Markets Recap

The Asian markets saw a mixed response to Pres. Trump’s Chinese trade deal “sooner than you may think” comment and an initial pact with Japanese PM Abe.   Japan ends the day with small gain with S. Korea flat.  However, Australia is lower and the mainland Chinese indices are the biggest laggards.  Local investors suffered jitters as Washington and Beijing lobbed warnings to each other regarding the democracy protests in Hong Kong.  Also, with the long Golden Week holiday approaching, some traders are taking money off the table.  After the mainland closed, China’s Ministry of Commerce made supportive statements.  Chairman Goa reports Chinese companies have made “considerable” purchases of U.S. pork and soybeans.  He also indicates China and the U.S. are preparing for another round of “high-level” negotiations.  This helped Hong Kong bounce from the flat line.

Overall, most sectors finish in the red, consumer staples by 0.7% with IT, healthcare and industrials c. 0.5%.  Financials advance 0.5% followed by telcos and real estate.  Japanese autos and steel traded well on the above trade deal.  Both the U.S. and Japan will continue talks with one of Japan’s goals to eliminate U.S. auto and parts tariffs.

After a modest dip to start, Europe rallied on the Chinese MOFCOM comments.

On the central bank front, the BoJ reduced its purchase of 5-10 yr. JGBs for the 4th time in the past 6 weeks.  Today, it offered to buy ¥350b vs. last week’s ¥380b.  The Philippine central bank reduced its benchmark rate by 25 basis points to 4%, as expected.  It notes inflation is slowing and signaled a dovish bias.

Regarding Brexit, PM Johnson did not hold back in addressing Parliament following the U.K. courts striking down his suspension of the assembly.  He called members cowards for refusing to take up two calls for a no-confidence vote and has issued a third call for the measure.  He refuses to request another Brexit extension.  On the lighter side of the matter, he sounded Scroogish when stating, “I have never heard so much humbug in all my life.”

Corporate Snippets

• Japan Post Ins +0.4% will start sales of insurance policies next January.  It had been expected to occur next month.  Sales had been halted due to sales practice infractions.
• Imperial Brands -9.0% is cutting its FY year outlook noting the vaping product sector has “deteriorated considerably over the last quarter.”   The company now sees FY EPS flat with revenues up 2% vs. prior the outlook with a top end of 4%.
• Pearson -16.3% is also cutting its outlook.  The company is experiencing softening demand for its collegiate offering in the U.S.  It foresees FY adj. OP of £590 to £640m which is at the bottom end of the anticipated range.
• Ericsson -1.7% is taking provisions of c. $1.2b for a U.S. investigation into ethics violations.
• Rounding out today’s European profit warnings is IAG -3.0%.  The group notes the negative impact of the ongoing pilot strikes at British Airways.
• ABN Amro -10.0% reveals it is facing a Dutch investigation regarding failure to report suspicious banking activities.  The bank says it is cooperating with authorities.

On Our Side of the Pond

• The Peloton IPO has been priced at the top end of the range, $29 per share.  This values the company at $8.1b.  The shares commence trading on NASDAQ today.
• Reports indicate, GM and the UAW may be near an agreement.
• Sources allege the Justice Dept. will investigate Facebook for antitrust violations.  This would be in addition to a current probe being made by the FTC.
• U.S. GDP and Initial Jobless Claims due.

Markets & Macro