Morning Report APAC: Welcome lift for oil boosts sentiment in Asia
- EIA data showed US oil inventories fell by 1.37 million barrels to 535.7 million last week
- The fall gave crude prices a welcome lift
- There was no relief for oil from Opec, with the cartel failing to agree on output curbs
- In base metals, Zinc extended its rally and reached a 10-month high
- The world’s grain farmers may harvest more crops than previously expected
- The outlook for corn and wheat in Argentina and the EU is improving, says the FAO
By Saxo APAC Sales Trading
Economic data of the day (Singapore Time)
0945: CNY – Caixin China PMI Composite (Prev. 50.8), PMI Services (Prev. 51.8)
1000: JPY – Nikkei Japan PMI Services (Prev. 49.3), PMI Composite (Prev. 48.9)
1030: HKD – Nikkei Hong Kong PMI (Prev. 45.2)
1100: SGD – Nikkei Singapore PMI (Prev. 49.4)
1200: MYR – Malaysia Exports YoY (Exp. 2.0%, Prev. 0.2%), Imports YoY (Exp. 0.0%, Prev. -5.5%)
1200: MYR – Trade Balance (Exp. 8.56B, Prev. 11.19B)
1300: INR – Nikkei India PMI Services (Prev. 53.7), PMI Composite (Prev. 52.8)
1555: EUR – Markit Germany Services PMI (Exp. 55.2, Prev. 55.2), Composite PMI (Exp. 54.7, Prev. 54.7)
1600: EUR – Markit Eurozone Services PMI (Exp. 53.1, Prev. 53.1), Composite PMI (Exp. 52.9, Prev. 52.9)
2030: USD – Change in nonfarm Payrolls (Exp. 160,000, Prev. 160,000)
2030: USD – Unemployment Rate (Exp. 4.9%, Prev. 5.0%)
2200: USD – Markit US Composite PMI (Prev. 50.8), Services PMI (Exp. 51.4, Prev. 51.2)
2200: USD – ISM Non-Manufacturing Composite (Exp. 55.3, Prev. 55.7)
2200: : USD – Factory Orders (Exp. 1.9%, Prev. 1.5%)
2200: USD – Durable goods Orders (Exp. 1.9%, Prev. 1.5%), Ex Transportation (Prev. 0.4%)
1545: USD – Fed's Evans Speaks on Economy and Policy in London
- ECB : The European Central Bank left the stimulus and rates unchanged but President Mario Draghi left open the door for further initiatives if necessary. The ECB continues to lower its forecast for core inflation, which is now predicted to be 1.0% in 2016, 1.2% in 2017, and 1.5% in 2018 which is below their target. ECB economists also raised their growth forecast for the Eurozone economy for 2016 to 1.6% from 1.4%, and continued to project an expansion of 1.7% in 2017. Corporate bond purchases will start on 8 June, as announced in March
- Draghi said that “When the equilibrium rate is so low that the central bank cannot bring its policy rate sufficiently below it, the capacity to increase the degree of stimulus through moving short-term rates becomes limited,”
- US: The ADP jobs figure increased 173,000 as expected The services sector outperformed the goods producing sectors in a solid report overall and Initial Jobless Claims dropped to 267,000 (Exp. 270,000)
- New York City business activity contracted at the fastest pace in seven years during May to 37.2 (Exp. 57). Labor contracted for the eighth time in the last nine months, while purchase volume declined by the most in seven years
- Crude oil: Opec failed to reach any agreement on an oil production ceiling at its meeting in Vienna. Cartel members decided against a return to a cap and repeatedly said the market is in rebalance. Members cited rising demand in the US, India and other major consumers as playing a major role in their decision. Members also pointed to falling production in the U.S. “Supply and demand is converging and oil and [refined] product stock levels in the OECD have recently shown relative moderation,” Opec said in a formal statement.
As expected the European Central Bank left policy unchanged and there were no major revisions to economic projections, although ECB President Mario Draghi noted that downside risks had diminished. But core European sovereign bonds markets still managed a broad based rally and peripheral European yields were down around 1%-3%, with the exception of Portugal and Greece.
