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International Summary

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International Summary

"CAPIS Global Markets – 11/8/2018"

posted by Clayton Duff on 11/08/2018 at 12:45 pm

by Clayton Duff

11/08/2018 at 12:45 pm

Asian Markets

Despite the strong gains in the States, momentum did not carry over to all of the Asian markets.  Only Japan came close, closing up 1.82% on strong gains in Energy, Utilities, Health Care, and Consumer Staples.  Gains in China and Hong Kong gave way to tepid moves later in the day. Energy names were leaders or at least in the top tier of gainers.  India was closed.

Economic releases were heavy side with Japan reporting Core Machine orders that showed a contraction in activity. Bank lending held steady with foreign purchases of Japanese equities rising. On a Dollar basis, China’s trade surplus in October grew from $31.28B to $34.01B but was shy of estimates. Exports rose 15.6%, ahead of the revised September reading and well ahead of the estimate. Imports rallied 21.4% vs the 14.5% prior reading/current estimate.  New Zealand left rates unchanged but RBNZ Gov Orr said a rate cut is possible if GDP readings disappoint.  Malaysia also left rates unchanged at 3.25%, as expected.

Important Corporate News

  • Toshiba +12.0% rocketed higher with a plethora of news.  The firm’s 5 year plan includes nearly $2B in cost cuts with intentions to offload its UK nuclear arm while selling their liquid natural gas unit to ENN Energy +4.4%.  Over the 5 years, 7k jobs are expected to be shed. At the same time, the firm sees FY NI light of estimates but a restored dividend boosted sentiment.  Furthermore, the firm plans for ¥700B in share buybacks.
  • Wynn Macau collapsed -9.7% giving back all the gains picked up on November 2nd.  While 3Q readings were strong, VIP growth is easing with new property upgrades at peers expected to weigh into next year.
  • As expected,  Samsung Elec. +0.1% will kick off a new phone next year that folds like a book. When opened, there will be two 7.3 inch displays with space to run three apps side by side as opposed to the Note 9 that can run two.  Maybe its just me but I’m getting flashbacks of the 80’s and the massive jam boxes we used to carry around, some on our shoulders.
  • James Hardie -15.0% post cutting their FY adj. net operating income targets.  The firm sees US housing growth as modest while input costs are growing.  However, they managed to retain North American fiber cement FY margins at 20-25%.

European Markets

The markets were off to a good start hitting highs of c. 0.7% about an hour into the session.  However, the they moved lower when the EU stated it sees “mounting Italian risks.”  It foresees the nation’s budget deficit breaching the 3% limit in 2020.  This caused equities to pare the advance.   Italian yields rose with the 10 yr. higher by c. 8 basis points before pulling back to end the day c. higher.   Equities halted their slide spending the next several hours trading in a tight range.  However, the markets dipped once again when EU Commissioner Katainen made comments regarding trade.   He said while the E.U. wishes to avoid a trade war the U.S., the outlook is “quite bad.”  This sent the region back to the lows and the majority of the indices finished the day lower with Itally the hardest hit.

In its economic outlook, the ECB indicated the region’s economy was still experiencing “broad-based expansion” while growth was still “somewhat weaker than expected.”

Another Day Chock Full O’ Earnings

  • Unicredit -3.8% failed to match Intesa Sanpaolo’s -1.3% strong performance during Q3.  The bank took a charge of €850m that was a negative surprise.  It is was related to the valuation of its holding in Yapi Kredi Bank -3.4% and to cover potential U.S. charges for Iranian sanction infractions.
  • Societe General +2.15% fared better with NI beating the top end of the range.  Equity trading saw a strong boost to revenues and the bank believes any litigation issues have put behind it during the quarter.
  • Commerzbank +5.4% is seeing short covering following strong results.  Q3 revenues were inline while OP and NI were both ahead of expectations.  The bank reaffirmed its FY outlook and its retail unit is performing well.  The only apparent negative was the indication it will not reach some 2020 targets.
  • AstraZeneca +4.0% experienced significant improvement to its product mix during Q3.  Newer cancer medications have gained traction in supplanting aging prescription offerings.  While noting U.S. medication prices should fall going forward, it sees continued momentum in China and higher prices in Europe.
  •  Siemens +0.8% posted results that had some solid headlines figures but several brokers are calling mixed.  However, the industrial giant announced a €3b buy back through Nov. 2021 and increased its dividend to €3.80 per share.
  • Burberry’s +2.7% H1 reassured with LFLs of +3.0% which matched consensus while confirming its FY outlook.  Adj. OP beat.
  • Deutsche Telekom -0.15% raised its FY targets thanks to continued better performance at T-Mobile %.  However, German operations continue to be mixed.  There was nothing really new regarding the T-Mobile/Sprint % merger.  The company said “there are no indication to doubt” U.S. approval.

