Silver as an investment

Asian Stocks Slide On iPhone X Demand Fears; US Futures Flat In Thin Holiday Trading

For the second day in a row, most Asian markets – at least the ones that are open – were dragged lower by tech stocks and Apple suppliers, with the MSCI Asia Pacific Index down 0.2% led by Samsung Electronics and Taiwan Semiconductor Manufacturing in response to the previously noted report that Apple will slash Q1 sales forecasts for iPhone X sales by 40% from 50 million to 30 million. Most Asian equity benchmarks fell except those in China. European stocks were mixed in a quiet session while U.S. equity futures are little changed as markets reopen after the Christmas holiday.

Away from Asia, stocks remained closed across the large European markets, as well as in parts of Asia including Australia, Hong Kong, Indonesia, the Philippines and New Zealand. Japanese benchmarks slipped from the highest levels since the early 1990s, helping to pull the MSCI Asia Pacific Index down, while shares in Dubai, Qatar and Russia were among the big losers in emerging markets. S&P 500 futures were flat as those for the Dow Jones slipped. The euro edged lower with the pound – although there were no reverberations from Monday’s odd EURUSD flash crash which was only observed on Bloomberg feeds, while Reuters ignored it even if the FT did note it… 

… while the Russian ruble, South African rand and South Korean won were the notable gainers. Gold extended its recent advance as silver also jumped.

In a continuation of Monday’s muted action, Apple’s Asian suppliers again responded to the biggest market news of the week and fell after Taiwan’s Economic Daily reported on Monday that Apple will slash its sales forecast for the iPhone X in the quarter to 30 million units, down from 50 million units originally. Some analysts have also flagged disappointing demand. U.S.-based JL Warren Capital is predicting shipments of just 25 million units as consumers baulk at the “high price point and a lack of interesting innovations”.  “Our work continues to suggest the March and June quarters will have a significant amount of iPhone X make-up shipments,” Chicago-based Loop Capital said in a note last week, forecasting shipments of 40-45 million units in the first quarter of 2018, up from an estimated 30-35 million units in the current quarter. Analysts at Jefferies have also forecast around 40 million iPhone X sales for the first quarter.

Apple suppliers that were most hit included Genius Electronic Optical Co Ltd which dropped 2.4 percent on Tuesday to take its losses this week to 11.4 percent. Pegatron Corp also fell on both days, losing 3.2 percent this week.

Meanwhile, China stocks closed higher on Tuesday as an advance by construction machinery makers and financials offset a drop by consumer staples. Hong Kong’s markets will reopen on Wednesday after a two-day holiday break. The Shanghai Composite Index rose 0.8% to 3,306.13, its highest level since Dec. 11 while the blue-chip CSI 300 Index added 0.3%, erasing earlier drop of 0.7%.

Still, as Bloomberg notes, traders are finding little to get excited about as the stellar year for risk assets crawls to its end, with the possible exception of the cryptocurrency roller coaster, where bitcoin was once again trading above $15,000 this morning. Traders may be opting to enjoy the relative calm as tensions continue to simmer between the U.S. and Russia, Italy’s parliament is set to be dissolved for a risky European election, and big decisions on the American debt ceiling were merely kicked down the road. That has set up a potentially eventful 2018.

In rates, U.S. 10-year Treasury yield hovers under last week’s high, and in overnight trading it climbed less than one basis point to 2.48%.

In currencies, the Bloomberg Dollar Spot Index holds two weeks of declines, as most major currencies trade in narrow ranges and volumes remain low heading into the year-end. The yen headed toward a six-week low against the dollar as policy divergence and optimism over the strength of the U.S. economy supported the greenback. Japan’s currency fell against most G-10 peers after the central bank kept its loose monetary policy stance last week and inflation data Tuesday showed prices are still rising at less than half its targeted pace. Passage of U.S. tax reforms and expected interest-rate hikes by incoming Federal Reserve Governor Jerome Powell next year could add to the pressure on the yen, according to FX Prime by GMO Corp. “If Powell confirms the pace of rate increases next year and if Trump unveils more specifics about infrastructure investment, that would support the dollar,” said Hiroshi Yanagisawa, chief analyst at FX Prime by GMO in Tokyo. “USD/JPY will become a bit top-heavy around 113.50, while support is seen firm around 112.50.”

While the yen slid, the South Korean won rose to the strongest in more than two years while most other Asian currencies were little changed as local markets reopened after the Christmas Day holiday. The positive correlation between strong U.S. stocks and Asian currencies remains in play, said Wu Mingze, a foreign-exchange trader at INTL FCStone in Singapore. “The only question is whether the rally in U.S. equities can continue early next year, while there isn’t any bullish factor left. Failure for stocks to climb higher may result in safe-haven currencies regaining strength.”

Elsewhere, the British pound dipped 0.1 percent to $1.3364. South Africa’s rand rose 0.2 percent to 12.5835 per dollar, the strongest in nine months. The Russian ruble jumped 0.4 percent to 57.7458 per dollar, hitting the strongest in two months with its eighth consecutive advance.

In commodities, moves were likewise subdued, with WTI holding above $58 a barrel as trading resumed following the Christmas holiday and after U.S. explorers refrained from adding rigs for a second week. Brent edged lower towards $65 a barrel on Tuesday, but remained within sight of its highest level since mid-2015, as the looming restart of a key North Sea oil pipeline offset support from OPEC-led supply cuts. The North Sea Forties pipeline, which plays an important role in the global oil market, is being tested following repairs and full flows should resume in early January, its operator Ineos said on Monday.

