Asian Markets

There was certainly plenty of top down news for the markets to digest today.  Early on, the region was down as Pres. Trump stated “not enough” progress was made in US-Mexican trade talks.  Specifically regarding China, locals were not impressed by a new PBoC medium term loan facility of CNY 500b.  This was an injection of liquidity to offset maturing loans.  A large U.S.-Taiwan arms deal was also not taken well.  The ChiNext closed in bear market territory.  India gave ground following yesterday’s holiday and the RBI cutting its GDP forecasts for FY20.  The central bank now sees growth at 7% vs. 7.2% previously and changed its policy stance to accommodative.  S. Korea was closed in honor of its Memorial Day.

However, China provided some lift to the markets which helped Hong Kong end the day higher.  Headlines hit that China intends to “boost” auto, home appliance and electronics consumption.  Details are vague but the markets that were open did catch a bid, as a result.  Most of the core markets were already closed including the Chinese mainland exchanges.  That headline coincided with Pres. Trump stating once again tariffs could be imposed on another $300b worth of Chinese products.  However, that has largely been ignored.

Following all of the above, here is how sectors ended.  Most were lower with IT off more than 1% while energy, industrials and materials were down shy of that mark.  Telcos and real estate managed modest gains.

Other Important Headlines

• Further causing unease for the Indian markets was the RBI noting “growth impulses have weakened significantly.”  This followed an expected 25 bps benchmark rate reduction to 5.75%.
• Softbank +3.1% benefited from Uber’s 4 day advance putting up above the IPO price once again.
• Mitsubishi Heavy -2.5% following yesterday’s report which indicated it is conducting talks to acquire Bombardier’s regional jet unit.
• After the local close, Glenn’s favorite jeweler, Chow Tai Fook reported an 11.8% growth in NI.  Bloomberg indicates this is 3.4% above consensus.

European Markets

The Chinese headlines regarding consumption hit that tape 10 minutes into the trading session.  The markets responded well and spent the better part of the morning session up a touch more than 0.5%.  It was trading above that level when the ECB decision headlines hit the tape.

The ECB made no changes to its rate policy but did indicate rates would stay at current levels through 2020.  There had been some recent speculation of additional stimulus.  However, that did not materialize.   It also set its new long term bank loans at main rate plus 0.1 ppt.  Equities have pared about half of the day’s advance following the headlines.  The € has gained following the news.

Most sectors are better but off highs.  Utilties, chems and energy up by c. 1% or a touch less being higher prior to the ECB headlines.  Telcos are off c. 0.5% followed by financials while food/bevies and retail are flat.

Corporate Snippets

• The major news of the day was Fiat Chrysler +0.7% stating it is scrapping the Renault -6.3% merger idea.  The Italian carmaker specifically cited the French political environment.  Several hours into the session, France stated it was still open to the merger idea.  Nissan -1.7% during the Japanese session.
• Elsewhere on the M&A front, sources allege Germany and the Netherlands have explored the possibility of a merger between Commerbank +2.3% and ING +1.7%.  The talks were said to be held last month.  This would leave Deutsche Bk +0.8% out in the cold.
• Aviva +1.3% has unveiled its restructuring plan.  The company will split management of its Life and General insurance units with the goal of saving £300m by FY22.  This will come at the expense of 1,800 jobs.

On Our Side of the Pond

• Mondelez has ended talks to acquire the Cambell Soup Arnott’s brand.
• The Mexican Peso fell due to Pres. Trump’s trade talk (TTT per Clayton) comments and Fitch cut the nation’s rating to BBB from BBB+.  The outlook is now stable.  The currency has managed to recoup some of the initial losses.

D-Day

We will know pause to remember all of those who took part in the Allied invasion of Normandy.  Most especially, those who paid the ultimate price to restore freedom to Europe.

Markets & Macro