ECB’s post-meeting press conference saw Draghi buy time to assess the benefits of the current policy stance. Treasuries firmed as investors adopted a cautious approach ahead of Friday’s Labour market report. The two-year note yield is dropped 1.6bps to 0.883%. The 10-year bond yield sank by 3.7 basis points to 1.799%. Lower bond yields are probably a case of pre-payrolls position shuffling more than anything else.
For the most part equity markets have posted modest gains on Thursday, with the Stoxx600 edging up 0.1% and the S&P500 closing up 0.3%. European equities closed mixed with the Euro Stoxx down 0.2%, Dax unchanged, and IBEX 35 up 0.5%. The CBOE Vix Volatility Index fell 4%to 13.63 after a two-day rally as the market is cautious ahead of the nonfarm payrolls report due out at 1230 GMT on Friday.
In corporate news Ciena Corp rallied 13% as quarterly results exceeded estimates and the current period’s revenue outlook beat some analysts’ forecasts.
Sarepta Therapeutics plunged 27% after regulators increased patients’ access to experimental drugs such as its unapproved therapy for a deadly muscle disease, which investors took as a signal that the product may not be cleared.
Hong Kong market preview
- HKEx (338 HK): Raised to neutral at Haitong Intl.
- China South City (1668 HK): Rated new buy at Haitong.
- CITIC Securities (6030 HK): Raised to buy at Goldman.
- COSCO Pacific (1199 HK): Cut to hold at Daiwa.
- Tencent (700 HK): Raised to buy at Haitong Intl.
- Baoxin Auto (1293) China Grand Auto ‘s buy of 75% of Baoxin Auto goes unconditional.
- Sinopec(386) ready to consider participation in Russia oil privatization depending on terms (Interfax).
- Dah Sing (440) has agreed to sell its insurance business to Thaihot Group for $1.4bn (Reuters)
- Air China(753) Lufthansa AG CEO will travel to Beijing next week in a bid to seal a joint venture deal with the co.
- Cathay Pacific (293) and China Southern (1055) said to have expressed interest in Air N.Z's Virgin Australia stake.
- Henderson Land (12) 's "Wellesley" has been selling a total of 21 flats since the launch in Jan, cashing in $640mln. Co said no plan for additional launch.
- Sino Land (83) ‘s "Commune Modern" has received over 1400 applications, over-subscribed by more than 9 times.
- Vanke (2202) May sales value +76% YoY to 36.4bn yuan.
- AIA (1299) joins R3 distributed ledger consortium, the financial innovation firm partnership. R3 designs and applies distributed and shared ledger-inspired technologies to global financial markets.
- CR Gas (1193) CFO said group sets gas sale growth target at 15% this year, adding that the performance of the group remains on right track since the beginning of this year.
- China Aoyuan (3883) May contracted sales +123% YoY to 2.1bn yuan.
Japan market preview
- Ajinomoto (2802 JP): Cut to neutral at Nomura
- Eisai (4523 JP): Cut to underperform at Credit Suisse
- Mitsubishi Tanabe (4508 JP): Cut to underperform from neutral at Daiwa.
- Arata (2733 JP): To sell ¥6bn of CBs; to spend up to ¥3bn on share buyback.
- Fast Retailing (9983 JP): Japan Uniqlo same-store sales +5.9% y/y in May.
- Fujifilm (4901 JP): Aims to make drug ops. profitable in FY2018, president says.
- Honda (7267 JP): China vehicle sales +23.9% y/y in May..
Australia market preview
- ALS (ALQ@AU) raised to hold vs sell at Shaw & Partners
- Treasury Wine Estates (TWE@AU) cut to equalweight vs overweight at Morgan Stanley
- FlexiGroup (FXL@AU) cut to hold vs add at CIMB
- Pilbara Minerals (PLS@AU) rated new buy at Numis
Source: Bloomberg / CIMB
Crude prices have firmed, but the rise came about through US inventory moves and with no thanks to Opec, which failed to agree on output curbs at its meeting in Vienna. Photo caption. Photo: iStock
– Edited by Robert Ryan
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