Markets Overview

Moves were subdued overnight in the Asian markets with mixed returns.  During the session, the US Federal Register confirmed US tariff rates will increase to 15% from 10% on $300B of Chinese goods.  As noted yesterday, China is continuing to boost domestic consumption with lower restrictions on car purchases being discussed.  This buoyed the auto sector overnight.  Shanghai and Shenzhen both saw slight weakness on the session with the Yuan still losing ground.  South Korea led the region.  The government plans to acquire KRW5.0T worth of materials and parts needed for 3 years as it looks to wean reliance upon Japan.  Japan’s exclusion of South Korea from their trusted-partner whitelist went into effect today.

In China, Discretionary and IT names were up.  The same were up in Hong Kong with Consumer Staples also in the mix.  Real Estate and Communication names led on the Nikkei.  In the commodities space, oil is advancing post yesterday large API draw.

As the political unrest continues in Hong Kong, China’s Public Security Minister instructed police to be vigilant against what they label as “terrorist activities” in the Guangdong province which borders Hong Kong.

European markets have been trading in the red since the outset.  U.K. PM Johnson is calling upon the Queen for the dissolution of Parliament.  This has the £ trading lower but the FTSE has been to the upside.  Elsewhere on the political front, the leader of Italy’s PD party is said to support Giuseppe Conte as PM.  The debts are markets see Italian yields tumble and the 10 yr. is now at a record low.  The region has moved to lows following a sharp decline to the U.S. weekly mortgage applications.

Most sectors in Europe are lower.  Industrials, construction, financials and travel/leisure are off by at least 1%.  Autos, chems and personal goods are following closely behind.  Energy and telecoms have managed to hold onto gains despite paring their advance.

Corporate Headlines

• Macquarie is halted.  The company is making an institutional placement worth A$1.0B which represents 2.5% of outstanding capital.  The funds will be used to invest in renewable energy projects as well as technology and infrastructure acquisitions.  The firm is offering shareholders the ability to purchase shares, as well.  The firm sees profit up 10% YoY in the 1H of next year but expects FY20 NI to be slightly lower YoY.
• Tencent’s -2.2% Tencent Music Group Ent. is being investigated by Chinese authorities.  Antitrust regulators allege TME has overpaid for exclusive rights to catalogs of some of the largest music labels in the world, mostly in the States.  Tencent is then sub-licensing the music to rivals at high costs which is being called unfair.  TME fell 7% in the US Tuesday.
• ZTE +1.0% after noting it sees 9M NI up 152-163%.
• Hyundai Motor +2.0% has reached  an agreement with its union on wages and working terms thus averting a strike.  This is the first time in 8 years a deal was done without a work stoppage.
• The US Dept of Defense in talks with Australia to have Lynas Corp. -1.7% host a facility to process rare earths as the US seeks to pare reliance on China.
• As we indicated yesterday, Fosun Intl +4.0% reported after the local close.  Its subsidiary, Fosun Tourism Group +5.3% is receiving approval from creditors for the £900m package to bailout troubled Thomas Cook -11.0%.  The deal was initially announced last month.
• BP +1.6% is selling its entire interest in Alaska operations to Hilcorp Energy for $5.6b.
• Uncredit +1.0% is considering selling its stake in Yapi Kredit Bk -3.2%.  The Italian bank along with KOC Holdings -0.2% currently hold c. 82% of the Turkish lender via a jv.  Unicredit it looking to restructure the holding to make a sale easier.
• Lukoil’s +2.4% Q2 NI beats the range and H1 profits rose 20.0%.
• After the local close, Toyota Motor and Suzuki Motor announce they will strengthen ties.  Toyota will purchase a c. 5% stake in Suzuki for ¥96b.   In turn, Suzuki will take a small holding in Toyota for ¥48b.
• Also after the close, a number of companies including the “Big 3” Japanese banks are selling a c. 7.16% stake in Recruit Holdings via a secondary offering.  In turn, Recruit announces a buyback of up 1.79% of outstanding capital.

On Our Side of the Pond

• Hewlett Packard Enterprises trades well pre-market after raising guidance.  HPE now sees adj. EPS of 42 to 47 cents.  Consensus is 43 cents.
• North of the Border, National Bank of Canada’s Q3 EPS are better than estimates.
• Peleton Interactive has officially filed its IPO.  Sources claim the company is seeking a valuation of c. $8b.
• U.S. Mortgage Applications suffered a sharp decline last week.

Markets & Macro