Bitcoin rallied as the biggest cryptocurrency has filled the gap from last week’s dramatic selloff.  Gold increased 0.2 percent to $1,278.34 an ounce, hitting the highest in more than three weeks with its fifth consecutive advance. Silver gained 0.6 percent to $16.43 per ounce, the highest in more than three weeks.

Economic data expected today include Richmond Fed Reserve Manufacturing Survey.

Market Snapshot

  • S&P 500 futures up 0.02% to 2,686.50
  • STOXX Europe 600 down 0.1% to 390.28
  • MSCI Asia Pacific down 0.2% to 172.31
  • MSCI Asia Pacific ex Japan down 0.2% to 561.44
  • Topix down 0.3% to 1,827.01
  • Hang Seng Index up 0.7% to 29,578.01
  • Australia S&P/ASX 200 up 0.2% to 6,069.71
  • Kospi down 0.5% to 2,427.34
  • German 10Y yield unchanged at 0.42%
  • Euro down 0.06% to $1.1863
  • Brent Futures down 0.2% to $65.10/bbl
  • Italian 10Y yield rose 0.6 bps to 1.645%
  • Spanish 10Y yield unchanged at 1.472%
  • Brent Futures down 0.2% to $65.10/bbl
  • Gold spot up 0.3% to $1,277.80
  • U.S. Dollar Index up 0.04% to 93.30

Top Overnight News from Bloomberg

  • The United Nation’s latest sanctions on North Korea are more likely to hurt ordinary people in the isolated nation than slow Kim Jong-Un’s push to develop missiles capable of hitting the U.S. with nuclear weapons.
  • Japanese inflation unexpectedly picked up in November but prices are still rising at less than half the rate targeted by the central bank. The tightest job market in decades got even tighter.
  • Early Monday morning in New York, the euro currency tumbled about 3 percent against the dollar in a matter of minutes. Given the limited Christmas Day volume, along with a lack of much market-moving news, the sudden plunge could’ve been sparked by computer-driven trading — a suspicion touted by the ZeroHedge website.
  • The Kremlin is “concerned” about the possibility the U.S. might further expand sanctions on Russia, presidential spokesman Dmitry Peskov said.
  • China can achieve a goal of doubling the size of its economy by 2020 even if annual expansion slows to 6.3 percent, according to a senior Communist Party official, signaling a greater willingness to tackle debt and pollution at the expense of growth.

In Asia, the MSCI Asia Pacific Index fell 0.2% led by declines in tech stocks including Samsung Electronics Co. and Taiwan Semiconductor Manufacturing Co. Main equity benchmarks in the region fell except those in China. Markets were closed for a second day in Australia, Hong Kong, Indonesia, the Philippines and New Zealand. The market had a muted reaction to data released early on Tuesday which showed that Japan’s core consumer prices rose for the 11th straight month, up 0.9 percent year-on-year, and household spending jumped in November. China stocks closed higher on Tuesday as an advance by construction machinery makers and financials offset a drop by consumer staples. Hong Kong’s markets will reopen on Wednesday after a two-day holiday break.  Shanghai Composite Index rises 0.8% to 3,306.13, its highest level since Dec. 11. CSI 300 Index adds 0.3%, erasing earlier drop of 0.7%. Shenzhen Composite Index +0.4%; ChiNext Index +0.2% after falling as much as 0.8%. XCMG Construction Machinery Co. surges by 10% daily limit as best performer on big-cap CSI 300 measure; Sany Heavy Industry Co. jumps 7.3%, the most this month; Zoomlion Heavy Industry Science and Technology Co. advances 5.2%, the most since March 2016.

Top Asian News

  • China’s Fosun Is Said to Explore Sale of Hollywood Studio Stake
  • Japan Stocks Fall in Thin Trade as Technology Shares Drag Index
  • China Stocks Rise to Highest in 2 Weeks as Machinery Makers Gain
  • Indian Bonds Erase Losses After Recap Debt Report, Trader Says
  • Reliance Communications Surges Ahead of ‘Important Announcement’

Across Europe, most financial markets are shut on Tuesday. The euro inched down 0.1 percent to $1.1869. The single currency gave up some ground last week after Catalan separatists won a regional election, deepening Spain’s political crisis in a sharp rebuke to Prime Minister Mariano Rajoy and European Union leaders who backed him.

Top European News

  • Euro May Rise Into Year-End If German CPI is Strong: FX Prime
  • Kuka’s CEO Plans for Robot Domination in China and Your Garage
  • Russia Harvested 85.8m Tons of Wheat in 2017: Statistics Service
  • France Sees EU1b Extra Corporate Tax Revenue for 2017: Les Echos
  • Bank of Russia Sells 14.3b Rubles in March 2018 KOBR Bills

In currencies, The Bloomberg Dollar Spot Index climbed less than 0.05 percent. The euro declined 0.1 percent to $1.186, the weakest in a week. The British pound dipped 0.1 percent to $1.3364. South Africa’s rand rose 0.2 percent to 12.5835 per dollar, the strongest in nine months. The Russian ruble jumped 0.4 percent to 57.7458 per dollar, hitting the strongest in two months with its eighth consecutive advance.

US Event Calendar

  • 9am: S&P CoreLogic CS 20-City MoM SA, est. 0.6%, prior 0.52%
  • 10am: Richmond Fed Manufact. Index, est. 21.1, prior 30
  • 10:30am: Dallas Fed Manf. Activity, est. 20, prior 19.4