CAPIS Global Recap – 7/30/2019

Asian Headlines Asian markets ended generally higher on small gains today with South Korea recovering a bit of yesterday’s pullback.   In addition to the US/China meeting and earnings, focus was on the BoJ today with little in the way of headlines out of that meeting.  Gains were fairly broad with Utilities and Health Care leading…

Asian Headlines

Asian markets ended generally higher on small gains today with South Korea recovering a bit of yesterday’s pullback.   In addition to the US/China meeting and earnings, focus was on the BoJ today with little in the way of headlines out of that meeting.  Gains were fairly broad with Utilities and Health Care leading in Japan while Softbank gave back yesterday’s gains.  Communication names though led in China while IT edged lower.  IT names also fell Down Under with Utilities again to the upside.

The BoJ left interest rates as-is with the rate on excess reserves remaining at -.10%. They kept forward guidance pledging to keep extremely low rates until at least through next Spring.  They added they will not hesitate to ease further if need be.  Several GDP targets for the next few years were pared slightly with CPI unsurprisingly lowered a bit as well.  To the upside, corporate profits were noted as remaining at high levels with banks said to have a sufficient capital base.  The ¥ traded to the upside today.   On the economic front Industrial Production turned south in June, off 3.6% MoM, the largest decline since January of last year.

In South Korea a news story out noted companies there worry more export curbs from Japan are in the works concerning chip materials.  In Japan, newspaper Donga Ilbo confirmed that reporting Japanese firms are unable to keep up with the demand on unrestricted chip materials from SK firms. One example includes Sumitomo Chemical +1.2% which informed SK firms they will see delays in shipments of DRAM and NAND photo-resists.  Tokyo Electron +3%. 

Despite reducing their FY NI and op income views Fanuc rallied 3.1% on the day. 1Q op income though was nicely higher with Chinese sales up 11.2% QoQ but waning demand from China for the year along with Taiwan and South Korea in the machine tool space curtailed FY profit views. Also, auto-related robot sales for North America was cited as weaker as well.

As we noted in yesterday’s morning report China Life expects a sharp pickup in 1H NI allowing the stock to rally 1.5% on the session today. New China Life +2.7% rose as well with a 1H NI expected pickup of 80%.

European Headlines

Indices are generally lower on higher turnover with Food names the only sector better today. Banks lead lower followed by Autos and Construction. Confidence readings for the region, while generally inline with estimates, show a pullback from better levels.   French GDP eased a bit from prior levels as did German inflation.  Further worrying traders, a hard-Brexit is appearing to be more likely with the Pound again lower allowing for the FTSE 100 to outperform on a smaller loss than peers. PM Johnson is said to be unwilling to discuss Brexit with EU leaders unless they forego the Irish backstop.

Couple these concerns with some notable disappointing earnings releases and the impending Fed and BoE meetings and you have some nervous traders.   Earnings of course are in focus with several movers to note.  Bayer -4.3% is off on weaker 2Q readings while noting the FY19 outlook is “increasingly ambitious”.  Their rev view was pared to €46B from 46.36B while FY adj ebitda levels were retained. Claims related to their Glyphosate plant-killer have swelled to 18,400.

Reckitt Benckiser -2.9% cut its FY LfL net revenue target to a positive 2-3% from 3-4% after 2Q net revs missed.  The company cited slowing growth for infant nutrition in China blaming fewer births. The company recently had to pony up a big chunk of change to settle the Indivior opioid addiction claim from the US gov.

Despite confirming FY guidance the weaker 3Q is leading Siemens Gamesa -15% lower today.  While 3Q sales missed at €2.63B the company expects a reading of €3B for the 4Q.  Their CFO sees a decline in their offshore businesses adding Brexit will have a ‘significant’ impact.

To end on a high note, the FTSE is helped by a solid return from BP +2.8% today. The firm upped production with 2Q adj NI ahead of estimate.  The company sees their break-even at $50 a barrel oil noting the firm will offload $4-5B in asset this year.  Amid the tension between the UK and Iran the firm is avoiding the Strait of Hormuz for the time being.

