Risk Off Markets

Following latest week’s word Pres. Trump would impose further sanctions upon Chinese products, China provided further reason for investors to be more defensive.  The PBoC set the Yuan reference price weaker than CNY6.90 to the Greenback.   The currency tumbled breaching CNT7/$ for the first time since 2008.  However, that wasn’t the only news that rattled investors.  Reports allege China is telling state owned companies to halt purchases of U.S. agricultural products.

Equity markets are tumbling with all the major indices lower in Asia and Europe.  A bounce off the European lows could not maintain momentum.  In both regions, all the major sectors are red.   Asia saw most off in excess of 1%. Losses in telcos, real estate and healthcare exceeded 2%.  Europe is seeing basic resources lower more than 3%.  There are eclines of at least 2% among tech, construction, personal goods, autos, industrials, retail and financials.

The debt markets are seeing sovereign bond yields tumble.  Most EU core yields are lower 2 to 4 basis points.  The U.S. 1o yr. yield is lower by 8 basis points.  In the commodity and currency markets, most risk assets fall while safe havens rally.  Bitcoin is better by more than 10.0%.

Corporate Snippets

• Toyota Motors -0.6% is a relative outperformer following the results published Friday.  The company trimmed its FY OP outlook but its Q1 OI was well ahead of consensus.
• Subaru +3.9% surged thanks to a Q1 OP beat of c. 50.0%!
• Asics +23.9% also bucks the overall trend.  The company provided the trifecta of: increasing its FY NI forecast by 50.0%, boosting its dividend forecasts and announcing a buyback.
• Kobe Steel -15.1% is a different story.  The company sees it FY current profit 67.0% lower than its prior guidance.
• HSBC’s -1.8% headline results read fairly well.  However, CEO Flint is stepping down after only 18 months at the helm.  The company’s buyback is less than anticipated.   It will reduced its workforce by 4,000 employees.
• Linde +1.5% now sees its FY adj. EPS growth 12-16% vs. its prior outlook of 9-13%.
• The WSJ indicates Renault +0.2% and Nissan -4.3% are conducting talks to reshape their alliance.  Renault’s goal is to reduce its Nissan holding and revive Fiat Chrysler -0.5% talks.
• Aslo, on the M&A front. Takeaway.com % has agreed to gobble up Just Eat % in an all share deal.

On Our Side of the Pond

• At present, Pres. Trump has not tweeted regarding the Chinese developments from overnight.
• Berkshire Hathaway’s Q1 profits are better by 17.0%.  The company’s cash holding is now $122b as Mr. Buffett finds little value at current equity levels.
• Canada is closed for Civic Day.

Markets & Macro