The story of the day is the arrest of Huawei Tech CFO Meng Wanzhou. Apparently, she has been arrested in Canada at the request of the United States. Reports indicate the arrest occurred while Pres. Trump and Prem. Xi were conducting trade talks! China is voicing its outrage and calling for her immediate release. Here are more details pertaining to the story. Naturally, the markets are worried about the impact this will have on trade negotiations.
This drove all the Asian markets lower and most by well over 1%. Sector performance was terrible. All the major sectors were well to the downside. Health care gave way by 3% with IT and telcos off by 2.5% or more. Within IT, Apple suppliers ended the day down by 3.8%, as a whole. (See Largan comments below.)
Other Important Headlines
- The Huawei story wasn’t the only negative for the tech sector. Apple supplier Largan Precision -9.95% sees December sales falling m/m. This follows November sales which slumped 29.0% y/y.
- Sources allege Softbank’s -4.9% IPO of its telecom unit is fully subscribed including the over allotment shares. That is a total of 176b shares, raising c. $24b. The shares commence trading on Dec. 19th.
- Elsewhere on the IPO front, Tencent -5.2% supported software developer IDreamsky Tech -8.6% fell in its trading debut. The IPO raised HK$ 745.3m.
- Developer and property manager Hopewell Holdings +30.5% will be taken private by the Chairman of the company for $2.7b.
Europe has been lower since the open and the markets have shown no inclination to recover. Market internal have been terrible. At one point, less than 10 names in the Euro Stoxx 600 were trading to the upside. Currently, there are less than 20. All the major sectors trade lower. Those seeing losses of about 3% includes financials and basic resources. Most other sector are down my at least 2%.
The energy markets are in focus with OPEC+ conducting its production meeting today. There have been a number of comments made. The most important of which was made by the Saudi oil minister. He noted there is no agreement at this point to cut production. Analysts see the need for a cut of at least 1m bpd to boost crude. Announcement is expected today but will continue tomorrow as well.
Snippets from the Region
- Huawei peers are trading in mixed fashion: Ericsson +1.5% and Nokia -2.0%.
- VW -2.7% believes it will reach its operating return target of 6% by 2022. That is three years ahead of its original target but that has is not helping the shares this morning.
- Cardboard container maker DS Smith -4.3% crumpled on the open c. 6% before paring the loss. The company’s plastic unit is not performing up to expectations and organic volume growth is contracting.
- Investors are taking chips off the table in the U.K. gaming names: William Hill -3.8%, Paddy Power Betfair -3.0%. They have agreed to cease advertising during live sports broadcasts.
On Our Side of the Pond
- The Fed Beige Book was released yesterday. The report shows all Fed districts are seeing “modest to moderate growth.”
- Keep an eye on Apple and suppliers following the Largan sales noted in the Asian Markets section. Our index of Apple suppliers listed overseas is lower by c. 4%.
- Lyft is filing for an IPO.
- Plenty of macro due this morning and all posted below.
Markets and Macro
|SK||BoP Current Account Balance||Oct||—||$9190.3m||$10831.4m||—|
|SK||BoP Goods Balance||Oct||—||$10997m||$13244m||—|
|JN||Japan Buying Foreign Bonds||30-Nov||—||¥1053.5b||-¥736.4b||-¥736.0b|
|JN||Japan Buying Foreign Stocks||30-Nov||—||-¥75.0b||¥80.8b||¥79.5b|
|JN||Foreign Buying Japan Bonds||30-Nov||—||¥733.1b||¥392.0b||¥368.3b|
|JN||Foreign Buying Japan Stocks||30-Nov||—||-¥137.9b||-¥195.0b||-¥203.5b|
|AU||Retail Sales MoM||Oct||0.30%||0.30%||0.20%||0.10%|
|HK||Bloomberg Dec. Hong Kong Economic Survey (Table)|
|GE||Factory Orders MoM||Oct||-0.40%||0.30%||0.30%||0.10%|
|GE||Factory Orders WDA YoY||Oct||-3.10%||-2.70%||-2.20%||-2.60%|
|GE||Markit Germany Construction PMI||Nov||—||51.3||49.8||—|
|US||Challenger Job Cuts YoY||Nov||—||51.50%||153.60%||—|
|US||ADP Employment Change||Nov||195k||—||227k||—|
|CA||Int’l Merchandise Trade||Oct||-0.73b||—||-0.42b||—|
|US||Nonfarm Productivity||3Q F||2.30%||—||2.20%||—|
|US||Unit Labor Costs||3Q F||1.00%||—||1.20%||—|
|US||Initial Jobless Claims||1-Dec||225k||—||234k||—|
|US||Bloomberg Consumer Comfort||2-Dec||—||—||60.6||—|
|US||Markit US Services PMI||Nov F||54.4||—||54.4||—|
|US||Markit US Composite PMI||Nov F||—||—||54.4||—|
|CA||Ivey Purchasing Managers Index SA||Nov||—||—||61.8||—|
|US||ISM Non-Manufacturing Index||Nov||59||—||60.3||—|
|US||Factory Orders Ex Trans||Oct||—||—||0.40%||—|
|US||Durable Goods Orders||Oct F||-2.40%||—||-4.40%||—|
|US||Durables Ex Transportation||Oct F||0.10%||—||0.10%||—|
|US||Cap Goods Orders Nondef Ex Air||Oct F||—||—||0.00%||—|
|US||Cap Goods Ship Nondef Ex Air||Oct F||—||—||0.30%||—|
|US||Household Change in Net Worth||3Q||—||—||$2191b||—|