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International Summary

"CAPIS Global Markets 10/10/2018"

posted by Clayton Duff on 10/10/2018 at 11:23 am

by Clayton Duff

10/10/2018 at 11:23 am

Asian Markets

Much like the US, moves were slight with the markets ending the day mixed.  South Korea saw heavy selling following yesterday’s holiday while India had a much needed rebound with the Nifty 50 able to move a bit above the 400 day mavg.  Financials lead there after State Bank of India +5.6% pledged to triple its purchase of loans.

On the economic front, Japan reported Core Machine orders up 6.8% in August, well ahead of the 3.9% slide expected but light the 11% growth in July.  Down Under, Consumer Confidence as measured by Westpac saw a stop in the slide over the prior 3 months with a reading of 101.5.

HK’s Chief Executive made a policy address today noting e-cigarettes will be banned adding they will increase the land supply for public housing.  He said 70% of new land supply will go towards public housing.  Additionally, he added any behavior towards promoting HK independence will not be tolerated

Despite being downgraded to Neutral at Macquarie, PetroChina +0.15% is again higher after being a positive standout yesterday.  The firm stopped imports of oil from the US in August while dramatically reducing gas imports upon the 25% tariff China placed on US LPG and 10% on LNG.

In the real estate space, moves were generally to the upside after CICC came out positive on the sector.  Sino-Ocean Group -1.3% posted an initial gain after reporting September group contract sales up 103% YoY.  China Vanke -0.3% saw 9 month sales up 9%.

Geely +2.7% saw a nice bump on word they and Daimler are in talks to create a ride-hailing and car-sharing service in China.  Li Shu Fu, the Chairman of Geely, of course holds a 10% stake in Daimler.

Softbank -5.6% is being reported by the WSJ to be in discussions to take a 50+% stake in Wework for $15-20B.

The two names we highlighted that reported after yesterday’s close ended the day as follows: J Front Retailing -5.6% and TSMC +0.2%.

After the close, Yaskawa Elec. cut forecasts noting slowing chip investment decreasing demand for its automated products. ABC-Marts FY guidance lags consensus.

The biggest news out after the close was a report indicating China is prepared to expand it “too big to fail” list to at least 50 financial institutions.

 

European Markets

Europe quickly moved to the downside and then continually moved lower.  Selling accelerated following the U.S. PPI data which sent yields lower.  It didn’t help when LVMH stated China was enforcing customs rules more strongly.  The region closed at its lows with many names seeing heavy volume in the closing auctions.  All of the major indices were firmly in the red with most lower by at least 1%.  The U.K. had some mild outperformance on headlines that appear to be indicating Brexit progress is being made.

Telecoms (see below) was the only sector to make any significant headway with gains just shy of 2% with banks clinging to gains.  Tech and basic resources were off 4% or more.  Losses of at least 3% were seen in autos, chemicals and industrials.  Construction, personal goods and financials were off 2% or more.

Snippets from the Region

  • LVMH-7.1% reported Q3 sales data that by and large most brokers have commented were “reassuring.”    Q3 sales of €1.38b were inline with estimates and organic growth was 10%.  However, Morgan Stanley downgraded the luxury goods sector to underweight.  The broker prefers value plays in the sector outperforming growth names.  This call is rippling across the sector.  The LVMH/China comments mentioned above didn’t help.
  • German wind turbine manufacturer Nordex -0.1% recorded significant Q3 new order growth of close to 400%!  The company noted strong demand in the U.S. and Europe.  The shares spent most of the session to the upside.
  • The gains in the telecom sector come with the Eurostoxx Telecom index bouncing from recent lows.  There may be some relief on the yield story.  Also, French Pres. Macron called for improved ties related to tech across the EU region.  He believes the bloc must remove barriers to offset competition with the U.S. and China.
  • Paper stocks suffered following several downgrades to International Paper.  Specifically, Goldman downgraded the paper giant to neutral.
  • PPG’s -0.2% profit warning for higher input costs and slowing Chinese demand weighed upon the chemicals sector.

On the Markets’ Agenda for Tonight

  • Watch for reaction to the Chinese too big to fail news.
  • Chinese funding data was posted after the close with September New Yuan loans increasing to 1,350b.
  • Macro due:  S. Korea’s current account, Japanese PPI and bank lending, French and Spanish CPI.
  • OPEC and EIA release their crude market reports.
  • Earnings due include Tata Consulting, Fast Retailing, Seven & I Holdings, Familymary Uny, Lawson, WH Smith and Walgreen Boots.

Markets and Macro

Markets Shapshot

 

Event Survey Actual Prior
SK BoP Current Account Balance Aug $8757.8m
SK BoP Goods Balance Aug $11428m
UK RICS House Price Balance Sep 1% 2%
JN PPI YoY Sep 2.90% 3.00%
JN PPI MoM Sep 0.20% 0.00%
JN Bank Lending Incl Trusts YoY Sep 2.20%
JN Bank Lending Ex-Trusts YoY Sep 2.20%
AU Consumer Inflation Expectation Oct 4.00%
JN Tokyo Avg Office Vacancies Sep 2.45
CH Foreign Direct Investment YoY CNY Sep 1.90%
CH Aggregate Financing CNY Sep 1550.0b 1520.0b
CH Money Supply M2 YoY Sep 8.30% 8.20%
CH Money Supply M1 YoY Sep 3.90% 3.90%
CH Money Supply M0 YoY Sep 3.30%
CH New Yuan Loans CNY Sep 1350.0b 1280.0b
FR CPI EU Harmonized MoM Sep F -0.20% -0.20%
FR CPI EU Harmonized YoY Sep F 2.50% 2.50%
FR CPI MoM Sep F -0.20% -0.20%
FR CPI YoY Sep F 2.20% 2.20%
FR CPI Ex-Tobacco Index Sep 103.28 103.48
SP CPI MoM Sep F 0.20% 0.20%
SP CPI YoY Sep F 2.20% 2.20%
SP CPI EU Harmonised MoM Sep F 0.60% 0.60%
SP CPI EU Harmonised YoY Sep F 2.20% 2.20%
SP CPI Core MoM Sep 0.10%
SP CPI Core YoY Sep 0.90% 0.80%
SP House transactions YoY Aug 16.20%
UK Bank of England Credit Conditions & Bank Liabilities Surveys
US CPI MoM Sep 0.20% 0.20%
CA New Housing Price Index MoM Aug 0.10% 0.10%
US CPI Ex Food and Energy MoM Sep 0.20% 0.10%
CA New Housing Price Index YoY Aug 0.50% 0.50%
US CPI YoY Sep 2.40% 2.70%
US CPI Ex Food and Energy YoY Sep 2.30% 2.20%
US CPI Index NSA Sep 252.702 252.146
US CPI Core Index SA Sep 258.634 258.141
US Real Avg Weekly Earnings YoY Sep 0.50%
US Real Avg Hourly Earning YoY Sep 0.20%
US Initial Jobless Claims 6-Oct 209k 207k
US Continuing Claims 29-Sep 1660k 1650k
US Bloomberg Oct. United States Economic Survey
US Bloomberg Consumer Comfort 7-Oct 61.6

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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