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v US
consumer spending climbs at the fastest pace since Aug 2009; home prices jump
v US
consumer confidence lowest since Nov 2015; regional manufacturing surveys
slip
v Euro
area inflation remains negative in May
v German
unemployment rate falls to record low
v DOSM:
Business performance to slow down in 2Q2016
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OVERNIGHT MARKET UPDATE:
· US – The personal spending
advanced1.0% in April from a month earlier, the biggest one-month jump since
August 2009. The personal income also showed steady growth of 0.4% m/m.
· US – The
S&P/Case-Shiller home price index rose 5.2% on annual basis in March,
slightly less than a 5.3% increase in February, driven in part by limited
inventory.
· US – The consumer confidence
index dropped to 92.6 in May, the lowest since late 2015 as Americans turned
slightly more pessimistic about overall business conditions and the job
market.
· US – The Chicago PMI dipped
below 50 in May at 49.3, with both production and new orders down. The Dallas
Fed manufacturing outlook also weakened at a fastest pace of -20.8. The
weakness was broad-based with the down in production and new orders.
· Euro area – The flash CPI
fell by 0.1% in May, matching economists’ forecasts. Core inflation rebounded
slightly to 0.8% y/y.
· Euro area – German
unemployment declined 11,000 to 2.695 million in May, the lowest level since
reunification.
· Currencies – GBP was the
largest mover overnight, falling as polls showed gains for the ‘Leave’
campaign. USD was also under pressure as regional manufacturing surveys
underperformed and consumer confidence fell.
· Equities – US bourses ended
mostly lower as investors turned cautious on the last trading day of the
month and ahead of key economic data releases this week.
· Rates – 2-year UST benchmark
yield touched its highest level in two months before the yield plunged to end
lower as manufacturing and sentiment data disappointed.
· Energy – Crude oil prices
flirted once more with the US$50/barrel level as traders continue to await
this week’s OPEC meeting in Vienna.
· Precious Metals – Gold
prices lifted for the first time in ten days as the market chose to focus on
the weaker side of US data.
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INDICATIVE
MAJOR CURRENCIES
Source: Bloomberg, AmBank
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Wednesday, June 1, 2016
Daily FX Update, 01 June 2016
CIMB Daily Fixed Income Commentary - 01 Jun 2016
Market
Roundup
- Short tenor US Treasuries posted late gains Tuesday, going against stock market losses and on month-end demand after moving largely weaker earlier in the day. The 5T went as high as 1.42% from the prior day’s 1.38% close before falling to close at 1.37%. Meanwhile, longer tenor UST ended unchanged as sentiment remained weak post last Friday’s Yellen’s hawkish comments.
- In macro data releases, consumer spending rose 1.0% in Apr against +0.7% consensus but the prior month’s number was revised down to zero growth versus +0.1% previous estimate. Meanwhile, the Case-Shiller 20-city home price index rose 0.9% mom in Mar, exceeding 0.8% consensus. The rest of the week we have the ISM manufacturing and ADP jobs data leading to the May non-farm payrolls to be released Friday. Consensus for May NFP is 160k or similar the Apr number. The Fed’s latest Beige Book report is due later today.
- With the changed sentiment post remarks by Yellen, we expect UST movement to trek weak. Short term target for the 10-year UST is 1.93% before next resistance at 1.98% which completes a 100% retracement of levels last Oct. Levels a couple of bps below 2.00% seemed to have been major inflection points since end-2014.
- The Ringgit remained weak amid the bullish dollar levels, levels seen above 4.1200 late in the day but it did claw back after hitting 4.1400. Also, the 5-year IRS rose 4bps on the day. With that Malaysian govvies moved on weaker footing with yields slightly higher with hints of position trimming ahead of Friday’s NFP release. However, there was still time for late buying as we heard selected real money players bought on dips. Short term period, we expect sustained pressure on MGS yields as we head closer to the FOMC meeting 14-15 Jun. Yields will be pressured upwards, with the new 5-year MGS should now sustain above 3.60%.
- Thai bonds also moved weaker with yields up 2-9bps. We expect pressure on THB and THB bonds to sustain as we head to the 14-15 Jun FOMC meeting. Towards the FOMC date, we expect the 5x5 swap spread to widen – target 15bps from last week’s entry of 8bps. In addition, the BoT policy meeting is scheduled for 22 Jun but consensus is that the central bank will not budge yet on interest rates, which means sustained pressure on bonds. Due today is the May CPI, with consensus of +0.27% (+0.07% Apr).
