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12.17.2018 13 new International Summary posts under Morning Note (9) and International Summary (4)

International Summary

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International Summary

"CAPIS Global Markets 7/19/2018"

posted by Clayton Duff on 07/19/2018 at 6:47 am

by Clayton Duff

07/19/2018 at 6:47 am

Asian Markets

Several bits of economic data helped steer markets as summer doldrums give way to tepid moves and low turnover.   Most core indices were lower while Australia and some peripherals advanced.  Health care especially in Hong Kong was the worst performing sector with Shanghai Fosun the culprit (See below).  Most other sectors also gave ground.  IT managed a modest uptick while energy and utilities held steady.

The Korean press noted South Korea and Canada have teamed to deal with the US’ tariffs concerning autos.  At this point, we do not know exactly what that plan looks like. Also on the trade front, the SCMP said their country’s leading industrial enterprises are totally reliant on imports of computer chips and crucial components with a third of “key materials” not available domestically.

  • Japan moved to a trade surplus during June, eclipsing the survey estimate with a ¥721B balance.  This was despite a slowdown in exports which grew 6.7% in June (+8.1% prior, 7.0% est).  Exports to the US fell for the first time in 17 months, off 0.9% YoY.  Imports were down substantially from the prior +14.0% reading, coming in at just +2.5% vs. the expected growth of 5.3%.
  • The BoJ again ratcheted down their purchases of JGB’s. This time by ¥10B in both 10-25 and 25 year maturities.
  • Australia reported employment change up 50.9k in June, ahead of the revised higher +13.4k May reading. Full-time jobs rose 41k, well ahead of the previous 20k drop.
  • Shanghai Fosun -7.0% announced a $338M placement that will see 68M shares be issued in a range equating to a 7-9% discount to yesterday’s close.  Another 29M shares could be added. General corporate purposes and working capital are the intended uses.
  • China Oriental Group      % will restrict blast furnace ironmaking production by 20% until the end of August.  This is a response to China’s largest steel city, Tangshan, instructing steel companies to reduce production.
  • Geely Automotive -3.0% will buy three firms from their second largest shareholder Zhejiang Geely for 3.17B Yuan as they look to expand vehicle production. Also, its Volvo unit reported revenues and op. profit up 26.9% and 28.6% YoY, respectively.
  • The Economic Times said Bharti Airtel +2.4% may sell 15% of Bharti Airtel International for $1.5B followed by possibly listing the unit to raise another $1.5B.  Funds will be used to retire debt as well as to increase their competitiveness in the Indian market.
  • Wheelock Properties 25.3% is being taken private by their parent company, Wheelock +1.1%.
  • After the close, TSMC’s Q2 NI was bang inline.  The company sees its Q3 sales below estimates.  It also cut its  annual compound growth outlook to 5-10% from 10.0%.  This had been anticipated, as we flagged yesterday.
  • Indonesia lefts its 7 day reverse repo rate at 5.25%.  While still hawkish, the recent spate of moves to support the IDR appear to be over.

European Markets

Europe has been mostly lower since the close but only modestly so.   The markets posted some improvement after Blackstone’s results hit the tape.  Earnings have been in focus once again with plenty on the tape.  Materials have been off c. 1% most of the morning (see commodities below).  Utilities and real estate have been lower more than 0.5%.  Consumer staples have been a standout all session thanks to Swedish Match and Unilever.

Here is a sample of today’s earnings palette:

  • The advertising sector has been rattled by a surprise decline in revenues at Publicis -7.45%.  Organic revenues fell 2.1% during Q2.  The market was anticipating a 1.1% increase.
  • Industrial group ABB +4.2% is among the Euro Stoxx 600 leaders.  While revenues were a touch light, Q2 Operating EBITA beat and net income surpassed the range.
  • SAP -1.9% disappointed with a 5% decline in licensing.  This has offset an improved Cloud related outlook.
  • Unilever +2.0% initially vacillated following results.  Revenues were a touch light; however, the company has maintained its FY forecasts. It expects sales to improve during the H2.  It has added to that sentiment during the call providing the shares additional impetus.
  • Matt’s favorite fragrance and flavor maker, Givaudan -2.6% suffered increased input costs during Q2 which weighed upon EBITDA and margins.
  • Volvo’s +1.2% Q2 EBIT surpassed consensus by c. 10.0%, rising 37.0% y/y.  It noted truck demand was “solid.”
  • Nordea’s +3.2% Q2 was reassuring following poor results from SHB -0.2%and Swedbank +0.4% yesterday.
  • Swedish Match +7.3% is on fire.  The company posted strong Q2 earnings and its important snus product line saw better profitability.

Commodities have been generally weaker as the USD continues to post solid gains in response to Fed Chair Powell’s assessment of the economy.  Crude is also seeing selling pressure as U.S. production reached 11,000,000 bpd.   That is almost a 13.0% increase since the beginning of the year.  We should also mention the unexpected build of inventories reported yesterday by the DoE.

On Our Side of the Pond

  • Plenty of U.S. earnings including Alcoa, Blackstone, Ebay, IBM, Amex Philip Morris to name a few.  Microsoft is due after the close.
  • Mind your eye on Apple following the TSMC results and advertisers due to Publicis.

Markets and Macro Data

Event Survey Actual Prior Revised
JN Trade Balance Jun ¥531.2b ¥721.4b -¥578.3b -¥580.5b
JN Trade Balance Adjusted Jun ¥155.0b ¥66.2b -¥296.8b -¥300.2b
JN Exports YoY Jun 7.00% 6.70% 8.10%
JN Imports YoY Jun 5.30% 2.50% 14.00%
AU NAB Business Confidence 2Q 7 7 8
AU Employment Change Jun 16.5k 50.9k 12.0k 13.4k
AU Unemployment Rate Jun 5.40% 5.40% 5.40%
AU Full Time Employment Change Jun 41.2k -20.6k -19.9k
AU Part Time Employment Change Jun 9.7k 32.6k 33.4k
AU Participation Rate Jun 65.50% 65.70% 65.50%
AU RBA FX Transactions Market Jun A$1752m A$556m
AU RBA FX Transactions Government Jun -A$1843m -A$672m
AU RBA FX Transactions Other Jun A$4821m A$442m
CH FX Net Settlement – Clients CNY Jun 47.3b 143.3b
JN Machine Tool Orders YoY Jun F 11.40% 11.40%
UK Retail Sales Ex Auto Fuel MoM Jun 0.10% -0.60% 1.30% 1.40%
UK Retail Sales Ex Auto Fuel YoY Jun 3.70% 3.00% 4.40% 4.50%
UK Retail Sales Inc Auto Fuel MoM Jun 0.20% -0.50% 1.30% 1.40%
UK Retail Sales Inc Auto Fuel YoY Jun 3.50% 2.90% 3.90% 4.10%
HK Composite Interest Rate Jun 0.62% 0.46%
HK Unemployment Rate SA Jun 2.80% 2.80% 2.80%
CA ADP Publishes June Payrolls Report
US Initial Jobless Claims 14-Jul 220k 214k
US Continuing Claims 7-Jul 1729k 1739k
US Philadelphia Fed Business Outlook Jul 21.5 19.9
US Bloomberg Economic Expectations Jul 56
US Bloomberg Consumer Comfort 15-Jul 58
US Leading Index Jun 0.40% 0.20%

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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