Markets Overview

Asia had a solid start to the week.  Of course, the markets were provided a strong hand-off from the States on Friday.   There were were several factors which added to the enthusiasm which we will outline below.  Greater China led the way with Shenzhen the best performer.  All major sectors gained with most better by at least 1%.  Real estates ends the day higher more than 2%.

Today’s Positives in Asia

• The PBoC announced interest rate reform measures.  Commencing tomorrow, new loans must be priced “mainly” in reference to a new benchmark, the LPR ( Loan Prime Rate).   The move is a measure to reduce leading rates for companies.  However, this was viewed to be a negative for banking stocks.
• After a conversation with Apple CEO Cook regarding tariffs, Pres. Trump stated Mr. Cook gave him much to ponder.  However, there are no changes to his current stance on Chinese trade talks.   Samsung. Elec. -0.7% was specifically discussed and that impacted the shares.
• While protests continue in Hong Kong, the general tone has been more peaceful.

The European markets have been better since the open.   While off highs, they are maintaining a solid advance.  Following Friday’s story that Germany would be willing to provide stimulus if a financial crises occurred, German FM Scholz indicates his nation could add another $55b in spending.   The region is currently near highs with another report hitting the tape that Germany is preparing a variety of fiscal initiatives if needed.  All sectors are moving to the upside: Basic resources, energy, construction, autos, industrials and tech by at least 1.5%.

The debt markets are seeing significant increases to bond yields.  Most sovereign 10 yr. yields move higher by at least 5 basis points.  Italy’s by about 8 basis points as the political picture remains murky.

Speaking of politics, U.K. PM Johnson is hearing calls to summon Parliament back early from recess.  A internal government report surfaced outlining dire consequences is a “no deal” Brexit scenario occurs.

Important Corporate Stories

• Bluescope Steel -8.3% melted following a profit warning.  The company sees expansion costs and spread prices impacting H1FY20 EBIT negatively by 45% y/y.
• The Telegraph is reporting Sainsbury +4.5% is searching for a replacement for CEO Coupe following his failure to land the ASDA deal.  The company has denied the story.
• Merger speculation is lifting Countrywide +1.3%. An unnamed suitor is allegedly conducting talks which may lead to a bid.
• Norwegian Air +5.3% soars following a stake sale of its finance unit.  It is selling its holding in Norwegian Finans in two tranches raising NOK 2.22b.  This will substantially improve its balance sheet.

On Our Side of the Pond

• Watch for Huawei headlines.  The current provision allowing some business to be conducted is due to expire today.  Pres. Trump stated he will be making a decision today.
• Estee Lauder will report results this morning with Baidu after today’s close.

Markets & Macro