Event Survey Actual Prior Revised
SK 21) Business Survey Manufacturing Aug 71 75
SK 22) Business Survey Non-Manufacturing Aug 71 74
AU 23) ANZ Roy Morgan Weekly Consumer Confidence Index 28-Jul 118.5 116.3
JN 24) Jobless Rate Jun 2.40% 2.30% 2.40%
JN 25) Job-To-Applicant Ratio Jun 1.62 1.61 1.62
JN 26) Industrial Production MoM Jun P -1.70% -3.60% 2.00%
JN 27) Industrial Production YoY Jun P -2.00% -4.10% -2.10%
AU 28) Building Approvals MoM Jun 0.20% -1.20% 0.70% 0.30%
AU 29) Building Approvals YoY Jun -24.30% -25.60% -19.60% -19.20%
SK 30) Department Store Sales YoY Jun 4.10% 2.70%
SK 31) Discount Store Sales YoY Jun -3.90% -3.60%
JN 32) BOJ Policy Balance Rate 30-Jul -0.10% -0.10% -0.10%
JN 33) BOJ 10-Yr Yield Target 30-Jul 0.00% 0.00% 0.00%
NE 34) Producer Confidence Index Jul 3.9 3.3
FR 35) GDP QoQ 2Q P 0.30% 0.20% 0.30%
FR 36) GDP YoY 2Q P 1.40% 1.30% 1.20%
NO 37) Retail Sales W/Auto Fuel MoM Jun 0.50% -0.40% -1.30% -1.40%
GE 38) GfK Consumer Confidence Aug 9.7 9.7 9.8
FR 39) Budget Balance YTD Jun -77.3b -83.9b
FR 40) Consumer Spending MoM Jun 0.20% -0.10% 0.40% 0.30%
FR 41) Consumer Spending YoY Jun 0.00% -0.60% -0.10% -0.30%
GE 42) CPI Saxony MoM Jul 0.40% 0.50%
GE 43) CPI Saxony YoY Jul 1.60% 1.80%
SZ 44) KOF Leading Indicator Jul 93.7 97.1 93.6 93.8
AS 45) GDP SA QoQ 2Q P 0.20% 0.40%
AS 46) GDP NSA YoY 2Q P 1.70% 1.40% 1.50%
AS 47) PPI MoM Jun -0.40% 0.00% -0.20%
AS 48) PPI YoY Jun -0.20% 0.80% 0.60%
SW 49) Wages Non-Manual Workers YoY May 2.40% 2.20%
SW 50) GDP QoQ 2Q P 0.30% -0.10% 0.60% 0.50%
SW 51) GDP WDA YoY 2Q P 1.90% 1.40% 2.10%
GE 52) CPI Baden Wuerttemberg MoM Jul 0.40% 0.40%
GE 53) CPI Baden Wuerttemberg YoY Jul 1.70% 1.80%
GE 54) CPI Brandenburg MoM Jul 0.30% 0.50%
GE 55) CPI Brandenburg YoY Jul 1.50% 1.80%
GE 56) CPI Bavaria MoM Jul 0.30% 0.40%
GE 57) CPI Bavaria YoY Jul 1.70% 1.80%
GE 58) CPI Hesse MoM Jul 0.50% 0.10%
GE 59) CPI Hesse YoY Jul 1.40% 1.50%
GE 60) CPI North Rhine Westphalia MoM Jul 0.40% 0.20%
GE 61) CPI North Rhine Westphalia YoY Jul 1.70% 1.70%
PO 62) Consumer Confidence Index Jul -8 -8.3
PO 63) Economic Climate Indicator Jul 2.3 2.4
EC 64) Economic Confidence Jul 102.6 102.7 103.3
EC 65) Business Climate Indicator Jul 0.08 -0.12 0.17
EC 66) Industrial Confidence Jul -7 -7.4 -5.6
EC 67) Services Confidence Jul 10.6 10.6 11
EC 68) Consumer Confidence Jul F -6.6 -6.6 -6.6
IR 69) Unemployment Rate Jul 4.60% 4.50%
PO 70) Industrial Production MoM Jun -4.50% -0.60% -0.40%
PO 71) Industrial Production YoY Jun -5.80% -0.60% -0.40%
PO 72) Retail Sales MoM Jun -0.90% 1.40% 1.30%
PO 73) Retail Sales YoY Jun 4.50% 4.40% 4.30%
GE 74) CPI MoM Jul P 0.30% 0.30%
GE 75) CPI YoY Jul P 1.50% 1.60%
GE 76) CPI EU Harmonized MoM Jul P 0.30% 0.30%