MSCI ACWI Markets
The MSCI semi-annual rebalance hit the tape. The ACWI Index markets will see a total of 48 additions and 66 deletions. Names of note include a reduction to Tencent’s -0.8% weighting while Alibaba’s will be increased. They become effective on Nov. 30th. Teaser alert: More on Tecent below.
China saw profit taking following the past two day’s of strong gains. This was due to mixed macro data which we outline below. Most of the rest of the markets ended the day with minor moves to one side of the flat line or the other. An exception to that statement is Australia. Heavy selling among energy and miners weighed heavily upon the ASX200.
In fact, energy names tumbled across the entire region following yesterday’s 7% decline in crude. As a group they gave way by about 2%. IT, health care and financials were lower by c. 0.5% or more. Consumer discretionary advanced by about that mark. They are boosted by autos on word Pres. Trump is holding off on tariffs for the sector. Another sector to gain was real estate. Chinese names were leaders as the weak financing data prompts hopes further restrictions will be ruled out.
- The Chinese macro data included the following. Yesterday, we had already flagged the October new yuan loans and aggregate financing were well below estimates. Today saw retails sales miss consensus while industrial production is a touch better.
- Japanese GDP readings were largely in line with estimates. They showed contraction across the board. Weather related events are seen to be the cause. Industrial production is off m/m and y/y during September with no consensus estimates available.
- Other macro on the tape is Thailand leaving its benchmark rate at 1.5%. Sri Lanka surprisingly raised rates.
- MUFG +1.7% following the results released after yesterday’s close. To recap, the bank sees its FY NI at ¥950b which is c. 12.0% higher than its previous guidance.
- Hon Hai -1.5% becomes the latest company proving further evidence of slowing iPhone demand. Q3 Sales are at the top end of the range. However, both OP and NI are light of expectations.
- After the close, both SMFG and Mizuho released results. Also, Tencent’s Q3 NI is CNY23.33b vs. CNY 18.39b expected. Online gaming revenues CNY 25.8b. Online advertising revenue CNY 16.2b. Thanks to its 31.0% holding in Tencent, Naspers % reversed earlier losses as the news hit the tape.
Europe has been in the red since the open hitting lows of more than 1% about an hour into session. The markets have been paring the losses ever since and are currently at highs of the day. Italy lags. The nation failed to adjust its budget with a 2.4% deficit and 1.5% GDP growth projections. This now leaves the ball in the EU court having already rejected the proposal. Sweden suffers as its parliament failed to appoint Ulf Kristersson as PM.
The bounce from lows is being providing by the auto sector which is better by c. 1.5%. Media, utilities and travel also giving some support. Basic resources are off > 2% with iron ore weak due to Chinese concerns. Chemicals and industrials are lower by more than 0.5%.
The markets will watch closely a meeting at 9AM Eastern in the U.K. At that time, PM May has called upon her cabinet to support a tentative Brexit agreement. A major sticking point is the UK will “temporarily” remain in the EU customs region. Many staunch Brexit supporters are calling it a “betrayal.” However, this was conceded to prevent an Irish “border” to be established. Stay tuned……
Crude is trying to recoup some of yesterday’s sharp declines but the rally is petering out. There were rumors earlier kicking around OPEC will cut output more than 1.4m bpd. The IEA’s monthly report shows global inventories have increased for the 4th consecutive month. They note this should not be seen as a threat but rather a positive. The corresponding declines in prices will benefit the global economy, most especially the emerging markets. Natural gas is surging as low inventories coincide with the abnormally cold weather in the States.
Snippets from the Region
- E.ON’s +3.8% results are reassuring. The company sees both adj. EBIT and adj. NI at the upper end of the guidance range. Those are €2.8b to €3.0b and €1.3b to €1.5b, respectively. It also raised its projections for the Innogy +0.2% acquisition.
- Iliad +8.4% follows Vodafone +3.4% with strong results in the mobile space. While it continues to see a mix in France, the company believes EBITDA margin will growth there this year. Q3 subscribers saw an improvement of 200k new mobile subscribers.
- Smith’s Group +6.0% will restructure, peeling its off health care equipment unit.
- AP Moller Maersk-flat is seeing stormy trading. The shares opened 3% higher but has given back the advance. While raising its sales outlook, the company is also narrowing its EBITDA range. The adjustment to the downside on the top end was more than the increase to the bottom end. The new guidance is $3.6b to $4.0b vs. previous of $3.5b to $4.2b.
On Our Side of the Pond
- Johnson Controls will sell its Power Solutions unit to Brookfield Business Partners for $13.2b.
- 3M announced a $10b buyback.
- Keep an eye on marijuana names. Up in the Great White North, Canopy Growth has posted results that show both revenues and EBITDA well below expectations. It should be pointed out, Bloomberg only has two estimates for consensus.
- Fed Chair Powell will speak at the Dallas Fed today.
- U.S. CPI data due.
