CAPIS Global Markets 2/21/2019

Asian Markets Following yesterday’s Fed minutes, the markets were mixed and most ended the day with minor moves.  Word regarding Sino-U.S. trade talks remains positive.  The two parties are said to be drafting 6 MOUs on key issues.  However, a strengthening yuan and comments from Chinese Prem. Li caused the mainland exchanges to give back…

Asian Markets

Following yesterday’s Fed minutes, the markets were mixed and most ended the day with minor moves.  Word regarding Sino-U.S. trade talks remains positive.  The two parties are said to be drafting 6 MOUs on key issues.  However, a strengthening yuan and comments from Chinese Prem. Li caused the mainland exchanges to give back earlier gains.

Premier Li reiterated the always prudent “prudent policy” statements.  He added the domestic economy would not be flooded with liquidity.  Additionally, the local press downplayed chances of a rate cut by the PBoC in the near term.  The measure would only be used as a “last resort” if the local economy slowed “sharply.” Elsewhere on macro related issues, Japan’s preliminary Feb. Manuf. PMI is below the contraction mark.  This is the first contraction since Aug. 2016.  Australia’s composite PMI also fell below 50 but employment gained more than anticipated.

This resulted in muted sector changes.   Consumer discretionary and IT gained less than 0.5%.  A subsector that outperformed is the Chinese airlines thanks to the yuan strengthening.  While a handful of sectors ended the day lower, those declines are minimal.

Other Important Headlines

  • Miners outside of Australia, especially Chinese names, gained with reports indicating the port of Dalian is refusing Australian coal shipments.  This has supposedly started at the beginning of the month.
  • Samsung Elec’s +0.1% foldable smartphone is creating mixed reaction from analysts.  To sum that link up: High marks for innovation but not for profitability.
  • Lenovo’s +11.9% Q3 NI is well ahead of consensus and marks the 4th consecutive quarterly beat.  The company is benefiting from falling memory chip prices and a turnaround in its mobile unit.  CEO Yang pledges the company will continue to address unprofitable businesses.
  • Santos +0.5% saw y/y increases on both the top and bottom line during FY18 and NI moved into the black.
  • Wesfarmers +6.9% also posted y/y increases and will pay a special dividend of A$1.00 per share.
  • Citing calls to various officials, Morgan Stanley says China will cease all local subsidies for electric and plug-in hybrids this year.

European Markets

The region’s markets are mixed and down small most of the day, as a whole.  The day offers a cornucopia of earnings. Those results are driving sector performance.  Banks are off more than 1% with basic resources off by about that mark followed by telecoms.  Media advances more than 0.5% followed by insurance and food/bevies.

There has also been plenty of macro out in the region and they raise slowdown issues.  The Markit German Feb. manufacturing PMI fell to contraction territory and missed consensus.  The same reading for the EU unexpectedly came in below 50.  To underscore growth woes, the ECB has stated growth in the region will be “below potential” for several quarters.

On the Brexit front, both PM May and the EU’s Juncker said yesterday’s meeting and talks were constructive.  Today, the negotiating teams for both side meet once again to work on the Irish backstop.  Conversely, the EU’s Kurz stated his meeting with Pres. Trump regarding EU/US trade talks were “contentious.”

Corporate Snippets

  • Swedbank -9.0% arranged a conference call following yesterday’s Danske Bk % related money laundering allegations.  However, CEO Bonnesen’s comments have not alleviated investor concerns.  Analysts say little new information was provided other than previously released statements.
  • Axa -1.6% saw earnings plunge last year due to “abnormally high” natural disasters and higher exposure to the commercial property and casualty arena due to its XL acquisition.  However, outflows ended in during the second half of the year which is better than many peers.  Revenues improved by 4% with underlying revenues higher by 6%.  The company will pay a dividend of €1.34/sh and maintains its FY20 outlook.
  • AP Moller -9.0% is sinking following a profit warning.  The company now sees its sees FY19 EBITDA c. $4b vs. the  prior outlook of $4.7b.   The company noted higher fuel prices hurt while trade worries are dampening activity.
  • A profit warning form Centrica -12.0% is creating a number of concerns.  The company sees its operating cash flow in jeopardy due to outages and government imposed price caps.  Investors expect estimates to be cut and are worried about the company’s dividend.

Plenty more out there, mind your eye!

On Our Side of the Pond

  • TechnipFMC’s French line is trading down by roughly 7% after the company posted an unexpected Q4 loss even when adjusting for one offs.
  • Johnson & Johnson confirms it has received talc related subpoenas from both the DoJ and SEC.
  • Nike is performing some damage control this morning following yesterday’s UNC vs. Duke basketball game.  Duke star Zion Williamson had his Nike show tear apart resulting in a “mild” knee injury.
  • U.S. jobless claims and durable goods due.

