Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 13 March 2018 at 1:39 GMT

Morning Report APAC: Weak market awaits clues on US inflation

APAC Sales Trading Desk / Saxo Capital Markets


  • US inflation report expected to give clues Federal Reserve policy tightening. 
  • Japanese and Aussie stocks largely unmoved with KOSPI also little changed
  • JPY the only currency reacting overnight, up 0.1% at 106.27 to the USD

By Saxo APAC Sales Trading

Economic data of the day (Singapore Time)



Speeches (Singapore Time)

22:15: CA - Bank of Canada governor Stephen Poloz speech in Kingston

06:10: AU - RBA’s Kent gives speech in Sydney

Overnight news

Market Summary: It was a quiet day for markets as lack of data. Concerns on tariffs made equities give up some gain from good job data in US. Treasuries were higher on the back of weakening dollar, while JPY strengthened. Commodities fell led by oil, as concerns on US production looms.    

Libor-OIS spread at six-year high : The Libor-OIS spread is regarded as a measure of how expensive or cheap it will be for banks to borrow, as shown by Libor, relative to a risk-free rate, the kind that’s paid by highly rated sovereign borrowers such as the US government. 

The Libor-OIS spread provides a more complete picture of how the market is viewing credit conditions because it strips out the effects of underlying interest-rate moves, which are in turn affected by factors such as central bank policy, inflation and growth expectations. 

Reasons behind the surge are three fold as mentioned by Bloomberg. First, there is a big trunk of Treasury bill supply after the US government last month resolved the borrowing limit impasse.

 Second, tax reform brings back money, however it's mostly kept in the form of short-term instruments, dampening the demand. Last but not least, is the balance sheet shrinkage caused less reserves in the financial system.    



Foreign exchange



The USD closed lower in a quiet trading day, mostly driven by headline report that US budget deficit is at highest level in six years.

JPY and CHF are higher as risk appetite waned ahead of US CPI data, which is expected to create ripples in the market.

Emerging Markets: Quiet day for emerging market currencies with slight drop generally. Turkish Lira led the loss with 0.8% decline on the back of increased current account deficit, as Turkey’s economy relies heavily on foreign capital inflows. 

Ruble is weaker amid issues on spy poisoning and getting pressure from UK.

Foreign exchange movements


Volatilities are generally lower as lack of data and market interests are low ahead of US CPI data tonight, which is expected to bring some life to the market.



Bunds were higher taking the hint from solid demand in US auctions. Peripherals generally gained with Italy underperformed ahead of heavy supply today.

US treasuries managed to log with some gains despite heavy supply amid 3Y and 10Y auctions, partly supported by dollar decline and may also benefited from short covering in 5Y and 10Y futures.  






US: Dow (-157 points) and S&P 500 (-3 points) closed off as investors worried a trade war persist.

The Dow rose more than 100 points earlier in the session as shares of Apple and Goldman Sachs reached all-time highs. However, market was dragged down by Boeing, Caterpillar and United Technologies all falling at least 2%. 

Shares of Oclaro (OCLR) jumped nearly 28% closed at 10.01 after laser and optical fiber specialist Lumentum Holdings said it would buy the optical components producer for $1.7 billion. Lumentum's shares rose 5.5% .

Micro chip giant Micron Technology (MU) surged nearly 9% followed by the coverage report Nomura Instinet. It raised its 12-month price target for the memory chip maker to $100 from $55.

The bullish call represents about an 83% upside to MU’s latest close and marks the highest price target out of the 26 research firms that cover the company. 

Netflix Inc (NFLX) shares price dipped over 3%, last traded at 321.30 after opening at a new all-time high.

This slip might simply mean investors wanted to grab some profits, but it seems more likely that a tweet from infamous short-seller Citron Research caused Netflix's intraday slump.

Europe: The main European stock markets finished mostly higher as markets in the region tried to shake off concerns surrounding tariffs and focus on the positive trading seen in individual stocks. UK's FTSE down 9 points and Germany's Dax closed higher +71 points. 

Utilities held the top spot in sector gains by the close following news that RWE was to sell 76.8% of its Innogy arm to rival E.On (OMPP). This "win-win" decision sent Innogy (IGY) shares to the top of the, finishing up 12.1% to EUR 38.70, while RWE came in second, jumping 9.25% to EUR 19.65, and E.On rose 5.4% to EUR 8.478.

UK telco provider Inmarsat (ISAT) sank 5.3% closed at GBp 409.70 – a new 52 week low, after CFRA Research cut its price target on the stock. 

The news added pressure to telecoms, which closed lower as a sector. This comes after the company reported earnings last week.

Hong Kong: Hang Seng Index (HSI) surpassed 50MA closed at 31,594 point, advanced 1.93%, up nearly 600 points as energy and tech names led broad-based gains. Index heavyweight Tencent was up 2.9% ahead of the market close. 

Tencent (700.HK) was back in the spotlight, share price soared $13, last traded at 460.00 following its investment in Xinli Media with over RMB3.3 billion. 

TENCENT's investment in leading broadcast platforms in Mainland China not only improves deployment of game ecological chain, but also demonstrates recognition and appreciation of upstream operators on content promotion effect of downstream broadcast platforms.

China Insurance Regulatory Commission (CIRC) released data for January 2018. Ping An (2318.HK) Life Insurance topped the industry as its premium scale surpassed China Life Insurance for the fourth month. 

During January, premiums of Ping An Life Insurance grew 31.5% yearly; whereas that of China Life (2628.HK) reduced 24% yearly. Share prices were up 2.6% to 86.80 and 0.8% to 23.40 respectively.

Blue chips were in uptrend. Chinese banks CCB (939.HK) and ICBC (01398.HK) surged 3.6% and 2.4%, while CM Bank (3968.HK) rallied 2.3% as CICC expects Mainland Banks 2017 net profit to rise 4.6%.

 The US CPI numbers will be the next driver for global markets. Photo: Shutterstock


– Edited by Adam Courtenay

This report was compiled by the Saxo APAC Sales trading team in Singapore – the home of social trading. Follow the team on @SaxoStrats or post your comment below to engage with Saxo Bank's social trading platform. Follow us on @SaxoStrats on Twitter

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