Asian Headlines

The Chinese markets had a solid return to trading following last week’s holiday.  The gains were triggered by two factors.  Low level Sino-U.S. trade talks are being conducted with higher level meetings to be held on the 14th and 15th of this week.  In addition, Pres. Trump signaled he would talk with Chinese Pres Xi ahead of the tariff truce deadline of March 1st.  The second key for Chinese traders were a number of encouraging statistics from the Lunar New Year.  We will highlight some of them below.   Political turmoil is unsettling the markets in Thailand.  Japan was closed for National Foundation Day.

Most sectors gained with the Chinese names providing the broad boost.  IT improved by c. 1.4% following by a 1% gain among consumer staples.  Energy gave ground by c. 0.3%.

Important Headlines

• Some of the Chinese statistics we flagged above include Chinese visitors to Macau rose 25.6% y/y.  Retail and catering sales jumped 8.5% y/y to CNY 1.01t.  Tourism revenue was also higher by +8.2% y/y.
• On a related note, Tencent +1.85% and Netease +1.8% are experiencing solid game sale increases following the roll out of New Year themed games..  During the period, they rose 8.0% and 35.0%, respectively.
• KB Financial’s -3.6% Q4 NI is below the lowest estimate.
• Amcor +1.9% published H1 results with NI of $267.6m.  Margins fell to 12.2% vs. 12.5% last year. The company maintains its FY outlook  and the dividend/sh is 21.5c vs. 21 cents last year.  It expects the Bemis +1.4% deal to be concluded Q2’19.
• JB Hi-Fi +1.5% sees H2 Australian sales growth outperforming and FY NI  meeting consensus.
• After the close, China released its December forex reserves.   They grew during December which is the 3rd consecutive monthly advance.  The nation continues to add to its gold reserves.

European Markets

Europe spent the entire day to the upside.  Even a lackluster U.S. session did little to dampen buying interest.  Many of the major sectors finished higher by at least 1%.  Those included banks, industrials, financials, retail and tech, among others.   Autos and healthcare lagged throughout the day.  Basic resources came under selling pressure later in the session.

The U.K. Brexit saga continues with PM May and Labour Party leader Corbyn sparring on the next measures to be taken.  Perhaps underscoring the uncertainty to the U.K. economy, a slew of U.K. readings unexpectedly slipped during December.  Those include GDP and Industrial Production.

Snippets from the Region

• The gains in the banking sector are the result of an encouraging ECB capital requirements report.  Many banks fared well especially Italian and Spanish 2nd tier names which had been cause for worry within the region.
• Smith & Nephew -3.0% has not made a comment regarding Friday’s reports its was conducting talks to acquire NuVasive +15.0%.   A potential deal is reputedly north of $3b and would give Smith and Nephew greater access to spinal surgery products.
• Euronext +0.1% has increased its offer for Oslo Bors +4.5% by 8% to NOK 158 per share.  This is roughly 4% more than Nasdaq’s bid which was accepted last month.  Oslo Bors stated it will review the higher offer while indicating it believes Nasdaq is the better strategic fit.

The Markets on Our Side of the Pond

• The U.S. budget talks have once again broker down as issues pertaining to immigration remain sticking points.  The current budget funding ends on Friday.
• Ingersoll-Rand -0.15% has agreed to acquire Precision Flow Systems for $1.45b.
• Loews -6.0% and Aurora Cannabis -4.7% following their results.

On the Markets Agenda Tonight

• Spain holds budget talks and the Supreme Court trial for Catalan separatists commences.
• OPEC’s monthly crude report is due.
• Keep an eye on Toshiba following a Nikkei report the company will cut its FY outlook by at least 50% when it reports results on Wednesday.
• Samsung Elec. will report following prelims out two weeks ago.  Other earnings due includes Nissan, Kering and Thyssenkrupp to name a few.

Markets and Macro