Morning Report APAC: USD takes a tumble on dovish Fed comments
- The Fed implied that its inflation target is further out of reach than previously
- The Fed's changed wording looked dovish, driving a USD selloff
- Copper has surged to its strongest level in more than two years
- The oil rally rolled on, helped by an EIA report showing shrinking US stockpiles
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
Speeches (Singapore Time)
- No noteworthy speeches scheduled for today
Overnight news, US
- The Federal Reserve left rates on hold yesterday as expected. The accompanying statement included language on balance sheet reduction that it would begin “relatively soon”. The implication is that it would be announced in September and begin soon after, likely in October.
- The Fed also changed its language on the inflation outlook dropping the word “recently”. The implication that the Fed’s inflation target is seemingly slightly further out of reach than it has been in recent meetings.
- This change in language was resoundingly interpreted as dovish by the market causing a heavy selloff in the US Dollar and treasury yields to fall.
- US inventory data saw a sizable drop in oil and gasoline inventories, pushing crude another 1.6% high and allowing some commentators to call the end to the glut.
Overnight news, Europe
- UK GDP: In line with expectations at 1.7%, but down from previous quarter at 2%.
- The European Central Bank Governing Council member Ewald Nowotny commented on ECB tapering, saying that he agrees with German central bank president Jens Weidmann that the ECB should be slowing moving away from ultra-accommodative stance.
- USD: Lower against almost every currency globally yesterday as the market took the Fed's statement to be resoundingly dovish.
- EUR: traded to fresh multi-year highs at 1.1748 in the broad USD sell off and boosted by Nowotny’s comments.
- NOK: On the back of oil price resurgence the Norwegian krone once again performed strongly. USDNOK broke the key 8.00 support level, breaching its 2016 lows.
- Emerging Markets: ZAR rebounded strongly with the USD selling, up over 1.3% on the day, while BRL was the next best performer up 1.1%. Brazil cut interest rates by a full 1% overnight to 9.25% as was widely expected by analysts.
Foreign exchange movements
- AUD gamma has been sold after the 0.80 hurdle was cleared.
- EURCHF vols have crept higher in the last few session, on increasingly speculation the SNB will be more aggressive on CHF strength.
- Treasuries advanced after the unchanged FOMC rate decision as we saw yields of 10 year UST falling back below the 2.3% level.
- The Fed hinted that it might begin unwinding its balance sheet before Janet Yellen's term ends and that could be as soon as the next September 20 meeting.
- The Dow Jones Index was the best former yesterday after Boeing posted its biggest one-day gain in percentage terms since October 2008 as the stock jumped $20.99, or 9.9 percent, to close at $233.45. The jump itself constitute a 144 points increase in Dow Jones Index and will be buying back $10 billion in company stock this year, up from a previous goal of $6.5bn.
- AT&T reported its earnings yesterday as earnings exceeded analysts's forecast while revenue came within expectations. The mobile carrier gained 127,000 wireless customers in Q2, 2017, while Wall Street expected a loss of 22,713. AT&T closed 5% before closong at $38.03.
- Chipmaker AMD recorded a 4.61% gain yesterday as stock hits a intraday high of $15.65 which was the highest price seen since July 25 2007. The surged was due to a surprise profit as revenue rose above expectations along with a raise in the revenue growth outlook. AMD closed at $14.76.
- Petrofac won a $100 million contract extension and a award yesterday with a combined value of more than $100 million for two international oil companies in Iraq. Share price closed 1.39% higher and face short term resistance at the 470GBp level.
Asian equities preview
Hong Kong analyst views
- Luxi Chemical Group (000830 CH): Initiated at Sealand with Buy; price target 11.70 yuan
- Agile Group (3383 HK): Raised to Neutral at Nomura, PT $HK8.66
- Goodbaby Intl (1086 HK): Raised to Buy at Guangfa Securities, PT $HK4.35
- Power Assets (6 HK): Downgraded to Sell at UBS; PT Lowered to $HK65
- Shanghai Port (600018 CH): New Overweight at Morgan Stanley, PT 7.80 yuan
- SSY Group (2005 HK): SSY Group Initiated at Hua Tai Securities with Buy; PT $HK4
Hong Kong stocks
- China Res Power (836 HK): Expects 6-Month Net to Drop 60%-70% on Year.
- China Shipbuilding (601989 CH): Seeks Restructuring Via Debt-to-Equity Swap.
- Cnooc (883 HK): Huizhou II Refinery May Produce Products Mid-Sept: ICIS-C1.
- Cnooc (883 HK): CNOOC, Ecopetrol Among Cos. In Qualifying Process for Pemex JVs.
- Country Garden Holdings (2007 HK): Country Garden to Redeem 2019 USD Notes on August 25.
- CRRC (601766 CH): Says Xi Guohua Resigns as President on Work Adjustment.
- FIH Mobile (2038 HK): Foxconn Wis. Factory Could Be First of Many in US: Official.
- Han’s Laser Tech (002008 CH): H1 Net 914.1mln yuan versus 399.6mln yuan a year ago.
- Hutchtel (215 HK): Hutchison Telecom Says It’s in Talks to Sell Fixed-Line Unit.
- Jiangxi Copper (358 HK): Expects H1 Net to Rise 60%-80% on Year.
- PetroChina (857 HK): Sees H1 Net to reach 9bn-11bn yuan vs 528mln Yuan Year Ago.