- IDR bond market was little changed in quiet trading and mostly on very short dated bonds up to 3 years (and the 10-year benchmark). MoF held syariah bond auction, and upsized the issuance by IDR4.93 trillion from IDR4.0 trillion target, while incoming bids reached IDR9.6 trillion. On the lookout today is the May CPI data with consensus at +3.30% yoy versus +3.60% Apr.
Affin Hwang Capital Daily Insight (LV) - 1 June 2016 - ASTRO / BANKING / MMC / BAB / MRCB / PARKSON
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Top Calls
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Results Note � Astro (BUY, maintain)
- Another good start to year Astro�s 1QFY17 core net profit of RM209m (+17.4% yoy) was above our and consensus expectations. The growth in earnings was mainly driven by higher adex revenue, Go Shop and radio segment contribution. Notably, Astro announced a higher interim DPS of 3 sen (1QFY16: 2.75 sen). Maintain our BUY rating on Astro and target price unchanged at RM3.20.
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Other Calls
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For
important disclosures, please refer to the Disclosure section at the end of
the individual linked research reports. |
Tuesday, May 31, 2016
Cautious Eye on the Fed and UK Referendum
2016, Issue V: Cautious
Eye on the Fed and UK Referendum
§ First, US Fed timeline for eventual future rate hike
remains data dependent. US growth recovery remains on track but recent global
developments out of China and volatile market activity may potentially affect
the number of hikes in 2016. Fed officials including Yellen are more
hawkish recently. Markets are now expecting 1 Fed hike in 2016; we are
expecting 1-2 rate hikes by end 2016. Key US events: ISM Manufacturing Mar
(1 Jun) (expected: 50.4); US May NFP (3 Jun) (expected: 160k); Fed Chair Yellen
to speak in Philadelphia (7 Jun); US-China Strategic Dialogue (6-7 Jun in
Beijing); FOMC meeting, May CPI (16 Jun); May durable goods (24 Jun); 1Q GDP
third print (28 Jun).
§ Second, Japan’s 2% inflation target has been pushed
back to 2H FY 2017 (by Mar 2018) due to oil softness and slow traction in wage
increases. The credibility of Abenomics has waned somewhat in 2016 even though
the easing bias is still clear. We do not expect any further moves by the
BOJ until Jul meeting at the earliest and further jawboning is likely
until then. Postponement of the consumption sales tax hike to Oct 2019 is now
very likely, removing a likely drag on the economy. PM Abe will hold a
press conference on 1 Jun to announce his decision on holding simultaneous
elections for both houses of parliament and on the sales tax hike in Apr 2017.
BOJ policy board member Sato speaks in Kushiro on 2 Jun and BOJ deputy governor
Nakaso speaks in Akita on 9 Jun and then again to the National Credit Union
Association on 24 Jun. BOJ meets on 16 Jun to decide on policy. There is also
the final print of 1Q 2016 GDP due on 8 Jun. JGB auctions in Jun: 10-year (2
Jun), 30-year (7 Jun), 5-year (9 Jun), 1-year (14 Jun) and 20-year (23 Jun).
§ Third, we expect ECB to keep monetary policy
stance status quo at the upcoming meeting (2 Jun) as ECB is determined to ease
financing conditions, stimulate new credit provision in an attempt to reinforce
growth momentum and return inflation to medium term objective of 2%.
Front-end yield differentials between 2Y Euro and UST bonds widened and may
weigh on Euro with some limits. Downside likely to be limited around 1.08 -
1.09 levels. ECB meeting, Apr PPI (2 Jun); 1Q GDP final (7 Jun);
May CPI (16 Jun); Jun ZEW survey expectations (21 Jun); Jun confidence
indicators (29 Jun).
§ Fourth, China still has excess capacity, heavily
indebted corporations and huge liquidity injections continue to add immense
pressure on the economy and the yuan medium term. PBOC continues to rely on
SLF, MLF and PSL as liquidity tools, we do not rule out interest rate cut
of 25bps and RRR to be cut in intervals by another 100bps within the
year. Activity indicators (i.e. urban investments, industrial production
and retail sales) will continued to be eyed. May PMI-mfg is due on 1 Jun
along with Caixin version. The China-US Economic and Strategic dialogue is
scheduled on 6-7th. Foreign reserves and trade data are curiously scheduled for
release on 7th and 8th respectively. CPI and PPI on the 9th. Activity data will
be released on the 12th. Liquidity numbers are due from 10th-15th. We
also like to watch Apr industrial profits due on the 27th. We also eye
potential inclusion into MSCI and JPM bond indexes.
§ We believe AXJs could see some weakness in 1H of Jun
in the run up to the June FOMC. We could see initial broad USD strength in the
lead-up to Jun FOMC and potential sell-off thereafter.
[1] Underlined
words represent new developments in the FX themes.
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