Markets and Macro
|SK||Unemployment rate SA||Oct||4.00%||3.90%||4.00%||—|
|AU||Westpac Consumer Conf Index||Nov||—||104.3||101.5||—|
|AU||Westpac Consumer Conf SA MoM||Nov||—||2.80%||1.00%||—|
|JN||GDP SA QoQ||3Q P||-0.30%||-0.30%||0.70%||0.80%|
|JN||GDP Annualized SA QoQ||3Q P||-1.00%||-1.20%||3.00%||—|
|JN||GDP Nominal SA QoQ||3Q P||-0.30%||-0.30%||0.70%||0.60%|
|JN||GDP Deflator YoY||3Q P||-0.10%||-0.30%||0.10%||0.00%|
|JN||GDP Private Consumption QoQ||3Q P||-0.20%||-0.10%||0.70%||—|
|JN||GDP Business Spending QoQ||3Q P||0.20%||-0.20%||3.10%||—|
|AU||Wage Price Index QoQ||3Q||0.60%||0.60%||0.60%||0.50%|
|AU||Wage Price Index YoY||3Q||2.30%||2.30%||2.10%||—|
|CH||Retail Sales YoY||Oct||9.20%||8.60%||9.20%||—|
|CH||Retail Sales YTD YoY||Oct||9.30%||9.20%||9.30%||—|
|CH||Industrial Production YoY||Oct||5.80%||5.90%||5.80%||—|
|CH||Industrial Production YTD YoY||Oct||6.30%||6.40%||6.40%||—|
|CH||Fixed Assets Ex Rural YTD YoY||Oct||5.50%||5.70%||5.40%||—|
|CH||Property Investment YoY||Oct||—||9.70%||9.90%||—|
|CH||Surveyed Jobless Rate||Oct||—||4.90%||4.90%||—|
|JN||Tertiary Industry Index MoM||Sep||-0.40%||-1.10%||0.50%||0.40%|
|JN||Capacity Utilization MoM||Sep||—||-1.50%||2.20%||—|
|JN||Industrial Production MoM||Sep F||—||-0.40%||-1.10%||—|
|JN||Industrial Production YoY||Sep F||—||-2.50%||-2.90%||—|
|IN||Wholesale Prices YoY||Oct||4.93%||5.28%||5.13%||—|
|GE||GDP SA QoQ||3Q P||-0.10%||-0.20%||0.50%||—|
|GE||GDP NSA YoY||3Q P||1.20%||1.10%||2.30%||—|
|GE||GDP WDA YoY||3Q P||1.30%||1.10%||2.00%||—|
|FR||CPI EU Harmonized MoM||Oct F||0.10%||0.10%||0.10%||—|
|FR||CPI EU Harmonized YoY||Oct F||2.50%||2.50%||2.50%||—|
|FR||CPI MoM||Oct F||0.10%||0.10%||0.10%||—|
|FR||CPI YoY||Oct F||2.20%||2.20%||2.20%||—|
|FR||CPI Ex-Tobacco Index||Oct||103.36||103.37||103.25||—|
|SP||CPI MoM||Oct F||0.90%||0.90%||0.90%||—|
|SP||CPI YoY||Oct F||2.30%||2.30%||2.30%||—|
|SP||CPI EU Harmonised MoM||Oct F||0.70%||0.70%||0.70%||—|
|SP||CPI EU Harmonised YoY||Oct F||2.30%||2.30%||2.30%||—|
|SP||CPI Core MoM||Oct||0.70%||0.80%||0.00%||—|
|SP||CPI Core YoY||Oct||1.10%||1.00%||0.80%||—|
|UK||CPI Core YoY||Oct||1.90%||1.90%||1.90%||—|
|UK||Retail Price Index||Oct||284.6||284.5||284.1||—|
|UK||RPI Ex Mort Int.Payments (YoY)||Oct||3.30%||3.20%||3.30%||—|
|UK||PPI Input NSA MoM||Oct||0.60%||0.80%||1.30%||1.40%|
|UK||PPI Input NSA YoY||Oct||9.60%||10.00%||10.30%||10.50%|
|UK||PPI Output NSA MoM||Oct||0.20%||0.30%||0.40%||—|
|UK||PPI Output NSA YoY||Oct||3.10%||3.30%||3.10%||—|
|UK||PPI Output Core NSA MoM||Oct||0.20%||0.30%||0.10%||—|
|UK||PPI Output Core NSA YoY||Oct||2.40%||2.40%||2.40%||—|
|UK||House Price Index YoY||Sep||3.20%||3.50%||3.20%||3.10%|
|EC||Industrial Production SA MoM||Sep||-0.40%||-0.30%||1.00%||1.10%|
|EC||Industrial Production WDA YoY||Sep||0.30%||0.90%||0.90%||1.10%|
|EC||GDP SA QoQ||3Q P||0.20%||0.20%||0.20%||—|
|EC||GDP SA YoY||3Q P||1.70%||1.70%||1.70%||—|
|EC||Employment QoQ||3Q P||—||0.20%||0.40%||—|
|EC||Employment YoY||3Q P||—||1.30%||1.50%||—|
|US||MBA Mortgage Applications||9-Nov||—||-3.20%||-0.70%||—|
|US||CPI Ex Food and Energy MoM||Oct||0.20%||—||0.10%||—|
|US||CPI Ex Food and Energy YoY||Oct||2.20%||—||2.20%||—|
|US||CPI Index NSA||Oct||252.828||—||252.439||—|
|US||CPI Core Index SA||Oct||258.947||—||258.441||—|
|US||Real Avg Weekly Earnings YoY||Oct||—||—||1.10%||0.80%|
|US||Real Avg Hourly Earning YoY||Oct||—||—||0.50%||—|