On Our Side of the Pond

  • D.R. Horton -6.0% spooked the home building market by noting “momentum” was “slipping.”  It sees Q1 deliveries and revenue below consensus.
  • Bombardier -14.4% cut its FY revenue outlook and will cut 5,000 jobs.
  • The markets now await the Fed’s decision later today.

On the Markets’ Agenda for Tonight

  • Moody’s put Bharti Airtel on watch for a downgrade to junk status citing cash flow concerns.
  • Earnings released after the local close include DeNA and Shinsegae.  Others due include Allianz, Toray Ind. and SK Hynix.
  • Macro due RBA monetary statement, Chinese inflation, UK GDP, trade and production readings.

Markets and Macro

Markets Snapshot

Event Survey Actual Prior Revised
JN Core Machine Orders MoM Sep -9.00% -18.30% 6.80%
JN Core Machine Orders YoY Sep 7.70% -7.00% 12.60%
JN BoP Current Account Balance Sep ¥1786.5b ¥1821.6b ¥1838.4b
JN BoP Current Account Adjusted Sep ¥1349.9b ¥1334.0b ¥1428.8b
JN Trade Balance BoP Basis Sep ¥334.2b ¥323.3b -¥219.3b
JN Bank Lending Incl Trusts YoY Oct 2.20% 2.30%
JN Bank Lending Ex-Trusts YoY Oct 2.20% 2.30%
JN Japan Buying Foreign Bonds 2-Nov -¥167.3b -¥1077.8b -¥1074.9b
JN Japan Buying Foreign Stocks 2-Nov ¥463.7b ¥2.7b
JN Foreign Buying Japan Bonds 2-Nov ¥547.4b ¥556.8b ¥554.9b
JN Foreign Buying Japan Stocks 2-Nov ¥107.6b -¥349.0b -¥356.9b
UK RICS House Price Balance Oct -2% -10% -2%
JN Tokyo Avg Office Vacancies Oct 2.2 2.33
CH Trade Balance CNY Oct 237.00b 233.63b 213.23b 210.38b
CH Exports YoY CNY Oct 14.20% 20.10% 17.00% 16.90%
CH Imports YoY CNY Oct 17.70% 26.30% 17.40% 17.50%
CH Trade Balance Oct $35.15b $34.01b $31.69b $31.28b
CH Exports YoY Oct 11.70% 15.60% 14.50% 14.40%
CH Imports YoY Oct 14.50% 21.40% 14.30% 14.50%
SK Bloomberg Nov. South Korea Economic Survey (Table)
JN Bankruptcies YoY Oct -0.40% -8.54%
JN Eco Watchers Survey Current SA Oct 48.7 49.5 48.6
JN Eco Watchers Survey Outlook SA Oct 50.3 50.6 51.3
GE Trade Balance Sep 20.0b 18.4b 17.2b 17.1b
GE Current Account Balance Sep 21.0b 21.1b 15.3b
GE Exports SA MoM Sep 0.40% -0.80% -0.10% 0.10%
GE Imports SA MoM Sep 0.80% -0.40% -2.70% -2.40%
FR Trade Balance Sep -5833m -5663m -5632m -5701m
FR Current Account Balance Sep -1.9b -1.6b -2.0b
FR Survey of Industrial Investment (Table)
SP Industrial Output NSA YoY Sep -2.80% 1.20% 1.10%
SP Industrial Output SA YoY Sep 0.80% -0.10% 1.20% 1.00%
SP Industrial Production MoM Sep -0.50% -0.70% 0.70% 0.60%
EC ECB Publishes Economic Bulletin
EC European Commission Updates Its Economic Forecasts
CA Housing Starts Oct 198.0k 205.9k 188.7k 189.7k
CA New Housing Price Index MoM Sep 0.00% 0.00% 0.00%
