Markets Overview

Much like the US, Asian markets gapped higher at the open and held those levels for the balance of the session.  Yesterday’s more upbeat trade tweet by Pres. Trump swung sentiment back to positive allowing for US markets to recover some of Friday’s tariff-induced losses.  Volumes in various markets, especially China, ended elevated with an MSCI Rebalance on the close kicking up turnover.  Chinese A shares are seeing a weight increase from 10% to 15%.  India is higher again after yesterday’s strong finish.  PM Modi’s government received central bank funds which will partially be used to bolster reserves at state-run banks.  Hong Kong lagged on results and unrest.

Discretionary names led in Japan as retailers and autos strengthened.  Pres. Trump stated he is not considering tariffs against Japanese automakers, at this time.  Pharmaceuticals also ticked up with relief seen following a U.S. opioid related lawsuit.  (More on this in the On Our Side of the Pond section.)  Discretionary and IT names buoyed the mainland Chinese markets with both up well over a percent.  Similar gains were seen Down Under.

The Yuan is weaker on the day but stronger than its opening level from yesterday morning.  Yesterday, several headlines noted demand in China for the USD continues to rise as liabilities to foreigners increase.  Bloomberg indicates that in addition to the $2T in liabilities that overseas subsidiaries owe, a large portion of maturing debt is due next year.  Industrial Profits in China rallied 2.6% in July after a 3.1% pullback last month.

Europe initially was seeing a mild pullback.  Germany’s Final Q2 GDP remained down small, as initially estimated.  This raises concerns the EU’s largest economy will fall into recession.  Political settlement hopes are causing Milan to outperform.  While talks have concluded without a deal, it appears there is agreement Giuseppe Conte would be sole Prime Minister.  The region has advanced into the green on a report claiming China will relax some restrictions on auto purchases.

Corporate Headlines

• On tough domestic vehicle competition, BAIC Motor’s -5.0% profits declined 26.0% YoY.  Revenues are better with its Mercedes Benz JV helping while their Hyundai JV was weaker.  Great Wall Motor +0.2% saw sharply lower NI as sales slowed.  The shares spent most of the session crossing back and forth across the flat line.
• China Merchants Bank -0.7% is resolving concerns the US has regarding dealings with North Korea.  An officer of the firm stated it was not under investigation locally either in relation to AML or sanction laws.
• AAC Tech -2.4% continues to slide following results.  The company is seeing downgrades on the Street including Bocom (reports today) and Jefferies.
• Fosun Intl reported after the close.  The company notes caution due to the volatile markets.  However, its says its is “confident” of “stable growth.”
• TechnipFMC +5.8% trades well following yesterday’s report the company will list as two separate companies.
• Flughafen Zurich +3.3% ascends following results.  Both revenues and EBITDA are ahead of expectations.  Revisions to traffic guidance were better than feared.
• Bunzl’s -0.1% H1 revenues are higher by +4.3% y/y and the company is increasing its interim dividend.  However, margins are worrisome.
• Daily Mail & General +2.0% is selling its Genscape energy data unit for $364m.   Verisk Analytics is the purchaser.

On Our Side of the Pond

• Johnson & Johnson is trading up pre-market.  In an opioid marketing trial, the company received a fine of “only” $572M fine an Oklahoma judge.  That was lower than anticipated.
• Bank of Montreal reports EPS that are below the range.  The company’s U.S. banking unit saw slower growth during Q3.
• EPS at Bank of Nova Scotia is 3 cents better than consensus.
• JM Smucker is lowering its FY earnings guidance.

Markets & Macro