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12.10.2018 19 new posts under International Summary (9), Morning Note (9), CAPIS Headlines (1)

International Summary

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International Summary

"CAPIS Global Markets 11/13/2018"

posted by Matthew Kiselica on 11/13/2018 at 7:02 am

by Matthew Kiselica

11/13/2018 at 7:02 am

Asian Markets

A tough day for most of the region as the sell-off in the States particularly in the tech space weighed upon the region.   We will address that further below.  Once again, the mainland Chinese markets were the standouts.  Shanghai, Shenzhen and ChiNext all started to the downside.  However, Shenzhen and ChiNext quickly reversed course and then Shanghai followed suit.  The impetus was chalked up to renewed trade talks between the States and China.  Sources say China’s Vice Premier Liu and Sec. of State Mnuchin held a phone conversation yesterday.  Furthermore, V. P. Liu may come to Washington prior to the meeting between Pres. Trump and Premier Li at the G-20 later.

In terms of sectors, the majority of them traded lower.  IT and consumer discretionary were lower by c. 1%.  Chinese names helped consumer staples and telcos gain about 0.5%.

Other Important News

  • The tech sector was weighed upon by Apple suppliers which fell by c. 2% as a group.  This was a result of yesterday’s profit warning from Lumentum.  The company sees lower Q4 results citing reduced demand from “a large customer.”  Their largest customer is Apple.  Another blow to the sector was Japan Display -9.5%.  Volatile customer demand will significantly impact sales growth and operating margins.
  • VTech’s -11.8% NP fell 13.0% y/y and brokers cut their recommendations. The electronics maker is considering moving its production to its Malaysia plant to avoid any future U.S. tariffs.
  • The auto sector showed mixed performance following word President Trump is meeting with trade advisers to levy a 20% tariff on vehicles built overseas.  On a related note, Honda -2.2% plans to move production of its SUV’s production to China from the U.S. as trade wars continue.
  • Australia’s Federal Court rejected a lending law settlement with Westpac Bank -2.1%.  The court ruled it was unclear the bank committed anything illegal.
  • Semen Indonesia was flat following confirmation its buying Holcim Indonesia from LagargeHolcim +0.5%.  The purchase of 80.6% stake will cost $1.75B.  LaFargeHolcim is looking to sell CHF2B in assets under their Strategy 2022 program and this move gets them most of the way.
  • Chinese banks offered US$ in an attempt to halt the yuan’s depreciation.
  • This is an interesting tidbit.  Japan’s asset purchase program has left it holding ¥553.6t.  This is more than the nation’s nominal GDP of ¥552.8t.
  • After the close, MUFG sees its FY NI at ¥950b which is c. 12.0% higher than its previous estimate.  However, CEO comments are worrisome.  He cautions H2 could “deteriorate” citing trade, Chinese slowdown and lack of global leadership.  Also after the close, Chinese funding data was released with new yuan loans and aggregate financing well below expectations.

European Markets

Europe has been trading to the upside since the open with a number of key earnings boosting the markets.  Italy is lagging with today being the budget revision deadline.  Athens is surging with reports alleging Greece will provide assistance to the banks.  Up to $47b of bad debt may be moved off their balance sheets to a special vehicle fund.

The energy markets are seeing interesting action.  Crude had been off more than 2% following Pres. Trump’s comments S. Arabia and other producers should maintain output.  It has pared some of the loss when S. Arabia stated it sees demand for its crude waning due to the slower macro picture and more supply from other producers.  Natural gas is higher by more than 5% as cold weather grips the States.

The Brexit saga continues to create a muddled picture.  PM May stated a deal is possible this week but not “definite.”  Despite this, she is holding off on having her cabinet vote upon her current proposals.   For its part, the EU is said to be preparing “No- Deal” seminars for its members.

All of this is creating the following sector reactions.  The major of sectors are to the upside.  Telecoms lead better by 2% (see Vodafone below).  Industrials, travel/leisure (airlines on lower crude), chemicals and banks are higher by c. 1%.  Energy is the bif loser off by c. 1.5%.

