Today’s Top Story

Two hours into the U.K. trading session, U.K. PM May announced she will step down as PM of her nation.  It was an emotional statement and as her voice trembled while stating she did her best for the “nation I love.”  She will remain at her post until June 7th giving her party time to select a new leader and PM.  It will be interesting to see who emerges.  Whatever happens, I don’t envy them the role.

The markets have shown an interesting response.  The £ has made several attempts to advance but been unable to maintain any significant headway.  Later it moved to advance but it once again pulling back.  U.K. gilt yields higher by c. 1 bps, trimming modestly higher gain.  The FTSE is up +0.8% making a modest advance post the news.  More regarding the European markets later.

Asian Markets

Mixed and rather subdued markets following yesterday’s losses.  Energy names played catch-down following the selling in the States despite a small rebound overnight in WTI. Shanghai closed flat despite selling in IT names.  Both of those sector end the day lower c. 0.5%.  Providing support to the region were gains of c. 0.5% for financials and telcos.

On the trade front, China’s Commerce Ministry (MOFCOM) acknowledged downward pressure to the economy adding they need to diversify their export market and work harder at improving trade.  China later cancelled 1K tons of  US-bred pork orders , further putting Chinese consumers in a bind with swine flu decimating supplies. Commerce Sec. Ross threatened rules to impose countervailing duties on those that undervalue their currency are being considered.  Obviously, China is on the list.

Other Important Headlines

• Japan’s April CPI met expectations up 0.9% and ahead of the 0.5% previously seen.
• Down Under, Energy led lower with the AUD selling off after Westpac said they now see 3 RBA rate cuts this year vs 2 previously.
• A local broker broker noted foreign investors continue to sell Taiwanese names, with 12 days of offloading to the tune of over T$114B.
• The U.S. has asked Samsung Elec -2.6% and other Korean companies to cease business with Huawei.
• After the close, the PBoC ceased control of troubled Baoshang Bk.

European Markets

Europe has been trading higher since the open.  There has been some improvement following the PM May news at the markets are currently at the highs.  All the major sectors are now to the upside.  Basic resources, insurance, utils, financials and construction are improved by 1% or more.  REMINDER: The U.K. will also be closed on Monday.

Snippets from the Region

• AP Moller-Maersk -4.0% noted a good start to the current FY.  It also will initiate its previously announced buyback.  However, the company sees “considerable uncertainties” due to the trade talks.
• Net new assets at Julius Baer -0.5% grew at 3% missing its 4-6% forecast.  Sources also allege the asset manager is looking at a short-list of candidates to replace CEO Hodler perhaps as soon as  Q3.
• Casino Guichard +9.5% has resumed trading following yesterday’s suspension.  Parent company Rallye -43.0% has been placed in creditor protection.  However, JPM is recommending investors buy Casino.  The broker believes the latest developments will help the company implement its asset disposals and remove other obstacles that have hindered its strategic plans.

On Our Side of the Pond

• The payment industry continues to see M&A activity.  Today’s report indicate Global Payments and Total System Services are discussing a “tie-up.”   Stay Tuned…..
• Foot Locker is trading lower post disappointing SSS and EPS.
• US durable goods orders are due later this morning.

Have a great Memorial Day holiday.

Markets and Macro