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"Marine Day Global Markets 7/16/2018"

posted by Clayton Duff on 07/16/2018 at 6:47 am

by Clayton Duff

07/16/2018 at 6:47 am

Asian Markets

With Japan closed for Marine Day, traders had to look elsewhere for action with plenty of macro news to keep markets active.  China turned in a mixed bag of macroeconomic headlines and indices fell on the day.  Most sectors ended the day lower.   Materials lost c. 1% followed closely by financials and real estate.  Consumer staples and telcos managed ot gain c. 0.5%.

Trade remains in focus with India reporting a larger trade deficit with imports rising over 21% in June vs the 15% tick-up in May.  China’s Premier Li continued to call for multi-lateralism and free trade while the EU’s President Tusk ratcheted up the rhetoric.  He said trade battles can lead to hot wars and called for the EU, Russia, US and China to adhere to their duty of upholding order.

  • 2Q GDP rose 1.8% in China, ahead of the 1.6% estimate and the prior +1.4% reading.  On a YoY basis, the 6.7% growth rate met estimates, slowing from the prior +6.8%.  Retail Sales rose 9.0% YoY vs. the estimate of +8.8% and previous +8.5% result.
  • The disappointment was with China’s Industrial Production which grew only 6.0% YoY, under the 6.5% expected and again light the 6.8% seen prior.  Fixed Asset growth was inline though at a multi-year low.
  • China restricted trading in a few foreign companies with weighted voting rights in a bid they said will protect investors from less-understood securities.   One such example is the newly IPO’d Xiaomi -1.9%.  The shares initially fell more than 9% on the headlines.
  • The semiconductor trade association, SEMI said 2018 shipments of semi equipment should be up nearly 11% and 7.7% next year.  However, a 25% tariff could weigh on the global supply chain to the tune of $20-30M or over $500M if memory chips were to see tariffs.
  • Both JPM and UBS see the market’s reaction to the current trade spat as overdone with UBS seeing a better 2H.  They see Chinese A shares up 10% on a best-case basis with domestic deleveraging also helping.

European Markets

The region started to the upside with modest gains.  The markets pulled back from the highs of the day as China filed a complaint against the U.S. with the WTO.  They saw further pressure following comments from Iran.   The nation’s oil minister stated output of several OPEC members was above the production limits.  The has caused crude to fall more than 1%.  In turn, energy is now one of the worst performing equity sectors off more than 1%.  Telcos, consumer, staples and consumer discretionary are also lower.  Industrials cling to gains and financials have been a relative outperformer.  The market is also awaiting word from Pres. Trump’s meeting with Russian Pres. Putin.  It is taking part in Helsinki as we go to press.

Late on Friday, U.K. housing data showed a small m/m decline in prices.  The £ has recorded some gains following a Bloomberg survey.  It revealed most economists expect the BoE will increase rates next month.  The EC’s trade balance fell short of expectations.

Top corporate stories include:

  • For the first time in a while, Deutsche Bank +6.9% has provided investors with some good news.  It sees Q2 PTP of c. €700m and NI of c. €400m.  These compare favourably (not a typo) to consensus of €321m and €151m, respectively.
  • Renault’s +0.5% H1 sales rose 9.8% y/y.  The company confirmed its outlook and increased its forecast for the global auto industry.  It now sees the total growth to be 3%.
  • Dialog Semi +3.7% has reassured the markets following recent Apple concerns.  The company’s Q2 sales and gross margin were ahead of expectations.
  • Indivior +21.6% leads the Euro Stoxx 600.  A New Jersey court has blocked Dr. Reddy’s -8.9% from selling a generic version of Suboxone until patent litigation is settled.

On Our Side of the Pond

  • The New York Times reported Goldman Sachs is prepared to name David Solomon as its next CEO.
  • Disney’s bid for 21st Century Fox has won key backing from shareholder proxy services ISS and Glass Lewis.
  • The U.K. press reported the EU is prepared to levy record antitrust fines against Alphabet.
  • Both Blackrock and Bank of America on the tape this morning.

Markets and Macro Data

Event Survey Actual Prior Revised
UK Rightmove House Prices MoM Jul -0.10% 0.40%
UK Rightmove House Prices YoY Jul 1.40% 1.70%
CH Surveyed Jobless Rate Jun 4.80% 4.80%
CH GDP YoY 2Q 6.70% 6.70% 6.80%
CH GDP SA QoQ 2Q 1.60% 1.80% 1.40%
CH GDP YTD YoY 2Q 6.70% 6.80% 6.80%
CH Retail Sales YoY Jun 8.80% 9.00% 8.50%
CH Retail Sales YTD YoY Jun 9.40% 9.40% 9.50%
CH Industrial Production YoY Jun 6.50% 6.00% 6.80%
CH Industrial Production YTD YoY Jun 6.80% 6.70% 6.90%
CH Fixed Assets Ex Rural YTD YoY Jun 6.00% 6.00% 6.10%
IN Wholesale Prices YoY Jun 5.23% 5.77% 4.43%
UK SURVEY REPORT: Majority of Economists See BOE Hiking in August
IT Trade Balance Total May 3378m 2938m 2985m
IT Trade Balance EU May 1015m 1077m 1124m
EC Trade Balance SA May 18.6b 16.9b 18.1b 18.0b
EC Trade Balance NSA May 17.6b 16.5b 16.7b
CA Int’l Securities Transactions May 9.13b
US Empire Manufacturing Jul 21 25
US Retail Sales Advance MoM Jun 0.50% 0.80%
US Retail Sales Ex Auto MoM Jun 0.30% 0.90%
US Retail Sales Ex Auto and Gas Jun 0.40% 0.80%
US Retail Sales Control Group Jun 0.40% 0.50%
CA Existing Home Sales MoM Jun 1.70% -0.10%
CA Bloomberg Nanos Confidence 13-Jul 54.5
US Business Inventories May 0.40% 0.30%

About the Author

ClaytonDuffFVP,Senior International Trader

Clayton Duff joined the firm in 2008. He has worked in the industry since 1994 and held various trading and sales positions before CAPIS, including four years as a trader for First Southwest. He earned his bachelor’s degree from the University of Texas Arlington. Clayton maintains Series 3,...

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