A solid day for the region with a number of factors driving the markets higher. India, the recent laggard, traded well with both S. Arabia and Japan seeking to forge closer economic ties. All major sectors gained with materials and utilities higher by 1%.
The key remains trade talks. As you know, Pres. Trump made comments indicating the current March 1st deadline for negotiations with China is not set in stone. Adding to optimism for those talks, Sen. Portman sees a “partial deal” in place by that date. Elsewhere on the trade front, Japan wants to iron out trade talks with the U.S. ahead of a summit in May. Regarding summits, Pres. Trump is upbeat regarding his meeting with N. Korean Sup. Leader Kim Jong Un.
On the macro front, Japanese Jan. exports fell more than expected while imports held up better than expected resulting in a higher deficit than anticipated. Interestingly, exports to China are lower by 17.4% y/y. This helped boost stimulus hopes in Japan but raised worries in China.
Other Important Headlines
- Macau gaming names have been given a boost by better than expected results at Melco Resorts and Ent. In response, Citi is raising its price target on Melco Intl. Dev. +6.6% to HK$27 from HK$23.50. Brokers also see the potential for capital return to investors.
- Crown Resorts -5.3% has not fared as well. The company’s H119 results are flat y/y. The company is seeing slower “high-roller gamblers” especially from China.
- China Gas +10.4% surged with CCB making positive comments on the implications of China’s Greater Bay Area Initiative. Additionally, Bloomberg postulates the shares may be added to the Hang Seng index.
- China Unicom +2.40% and China Mobile +0.15% both advanced following January subscriber data.
- S. Korean authorities searched Hyundai Motor -0.5% and Kia Motor +0.15% offices regarding manufacturing fraud.
- Wuxi Biologics +3.1% sees 2018 profit leaping more than 245% y/y.
Europe has been trading higher since the open. The markets pared some gains following a number of headlines. China warned of potential negative impact for equities if a trade deal is not reached. This is a departure from some of the recent commentary. However, most sectors are higher. Autos gains more than 1% while travel/leisure, construction, media, insurance and industrials are better by more than 0.5%. Chemicals and retail are lower by c. 0.2%.
The £ is giving ground as PM May is in Brussels to hold her next round of Brexit talks. She will attempt to iron out nuances that will permit her to present to parliament next week. This would help her avert threatened cabinet resignations.
Important Snippets from the Region
- Sainsbury -15.3% has been handed a sharp blow by UK regulators. They believe proposed store sales related to Asda acquisition do not allay monopoly concerns. The implications revert across the sector.
- The Swedish press allege Swedbank -10.5% handled c. $4.3b that may be related to the Dankse Bk % money laundering probe. For its part, the bank acknowledges it has notified authorities about “suspicious transactions.” However, the bank “doesn’t recognize” the figures quoted in the press report.
- The Q1 outlook of Air France-KLM +4.0% initially created selling pressure. However, comments from CEO Smith are reassuring investors. He indicates summer bookings are off to a better start. Additionally, the rather dysfunctional relationship between the French and Dutch units appear to be improving.
On Our Side of the Pond
- Lazy Boy is trading well following results. Southwest Airlines has cut guidance for Q1 citing the government shutdown.
- Keep an eye on Walmart due to Sainsbury/Asda news noted above.
- Unless other headlines create a stir, we will probably see cautious trading until the Fed minutes are released.
Markets and Macro
|AU||Westpac Leading Index MoM||Jan||—||-0.01%||-0.21%||-0.26%|
|JN||Trade Balance Adjusted||Jan||¥150.7b||-¥370.0b||-¥183.6b||-¥221.5b|
|AU||Skilled Vacancies MoM||Jan||—||1.30%||0.70%||1.40%|
|AU||Wage Price Index QoQ||4Q||0.60%||0.50%||0.60%||—|
|AU||Wage Price Index YoY||4Q||2.30%||2.30%||2.30%||—|
|JN||Bloomberg Feb. Japan Economic Survey (Table)|
|JN||Convenience Store Sales YoY||Jan||—||0.80%||1.20%||—|
|UK||CBI Trends Total Orders||Feb||-5||6||-1||—|
|UK||CBI Trends Selling Prices||Feb||16||22||18||—|
|US||MBA Mortgage Applications||15-Feb||—||3.60%||-3.70%||-6.90%|
|EC||Consumer Confidence||Feb A||-7.7||—||-7.9||—|
|US||FOMC Meeting Minutes||30-Jan||—||—||—||—|