- PetroChina (857 HK): To Optimize Asset Structure, Cut Costs in H2.
- Sands China (1928 HK): Las Vegas Sands Q2 Net Revenue Beats Highest Estimate.
- Shanghai Port (600018 CH): Sells $1bn Zero Coupon Bonds: Terms.
- TVB (511 HK): TVB Unit Forms Joint Venture With U.S. Production Co. Imagine.
- Wanhua Chem Group (600309 CH): Linde Expands Cooperation With Wanhua in China.
- Zhejiang Huahai Pharma (600521 CH): Zhejiang Huahai Prelim. H1 Net 295.3mln yuan.
Japan analyst views
- Ain Holdings (9627): Rated new sell at UBS; upgraded to positive from neutral at Storm Research.
- Toho (9602): Raised to overweight from neutral at Mitsubishi UFJ Morgan Stanley.
- Ube Industries (4208): Cut to hold from buy at Jefferies.
- Sankyu (9065): Cut to neutral from buy at Mizuho.
- Toray Industries (3402): Rated new neutral at UBS.
- Advantest (6857): 1Q operating profit ¥2.23bn vs analyst est. ¥5.5bn; says profits hurt by Chinese smartphone inventory adjustments.
- Canon Electronics (7739): 1H operating profit +16% y/y to ¥5.2bn; keeps full-year forecasts unchanged.
- Canon Marketing (8060): 1H net income +26% y/y to ¥8.4bn; keeps full-year forecasts unchanged.
- Dentsu (4324): Establishes Rakuten Data Marketing Co. with Rakuten.
- Energy industry: Japan to tweak power imbalance penalty rules from October.
- Hitachi Kokusai (6756): Lifts full-year operating profit forecast 29% to ¥22.5bn after reporting strong Q1 results.
- Hoya (7741): Expects to complete Performance Optics purchase early August.
- Japan Aviation (6807): 1Q operating profit nearly triples to ¥4.0bn from ¥1.4bn a year earlier; keeps full-year forecast at ¥16bn.
- Kewpie (2809): To buy back up to 2.96% of shares at discount from shareholders with ties to Chairman Amane Nakashima.
- Kinden (1944): Q1 net income +87% y/y to ¥1.95bn; keeps full-year forecasts unchanged.
- Line (3938): Q2 operating profit ¥14.6bn vs analyst est. ¥5.6bn; posts first-ever decline in MAU in 4 key markets; plans to launch food-delivery service in Japan this summer.
- M3 (2413): 1Q net income +38% y/y to 4.73b yen vs analyst estimate for ¥4.53bn.
- Melco Holdings (6676): To buy back as much as 15.61% of shares for ¥10.5bn; Q1 net income -0.7% y/y to ¥1.2bn.
- Nidec (6594): Lifts full-year outlook closer to analyst estimates.
- Nintendo (7974): Q1 operating profit 16.2b yen vs analyst est. ¥10.6bn; maintains Switch target.
- Shikoku Chem (4099): Q1 operating profit +14% y/y to ¥1.9bn, maintains full-year forecast at ¥7bn.
- Voyage Group (3688): Nine-month operating profit +21% y/y to 1.6b yen, maintains full-year forecast at ¥1.8bn.
- Yahoo Japan (4689): Takes stake in Hulu Japan operator.
Australia analyst views
- Automotive Holdings (AHG): Cut to hold at Morningstar.
- CSR (CSR): Cut to neutral at Evans and Partners; price target $A3.88.
- Fairfax Media (FXJ): Raised to buy at Citi, PT $A1.10.
- Metcash (MTS): Cut to underweight at JPMorgan, PT $A2.30.
- Reliance Worldwide (RWC): Raised to positive at Evans and Partners.
- ANZ Bank (ANZ), Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac (WBC): West Australia state says could raise $1Abn over 4 years from its own bank tax: Age.
- Aurizon Holdings (AZJ): Aurizon takes $A526mln impairment in bulk business; Ebit in line
- Beach Energy (BPT): Q4 production report expected; NOTE: Co. in April sees FY17 output target 10.3-10.7mmboe.
- BHP Billiton (BHP): Esso JV tender for gas from Longford is understood to have fetched about double historical prices: AFR.
- Fonterra (FSF): Lifts 2017-18 milk price forecast by $0.25.
- Fortescue (FMG): Q4 production report expected; NOTE: Q4 total ore shipped est. 43.2mt (3 analysts).
- GUD Holdings (GUD): FY results expected; NOTE: Co. in Feb. forecast FY17 underlying Ebit ~$A85mln.
- Macquarie Group (MQG): Annual meeting; NOTE: Co. in May forecast FY18 net profit contribution in line with FY17.
- Resolute Mining (RSG): Q4 production report expected.
- Woodside (WPL), WorleyParsons (WOR), Oil Search (OSH), Karoon (KAR), Origin Energy (ORG), Santos (STO): Oil climbs as U.S. supplies shrink to lowest since start of year
- Bank of New York Australia ADR Index +0.9%.
- BHP Billiton ADR +1.4% to A$25.45 equivalent, 0.3% premium to last Sydney close.
- Rio Tinto ADR +0.2% to A$57.47 equivalent, ~11% discount to last Sydney close.
- Companies trading above 20/50/200 day moving averages, Bollinger upper band with RSI above 70: ISD
- Companies trading below 20/50/200 DMAs, Bollinger lower band with RSI below 30: None among screened stocks.
– Edited by Robert Ryan
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