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"CAPIS Global Markets 10/9/2018"

posted by Clayton Duff on 10/09/2018 at 11:07 am

by Clayton Duff

10/09/2018 at 11:07 am

Asian Markets

The Nikkei reopened today down ~1% and held steady there the balance of the session.   IT names saw sizable losses, inline with other regions in the world as Materials and Communications also slipped.   The Hang Seng ended the day down small after yesterday ending under the mid-September pullback that prompted the talking heads to report the index was off over 20% from highs.  Energy was the leader to the upside with RE also holding in well.

Following yesterday’s sizable losses in China, it was a welcome sight to see some green on both the Shanghai and Shenzhen even as gains were kept in check.  South Korea was shut for Hangul Day while India held above yesterday’s lows.

With the ¥ strengthening for the 4th consecutive day and  following 3 day weekend, Japan was set to play “catch down” with IMF headlines no help.  They lowered both FY18 and ’19 GDP forecasts citing escalating trade conflicts and tighter financial conditions. Emerging markets as whole saw sharp cuts to growth with Argentina, Brazil, Iran, and Turkey accounting for much of weakness.

With China looking to clean up the environment, liquid natural gas has been focused on to reduce coal use.  This has led to LNG prices hitting levels already this year that are above last winter’s highs.  The Securities Times said imports rose ~40% over the first 8 months of this year with demand increase as it gets colder.  In the space, PetroChina rose 2.1% with Kunlun Energy up 3%.

After falling through support and continued weakness in the SOXX, weakness in the space continues to spread.  Japanese names fell with a Jefferies analyst noting they see lower investment as memory capex falls. Price cuts in several names followed with Sumco -9%, Tokyo Electron -4.5%, Advantest -4.4%, and Hitachi High-Tech -3.9%.

It was a tough day for Tata Motors -13.5%.  The company announced it was halting production at a U.K. Jaguar plant due to falling Chinese demand.  Chinese sales slumped 46.0% last month.

After the local close, J Front Retailing reported H1 results that saw revenues, OP and NI each decline y/y.  The company maintained its FY OP and NI outlooks but cut its revenue outlook 2.1%.  TSMC released Q3 and Sept. sales data.

European Markets

Following a mixed start,  Europe started trading lower hitting its trough about 90 minutes before the U.S. open.   However, the markets started to bounce from there and most of the major indices ended the day small to the upside.  It was energy that provided the biggest lift with an advance of 1.5%.  Basic resources were also improved by more than  1%.  While ending the day lower, chemicals, healthcare, telecoms and construction all pared losses which also helped with the day’s small gains.

 

Snippets from the Region

  • Wirecard +9.7% rebounded.  It confirmed its FY ’18 goals and provided long term targets out to 2025 which it also noted were conservative.
  •  Retailer Ceconomy -18.5% cut its FY EBITDA forecast to €630m vs. its prior bottom end guidance of €680m.  The company had updated the market just three weeks ago.  Therefore, this is quite a shock.
  • Ford has selected Omnicom to handle certain portions of its marketing.  This is a blow to WPP -1.35% which will continue to work with the company on other efforts.
  • Givaudan’s -2.1% Q3 sales reached CHF 1.4b vs. CHF 1.36b.  The company stated it is aiming for 4-5% sales growth as a 5 year average.

 

On the Markets’ Agenda for Tonight

  • Watch for EU comments regarding Brexit.
  • Denmark will hold a meeting to review the Danske Bank money laundering scandal.
  • Macro includes Australian Westpac Confidence, Japanese Core Machine Orders, Chinese funding data and possible FDI, various European industrial production results, UK trade data and GDP and U.S. PPI.
  • Results due include Yasakawa Elec., ABC-Mart, and Aeon Mall.

 

Markets and Macro Data

Markets Snapshot

 

Event Survey Actual Prior Revised
AU ANZ Roy Morgan Weekly Consumer Confidence Index 7-Oct 117.3 118.1
UK BRC Sales Like-For-Like YoY Sep 0.10% -0.20% 0.20%
JN BoP Current Account Balance Aug ¥1889.6b ¥1838.4b ¥2009.7b
JN BoP Current Account Adjusted Aug ¥1516.0b ¥1428.8b ¥1484.7b
JN Trade Balance BoP Basis Aug -¥208.0b -¥219.3b -¥1.0b
AU NAB Business Conditions Sep 15 15 14
AU NAB Business Confidence Sep 6 4 5
JN Bankruptcies YoY Sep -8.54% 8.60%
JN Eco Watchers Survey Current SA Sep 47 48.6 48.7
JN Eco Watchers Survey Outlook SA Sep 50.8 51.3 51.4
GE Trade Balance Aug 16.2b 17.2b 16.5b
GE Current Account Balance Aug 16.2b 15.3b 15.3b 15.1b
GE Exports SA MoM Aug 0.40% -0.10% -0.90%
GE Imports SA MoM Aug -0.10% -2.70% 2.80%
US NFIB Small Business Optimism Sep 108.3 107.9 108.8
CA Housing Starts Sep 210.0k 188.7k 201.0k 198.8k
CA Bloomberg Nanos Confidence 5-Oct 55.7 55.2

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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