Asian Markets

The region had a mixed day with most markets recording minor index moves.  This followed a strong day yesterday as positive trade comments from both the U.S. and China prompted buying interest.  Sectors were mixed, overall.  Healthcare and telcos gave way by a little more than 0.5%.  Providing support were real estate and financials but the advances are shy of 0.5%.

Perhaps the most important macro development is BoJ Gov. Kuroda’s presentation to parliament.  He stated continued strength in the ¥ would prompt the central bank to add stimulus, if needed.  This caused the currency to give ground.  The AUD was also trading lower.  The RBA minutes were released and the central bank is concerned about the impact of falling home prices for the overall economy.

Important Headlines

• Hang Seng Bk’s +1.0% FY ’18 NI is a beat at HK$ 24.21b vs. HK$23.38b expected.  FY Net Interest Income is HK$30.05b.  CET1 RATIO is a robust 16.6%.  The company set its FY18 dividend of HK$3.60/sh.
• Nutritional and health care supplier Blackmores -25.0% unsettled related Chinese consumer plays.  The company says H2 sales will slow due to changes in Chinese consumer buying habits.
• Cochlear -8.15% projects it will reach its FY19 NI target of A$265m to A$275m.  However, investors are worried to hear the company is suffering market share loss in the U.S. and increased competition in Europe.
• South Korean airlines will raise fuel charges on international flights to counter rising oil prices.

European Markets

The region has been lower for most of the day thus far.  The markets have seen a number of high profile earnings hit the tape and are raising concerns.   Also, keep an eye out for EU/US trade commentary.   Yesterday, there were a number of comments that sparked investor worries especially for the auto sector.

With the exception of travel/leisure, all the major sectors are trading to the downside.  Banks are off more than 1.5% and been in the red all session.  Many sectors are off at least 0.5% including financials, media, chems and tech.

PM May and negotiators held a round of talks with their EU counterparts yesterday and they will be resumed tomorrow.  The “Irish Back Stop” will be targeted for rewording.  Worth noting yesterday, 7 members of the UK Labour Party (not a typo) withdrew from the party to establish an independent bloc.  They cited disagreement with MP Corbyn’s leadership on the issue and anti-semitism.

Important Snippets from the Region

• HSBC’s -4.0% FY earnings are a disappointment and Standard Chartered -3.0% is trading down on sentiment.  The company’s adj. PTP had a minor dip during Q4 and are short of consensus.  Revenues at the investment bank are off 16% y/y.  Adding to concerns are the comments from the CEO regarding uncertainty for the current FY.  He notes Sino-U.S. relations, Chinese macro and Brexit all create a murky picture.
• Danone -0.6% has underscored the Chinese consumer concerns we highlighted in the Asian section.  The company sees FY19 LFL growth of 3%.  This is lower than anticipated by the Street.  The company said Chinese baby food sales would be “around flat” in 2019 and overall H1 will be “slower, especially during Q1.”
• BHP’s -0.7% H1 underlying profits are well below expectations at US$3.73b vs. consensus of $4.37b.  Mining outages limited overall output.  The company provides FY19 production guidance that is “broadly flat.”  The company indicates it does not have the capacity to compensate for Vale’s lost iron ore production.

On Our Side of the Pond

• Walmart is trading higher following strong Q4 results with top and bottom lines along with same store sales beating expectations.
• U.K. lawmakers refer to Facebook as “digital gangsters.”
• Navient has rejected a take over approach from Canyon Capital and Platinum Equity.
• Late yesterday and way south of the border in Brazil, Pres. Bolsonaro fired Sec. Gen. Bebianno over a campaign fund scandal.  Mr. Bebianno was seen as a key ally for Pres. Bolsonaro.

Markets and Macro