreign exchange



The poor GDP number pushed the DXY lower by 1% with the USD lower against all major currencies. This move was also triggered by month-end flows due to the fact that the US equity market was up 4-5% for the month of July. It will be interesting to see how the USD reacts without this month-end flows.

The biggest mover overnight was USDJPY with the disappointment from the BoJ meeting. Tomorrow will be important with the awaited fiscal stimulus and any disappointment would push USDJPY much lower as the market is still long USD.

Foreign exchange movements


USDJPY curve was sold off quite aggressively despite the move lower in spot and the market is now buying the two-months date ATM because it covers the next BoJ meeting. There is a possibility BoJ eases at the next meeting

G10 volatilities were mostly lower on very little activity.


US Treasuries rallied after a weaker than expected Q2 GDP data on Friday and the probability of a rate cut in September went down from 28% to 18% and 45% to 35% for December.
Friday was a volatile day for US Treasury as the US 10-year fell from 1.56% after the BoJ meeting before closing to 1.45%. Yield of US Treasury note also fell for a second month straight to 1.458%.
While the BoJ disappoints the market consensus of the scale of the stimulus, the BoJ doubles its US dollar loan facility for Japan companies. Noteworthy is that the dollar loan program was set up in April 2012 when there was a global shortage of dollars due to fears about the breakup of the euro and also to help companies easily tap foreign funding and push them to invest abroad.






  • The S&P 500 closed 0.2% higher to 2,173.55 last week, just within two points of its record, after data showing the American economy grew slower than forecast last quarter dampened the Fed's rate-hike possibility. The Dow Jones Industrial Average fell 0.1% to 18,432. It rose 2.8% in July, a sixth consecutive advance. The Nasdaq 100 Index rose 0.2% Friday, leaving it 7% higher in the month.
  • Google parent Alphabet rose to the highest since December after its quarterly profit topped estimates. 
  • Cigna declined after the health insurer reported quarterly earnings that missed estimates and cut its full-year forecast.          
  • Newell Brands jumped 6.2% after reporting adjusted Q2 EPS of $0.78 better than Mkt est: $0.72, from $0.64 a year ago. Revenue more than doubled due to the Jarden acquisition, and core sales jumped 5%.          
  • European stocks advanced with banks prominent ahead of their stress-test results from the European Banking Authority. The FTSEurofirst 300 index gained 0.7% to 1,347.43. The STOXX Europe 600 Banks index rallied 2.1%. In London the FTSE 100 crept up 3.37 points to 6,724.43.  
  • UBS climbed 0.5% after it beat Q2 consensus profit forecasts however it did warn that tough market conditions were likely to continue for the foreseeable future.
  • ArcelorMittal hiked 5.6% after reporting its best quarter in five years, with net profit increased to $1.1bn from $179mln a year before and total shipments to customers rose 2.9%. The company expects markets to remain strong in the second half of the year.
  • Barclays leapt 5.5% despite news it had reported a 21% slump in H1 pre-tax profits. Investors were encouraged to discover that profits from core businesses such as consumer and commercial lending, credit cards and investment banking, jumped 19% to £2.4bn.

Asia-Pacific equities

Hong Kong analyst ratings

  • ASM Pacific Technology (522 HK) cut to ’neutral’ vs ’outperform’ at Credit Suisse
  • Baidu (BIDU US) cut to ’hold’ at TH Capital
  • (JD US) rated new ’buy’ at DBS Vickers

Hong Kong preview

  • China Asset (1359 HK) to sell up to 300m preference shares
  • CCB (939 HK) to pilot non-performing asset securitization
  • China Galaxy Sec (6881 HK): VP cooperating with investigation
  • China Life (2628 HK) profit may drop up to 70% on returns
  • China Moly (3993 HK): MOFCOM won’t review acquisition further
  • China Railway (390 HK) unit gets approval for asset swap
  • China Railway Construction (1186 HK) 1H profit falls 4.9%
  • China Reinsurance (1508 HK) sees 1H profit drop of about 60%
  • China Taiping (966 HK) expects 6-mo. profit to fall 45-50%
  • China Shipping Dev (1138 HK) sees 1H profit rise of 100-150%
  • China State Cons. (601668 CH) expects 1H net to rise >15%
  • China Unicom (762 HK) expects 1H net to drop approx. 80%
  • Citic Resources (1205 HK) 1H net HK$102m vs HK$850.3m loss yr earlier
  • Evergrande (3333 HK) hiked Langfang Development stake to 10%
  • Fosun (656 HK) plans sale of assets in reversal of $15 billion M&A spree
  • Fosun (656 HK) to acquire control of Brazil’s Rio Bravo Fund
  • Fosun (656 HK): BCP deal to extend Europe, Africa business
  • Future Land (1030 HK) 1H net income 490.8m yuan vs 348.1m yuan yr earlier
  • Gome warns (493 HK) 1H profit may fall about 90%-100% on year
  • HKEx (388 HK) board didn’t approve proposed listing reform plan: SCMP
  • Hutchison (1 HK, 13 HK) asks court to overturn O2 takeover ban
  • Pacific Basin (2343 HK): 1H net loss $49.8m vs profit yr ago
  • Ronshine China (3301 HK) unit issues fourth tranche of bonds
  • Sinopec (386 HK) says CFO to resign because of job duty
  • Sinopec (386 HK): damaged gas pipeline fixed, resumes supply
  • Soho China (410 HK) to sell Shanghai property for 3.22b yuan
  • Soochow Securities (1141 HK) to buy stake in Skyway Securities

Japan analyst ratings

  • NSSMC (5401 JP): Downgraded to neutral from neutral plus at Iwai Cosmo

Japan preview

  • Mitsubishi July Domestic Minicar Sales May Fall 17%: Nikkei
  • METI Considering Public Fund for Fukushima: Nikkei
  • Shikoku Elec. May Resume Ikata No.3 Reactor Aug. 11: NHK
  • Japan to Invest $10b in Iran Economy, Oil: IRNA
  • Royal Holdings Jan.-June Op Profit Seen Down 6%: Nikkei
  • Japan Post to Cut Rates on Smaller Parcels Up to 30%: Nikkei
  • Japan Industrial Partners Buys Narumiya From SBI: Nikkei
  • Aeon to Open Stores in Myanmar With Local Partner: Nikkei


Australia preview

  • Fonterra (FSF NZ) sees FY17 EPS in range NZ50-60 cents
  • Precinct Properties (PCT NZ) to invest NZ$213m to develop govt accomodation
  • Sundance Energy (SEA AU) in Texas re-fracturing deal with Schlumberger
  • Pepper Group (PEP AU) in consumer finance jv with Banco Popular
  • Iluka Resources (ILU AU) in talks to acquire Sierra Rutile

Source: CIMB / Bloomberg


 US GDP grew a disappointing 1.2% in the second quarter. Photo: iStock

– Edited by Gayle Bryant

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