Asian Markets

Another mixed day of trading across the region.  To underscore that statement, Japan saw the Topix and Nikkei 400 manage small gains while the benchmark Nikkei 225 dipped.  The Chinese markets saw interesting activity.   They fell during the afternoon session with no trigger we could delve up.  It may have been partially related to TSMC (See below) but that can’t account for all the move.  Therefore, keep your eyes open.  News the U.S. will proceed with a Huawei criminal probe had been out well before the local open and had been largely shrugged off.  Hong Kong was still open when China confirmed Vice. Prem. Liu will come to the U.S. at the end of the month to resume trade talks.  However, that did not help the market rally.

Real estate was the worst performing sector by far with Chinese related names lower following the selling noted above.  Jiayuan Intl slumped 80.0%!  Following yesterday’s results at Goldman Sachs, financials had a good start to the day.  However, Chinese names ended up pulling the sector back to the flat line.

Other Important Headlines

• Here are the TMSC results we noted above which we were released after the local close.  Q4 NI of NT$99.98b was basically inline.  But, OP of NT$ 107.1b was light of the NT$ 108.24be.  The company sees Q1 Sales $7.3 to $7.4b and gross margin 43% to 45% vs. 47.5% expected.  FY CAPEX $10b to $11b.  Says H1 “may be worse y/y” but H2 to “fare better.”
• Softbank Group +0.8% is conducting a bond tender offer for the first time in its history.  It will purchase $750m worth of $ and € denominated bonds.  Minute amount vs. its overall debt pile but being taken as  small positive.
• Byd -6.0% suffered a number of downgrades including by Morgan Stanley and Credit Suisse.  The concern is electric car subsidies in China are being reduced faster than anticipated.
• Gree Elec fell -1.65% despite seeing FY ’18 net income rising between 16%-21% y/y to CNY 26b-27b.
• Glenn’s favorite steak restaurant, Bronco Billy’s -8.2% FY parent OP ¥2.6b missed its own forecast of  ¥2.9b.  The company is forecasting OP of ¥2.7b for the current FY.
• On the central bank front, surveys indicate the RBA is now expected to hold off on any rate hike until Q1 of ’20 and then remain patient until the end of the year.  Indonesia left its benchmark rate unchanged at 6.0%.

European Markets

To start, PM May survived the no confidence vote.  It was a slim margin (325 to 306) but allows her to remain at her post.  She is calling upon both parties to come together to get a Brexit deal ironed out.   Also regarding confidence votes, Greek PM Tsipras was also victorious in a measure he brought to the table following the resignation of his defense minister.

The markets started to the downside and have been in the red as a whole.  However, losses have been pared and Sweden and Switzerland are up small.  We are experiencing a bit of a wobble following Morgan Stanley results but nothing dramatic.

The majority of sectors are lower with autos and banks off more than 1%.  Food and beverages are up about 0.5% with personal goods also gaining.

Snippets from the Region

• Societe Generale -5.0% is creating the weakness in the banking sector especially for its French peers.  SG suffered a 20.0% decline in trading revenue and is considering closing its proprietary trading unit.  With its CET1 ratio weaker, the  bank has announced a scrip dividend as opposed to a cash dividend.
• Elsewhere in the banking sector,  Deutsche Bk -3.1% and Commerzbank -3.1% are giving back about half of yesterday’s advance on the news we flagged.  Barclays commented the story does “not bode well” for earnings at Deutsche Bk.
•  Voestalpine -5.7% issued its second warning in four months.  The Austrian steel maker cuts outlook noting higher operational and legal costs.

On Our Side of the Pond

• Morgan Stanley is trading lower post its results this morning following a revenue miss and outlook comments.
• You can’t go anywhere without transports:  Revenues at CSX are also below expectations.
• Other important U.S. earnings due include BB&T, Amex and Netflix.
• Up in the Great White North, Husky Energy has ended its bid for MEG Energy citing lack of investor support.

We would remiss to not note the passing of investment legend Jack Bogle.

Markets and Macro