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.
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%.
- 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
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
|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||—|