Markets and Macro

Markets Snapshot

Event Survey Actual Prior Revised
AU CBA Australia PMI Mfg Feb P 53.1 53.9
AU CBA Australia PMI Services Feb P 49.3 51
AU CBA Australia PMI Composite Feb P 49.7 51.3
JN Japan Buying Foreign Bonds 15-Feb ¥193.7b ¥992.4b ¥996.6b
JN Japan Buying Foreign Stocks 15-Feb -¥59.1b -¥114.3b -¥114.4b
JN Foreign Buying Japan Bonds 15-Feb ¥84.3b ¥906.1b ¥882.2b
JN Foreign Buying Japan Stocks 15-Feb -¥52.9b -¥102.0b -¥101.9b
SK Exports 20 Days YoY Feb -11.70% -14.60%
SK Imports 20 Days YoY Feb -17.30% -9.50%
JN Nikkei Japan PMI Mfg Feb P 48.5 50.3
AU RBA FX Transactions Market Jan A$337m A$1622m
AU RBA FX Transactions Government Jan -A$546m -A$1735m
AU RBA FX Transactions Other Jan -A$5637m A$1611m
AU Employment Change Jan 15.0k 39.1k 21.6k 16.9k
AU Unemployment Rate Jan 5.00% 5.00% 5.00%
AU Full Time Employment Change Jan 65.4k -3.0k -9.5k
AU Part Time Employment Change Jan -26.3k 24.6k 26.4k
AU Participation Rate Jan 65.60% 65.70% 65.60%
JN All Industry Activity Index MoM Dec -0.20% -0.40% -0.30% -0.50%
JN Supermarket Sales YoY Jan -3.40% -0.70%
JN Nationwide Dept Sales YoY Jan -2.90% -0.70%
JN Tokyo Dept Store Sales YoY Jan -2.90% -1.10%
JN Machine Tool Orders YoY Jan F -18.80% -18.80%
GE CPI MoM Jan F -0.80% -0.80% -0.80%
GE CPI YoY Jan F 1.40% 1.40% 1.40%
GE CPI EU Harmonized MoM Jan F -1.00% -1.00% -1.00%
GE CPI EU Harmonized YoY Jan F 1.70% 1.70% 1.70%
FR Business Confidence Feb 102 103 102
FR Manufacturing Confidence Feb 103 103 103
FR Production Outlook Indicator Feb -11 -5 -11
FR Own-Company Production Outlook Feb 6 9 10
FR CPI EU Harmonized MoM Jan F -0.60% -0.60% -0.60%
FR CPI EU Harmonized YoY Jan F 1.40% 1.40% 1.40%
FR CPI MoM Jan F -0.50% -0.40% -0.50%
FR CPI YoY Jan F 1.20% 1.20% 1.20%
FR CPI Ex-Tobacco Index Jan 102.67 102.67 103.16
FR Markit France Manufacturing PMI Feb P 51 51.4 51.2
FR Markit France Services PMI Feb P 48.5 49.8 47.8
FR Markit France Composite PMI Feb P 48.9 49.9 48.2
GE Markit/BME Germany Manufacturing PMI Feb P 49.8 47.6 49.7
GE Markit Germany Services PMI Feb P 52.9 55.1 53
GE Markit/BME Germany Composite PMI Feb P 52 52.7 52.1
HK Unemployment Rate SA Jan 2.80% 2.80% 2.80%
EC Markit Eurozone Manufacturing PMI Feb P 50.3 49.2 50.5
EC Markit Eurozone Services PMI Feb P 51.3 52.3 51.2
EC Markit Eurozone Composite PMI Feb P 51.1 51.4 51
IT CPI FOI Index Ex Tobacco Jan 102.2 102.1
IT CPI EU Harmonized YoY Jan F 0.90% 0.90% 0.90%
GE CPI Hesse MoM Jan -1.00% -0.10%
GE CPI Hesse YoY Jan 0.90% 1.40%
GE CPI Brandenburg MoM Jan -0.50% 0.30%
GE CPI Brandenburg YoY Jan 1.30% 1.60%
GE CPI Bavaria MoM Jan -1.00% 0.00%
GE CPI Bavaria YoY Jan 1.70% 2.20%
UK Public Finances (PSNCR) Jan -25.4b 21.3b 21.6b
UK Central Government NCR Jan -25.8b 18.2b
UK Public Sector Net Borrowing Jan -11.1b -15.8b 2.1b
UK PSNB ex Banking Groups Jan -10.0b -14.9b 3.0b
GE CPI Baden Wuerttemberg MoM Jan -0.90% 0.00%
GE CPI Baden Wuerttemberg YoY Jan 1.60% 2.00%
GE CPI Saxony MoM Jan -1.00% 0.40%
GE CPI Saxony YoY Jan 1.40% 1.90%
CA Wholesale Trade Sales MoM Dec -0.20% -1.00%
US Philadelphia Fed Business Outlook Feb 14 17
US Initial Jobless Claims 16-Feb 228k 239k
US Continuing Claims 9-Feb 1743k 1773k
US Durable Goods Orders Dec P 1.70% 0.70%
US Durables Ex Transportation Dec P 0.30% -0.40%
US Cap Goods Orders Nondef Ex Air Dec P 0.20% -0.60%
US Cap Goods Ship Nondef Ex Air Dec P 0.00% -0.20%
US Bloomberg Consumer Comfort 17-Feb 60
US Bloomberg Economic Expectations Feb 44.5
US Markit US Manufacturing PMI Feb P 54.8 54.9
US Markit US Services PMI Feb P 54.3 54.2
US Markit US Composite PMI Feb P 54.4
US Leading Index Jan 0.10% -0.10%
US Revisions: Existing Home Sales
US Existing Home Sales Jan 5.00m 4.99m
US Existing Home Sales MoM Jan 0.20% -6.40%