CA New Housing Price Index YoY Sep 0.20% 0.20% 0.40%
US Initial Jobless Claims 3-Nov 214k 214k 214k 215k
US Continuing Claims 27-Oct 1634k 1623k 1631k
US Bloomberg Consumer Comfort 4-Nov 61.3 60.3
US Mortgage Delinquencies 3Q 4.47% 4.36%
US MBA Mortgage Foreclosures 3Q 0.99% 1.05%
US FOMC Rate Decision (Upper Bound) 8-Nov 2.25% 2.25%
US FOMC Rate Decision (Lower Bound) 8-Nov 2.00% 2.00%
US Interest Rate on Excess Reserves 9-Nov 2.20% 2.20%
JN Money Stock M3 YoY Oct 2.40% 2.50%
JN Money Stock M2 YoY Oct 2.80% 2.80%
AU RBA Statement on Monetary Policy
AU Home Loans MoM Sep -1.00% -2.10%
AU Investment Lending Sep -1.10%
AU Owner-Occupier Loan Value MoM Sep -2.70%
CH PPI YoY Oct 3.30% 3.60%
CH CPI YoY Oct 2.50% 2.50%
IT Bank of Italy Report on Balance-Sheet Aggregates
CH Foreign Direct Investment YoY CNY Oct 8.00%
FR Industrial Production MoM Sep -0.30% 0.30%
FR Industrial Production YoY Sep 1.10% 1.60%
FR Manufacturing Production MoM Sep -0.20% 0.60%
FR Manufacturing Production YoY Sep 1.80% 1.90%
UK Visible Trade Balance GBP/Mn Sep -£11395 -£11195
UK Trade Balance Non EU GBP/Mn Sep -£3825 -£4219
UK Trade Balance Sep -£1500 -£1274
UK Industrial Production MoM Sep -0.10% 0.20%
UK Industrial Production YoY Sep 0.40% 1.30%
UK Manufacturing Production MoM Sep 0.10% -0.20%
UK Manufacturing Production YoY Sep 0.40% 1.30%
UK Construction Output SA MoM Sep 0.10% -0.70%
UK Construction Output SA YoY Sep 1.30% 0.30%
UK GDP (MoM) Sep 0.10% 0.00%
UK Index of Services MoM Sep 0.10% 0.00%
UK Index of Services 3M/3M Sep 0.50% 0.50%
UK GDP QoQ 3Q P 0.60% 0.40%
UK GDP YoY 3Q P 1.50% 1.20%
UK Private Consumption QoQ 3Q P 0.50% 0.30% 0.40%
UK Government Spending QoQ 3Q P 0.40% 0.40% -0.40%
UK Gross Fixed Capital Formation QoQ 3Q P 0.30% 0.80% -0.50%
UK Exports QoQ 3Q P 3.00% -3.60% -2.20%
UK Imports QoQ 3Q P 0.80% -0.80% -0.20%
UK Total Business Investment QoQ 3Q P 0.20% -0.70%
UK Total Business Investment YoY 3Q P -0.10% -0.20%
US PPI Final Demand MoM Oct 0.20% 0.20%
US PPI Ex Food and Energy MoM Oct 0.20% 0.20%
US PPI Ex Food, Energy, Trade MoM Oct 0.20% 0.40%
US PPI Final Demand YoY Oct 2.50% 2.60%
US PPI Ex Food and Energy YoY Oct 2.30% 2.50%
US PPI Ex Food, Energy, Trade YoY Oct 2.90%
US Wholesale Inventories MoM Sep F 0.30% 0.30%
US Wholesale Trade Sales MoM Sep 0.40% 0.80%
US U. of Mich. Sentiment Nov P 98 98.6
US U. of Mich. Expectations Nov P 87.2 89.3
US U. of Mich. Current Conditions Nov P 114.9 113.1
US U. of Mich. 1 Yr Inflation Nov P 2.90%
US U. of Mich. 5-10 Yr Inflation Nov P 2.40%

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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