Corporate Snippets

  • Investors are ringing up Vodafone +7.8%.  There are several metrics that provide the lift.  Q2 organic revenues rose 0.5% vs. -0.6% anticipated.  The company will keep its dividend flat but the cash savings will be used to reduce its debt pile.  It sees higher FCF and will restructure to reduce costs.
  • Bayer’s -0.1% Q3 adj. EBITDA of €2.2b beat the highest Bloomberg estimate.  The company maintained its FY forecasts and foresees a flat dividend.
  • Experian +5.7% appears to be putting its data breach woes behind it.  The company predicts FY organic revenue growth will be at the top end of the range.  It also expects EBIT growth to outpace revenue growth.
  • Telecom Italia’s  +0.4% board essentially has fired CEO Genish.  Vivendi +0.1% is denouncing the move and the battles with Elliott Management will probably ratchet up from here.

Athens Stock Exchange Intraday Move

Athens

On Our Side of the Pond

  • Prudential Financial is purchasing Wahhwani Asset Management.
  • The Wall Street Journal is reporting Amazon has selected the New York and Virginia locations as the winners for its second head quarters.

Markets and Macro Data

Markets Snapshot

Event Survey Actual Prior Revised
SK Import Price Index YoY Oct 10.70% 9.70%
SK Import Price Index MoM Oct 1.50% 1.50%
SK Export Price Index YoY Oct 1.30% 1.40% 1.30%
SK Export Price Index MoM Oct 0.50% 0.30% 0.20%
AU ANZ Roy Morgan Weekly Consumer Confidence Index 11-Nov 119.8 116.8
AU NAB Business Conditions Oct 12 15 14
AU NAB Business Confidence Oct 4 6
SK Money Supply L SA MoM Sep 0.10% 0.20% 0.40%
SK Money Supply M2 SA MoM Sep -0.10% 0.60%
SK Bank Lending To Household Total Oct KR815.5t KR807.7t
GE CPI MoM Oct F 0.20% 0.20% 0.20%
GE CPI YoY Oct F 2.50% 2.50% 2.50%
GE CPI EU Harmonized MoM Oct F 0.10% 0.10% 0.10%
GE CPI EU Harmonized YoY Oct F 2.40% 2.40% 2.40%
EC SURVEY REPORT: Euro Area Economic Forecasts in Nov. 2018
FR Wages QoQ 3Q P 0.40% 0.30% 0.40%
FR Private Sector Payrolls QoQ 3Q P 0.30% 0.20% 0.10%
SP House transactions YoY Sep 9.70% 7.40%
CH Money Supply M1 YoY Oct 4.20% 2.70% 4.00%
CH Money Supply M0 YoY Oct 2.80% 2.80% 2.20%
CH Money Supply M2 YoY Oct 8.40% 8.00% 8.30%
CH New Yuan Loans CNY Oct 904.5b 697.0b 1380.0b
CH Aggregate Financing CNY Oct 1300.0b 728.8b 2205.4b 2168.2b
UK Claimant Count Rate Oct 2.70% 2.60%
UK Jobless Claims Change Oct 20.2k 18.5k 23.2k
UK Average Weekly Earnings 3M/YoY Sep 3.00% 3.00% 2.70% 2.80%
UK Weekly Earnings ex Bonus 3M/YoY Sep 3.10% 3.20% 3.10%
UK ILO Unemployment Rate 3Mths Sep 4.00% 4.10% 4.00%
UK Employment Change 3M/3M Sep 25k 23k -5k
GE ZEW Survey Current Situation Nov 65 58.2 70.1
GE ZEW Survey Expectations Nov -26 -24.1 -24.7
EC ZEW Survey Expectations Nov -22 -19.4
US NFIB Small Business Optimism Oct 108 107.4 107.9
US Monthly Budget Statement Oct -$100.0b -$63.2b

About the Author

MatthewKiselicaFVP,Manager of International Trading

Matthew Kiselica joined CAPIS in 2010 and has over twenty-five years of industry experience. Prior to CAPIS, he was vice president of Cazenove’s global sales trading desk in New York. Matthew is a board member for the National Psoriasis Foundation. He earned his bachelor’s degrees in fina...

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