TradeTheNews.com Asian Market Update: Precious metals spike as investors question Fed's inflation tolerance

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TradeTheNews.com Asian Market Update: Precious metals spike as investors question Fed's inflation tolerance

20.06.2014 10:42 Friday
***Economic Data***
- (US) NORTH AMERICA MAY SEMI BOOK/BILL RATIO: 1.00 V 1.03 PRIOR
- (NZ) NEW ZEALAND MAY ANZ JOB ADS: -5.2% (first decline in 5 months) V 2.1% PRIOR
- (NZ) NEW ZEALAND JUN ANZ CONSUMER CONFIDENCE INDEX: 131.9 V 127.6 PRIOR; M/M: +3.4% V -4.4% PRIOR

Market Snapshot (as of 03:30 GMT):
- Nikkei225 +0.4%, S&P/ASX -0.5%, Kospi -1.0%, Shanghai Composite -0.2%, Hang Seng +0.2%, Sept S&P500 flat at 1,950, Aug gold -0.1% at $1,312, Jul crude oil +0.3% at $106.70/brl

***Highlights/Observations/Insights***

- Gold prices saw the largest margin of increase in nearly a year today as investors expressed much more confidence in the Yellen Fed tolerating inflationary pressures to the benefit of reducing unemployment. Recall Yellen dismissed the latest CPI data as noisy and saw inflation being contained, as yesterday's FOMC statement disappointed those looking for greater acknowledgement of rising prices. Metals markets appear to be increasingly more critical of the Fed's inflation-curbing credentials however, piling into the "store of value" trade that is further justified by continued geopolitical turmoil in Ukraine/Iraq and overextended bearish positioning. Goldminers in US, Australia, and China were also up in high single digits.

- China indices are mixed going into Sunday's flash PMI release. The most recent figure of 49.4 was a 5-month high, albeit the 5th consecutive month in contraction. Among notable local press reports, PBoC official actually suggested the China property market correction is "necessary", "reasonable", and "beneficial" in the wake of this week's troublesome price data for May. Recall the all-70 new home prices saw their first m/m drop in 2 years, while y/y rate of increase slowed by 1.3pts to 5.4%.

- In US tech, shares of Oracle were down 5% afterhours following a miss on top/bottom lines for Q4, while Q1 guidance was in line with consensus. Apple also rallied modestly into the close following reports of the iWatch production starting next month and retail release coming in October.

***Speakers/Political/In the Papers***
- (CN) China may announce more minor stimulus measures; Tunes of micro-stimulus has not been changed - Chinese press
- (CN) PBoC official: Current correction in China housing price is "necessary and inevitable"; Reasonable correction beneficial for economic reform and development of reasonable price structure - Chinese press
- (CN) China iron ore traders see drop in bank credit; May force small traders to sell their stocks - financial press
- (CN) China Ministry of Industry and Information Technology (MIIT): May telecom industry total Rev CNY150.2B, +15.8% y/y; Top 3 telecom companies Rev CNY105.2B, +9% y/y
- (JP) Japan Defense Min Onodera to travel to US in early July to update Defense Sec Hagel on govt plans regarding collective self-defense constitution changes - Nikkei
- (JP) Japan's GPIF and other pension funds sold a net of about ¥1.8T in Jan-Mar; Suggesting GPIF may be rebalancing portfolio sooner than expected - Nikkei
- (IQ) President Obama: Could take targeted military action against ISIS if and when it is needed, to consult with Congressional leaders

***Fixed Income/Commodities/Currencies***
- (AU) Australia MoF (AOFM) sells A$700M in 5.25% 2019 Bonds; avg yield: 3.0436%; bid-to-cover: 4.35x
- (CN) PBoC sets yuan mid point at 6.1524 v 6.1531 prior setting (strongest Yuan setting since June 13th)
- (US) Weekly Fed Balance Sheet Total Assets Week ending June 18th: $4.37T v $4.34T prior; Reserve Bank Credit: $4.33T v $4.30T prior; M1: +$3.3B v +$59.1B prior; M2: -$9.3B (first decline in 7 weeks) v +$10.9B prior; M1 y/y change: 10.3% v 10.4% w/w; M2 y/y change: 6.3% v 6.3% w/w

***Equities***
US markets:
- FDO: Icahn discloses amended stake and new letter to the company, urges immediate sale of the company, asks for 3 board seats; +2.6% afterhours
- TMUS: Sprint said to have lined up as many as 8 banks for over $40B debt financing in proposed acquisition of T-Mobile - financial press; +0.5% afterhours
- AKS: Guides Q2 adj loss -$0.06 to -$0.02 v +$0.09e; -2.6% afterhours
- ORCL: Reports Q4 $0.92 v $0.95e, R$11.3B v $11.5Be; -5.0% afterhours
- TRGP: Responds to press rumors and trading activity regarding acquisition by ETE; previously engaged discussions on potential business combination were terminated; -10.2% afterhours
- SWHC: Reports Q4 $0.44 v $0.40e, R$170.4M v $163Me; Guides initial FY15 GAAP $1.30-1.40 v $1.42e, Rev $585-600M v $618Me; -11.2% afterhours

Notable movers by sector:
- Consumer Discretionary: Isetan Mitsukoshi 3099.JP +0.1% (speculation on Op profit)
- Materials: Zhongjin Gold 600489.CN +2.8%, Shandong Gold Mining 600547.CN +2.9% (gold futures traded higher by over 3% during US session); Sandfire Resources SFR.AU +0.8% (drilling plans)
- Healthcare: Takeda Pharmaceutical 4052.JP -0.4% (investors oppose appointment of president)
- Telecom: China Unicom 762.HK -1.7% (May subscriber data)
- Financials: Fosun International 656.HK +2.8% (investment in Greece)
- Industrials: Austin Engineering ANG.AU +6.8% (awarded contracts)


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