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05.23.2019 15 new Morning Note posts under Morning Note (10) and International Summary (5)

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International Summary

"CAPIS Global Markets 2/25/2019"

posted by Matthew Kiselica on 02/25/2019 at 10:57 am

by Matthew Kiselica

02/25/2019 at 10:57 am

Asian Markets

It is very much a top down day.  Pres. Trump indicated he would extend the March 1st tariff deadline citing significant progress in the Sino-U.S. trade negotiations.  Agreements are said to have been reached concerning intellectual property and technology et. al.  Perhaps under the radar were comments from Chinese Pres. Xi.  In a Politburo meeting, he discussed a commitment to continued reform for the finance sector.

Those two factors caused Chinese equities to surge.  Shanghai and Shenzhen posted their strongest percentage gains in several years coupled with volumes that were also at multiple year highs.  Bloomberg noted all equities that had the word “securities” in their name advanced the limit up 10.0%.

Across the region and buoyed by Chinese names, financials gained c. 3.5% with industrials and IT better by 2% or more.  Defensives lagged and telcos ended the day down small as a group with Chinese names pulling back from recent highs.

Other Important Factors

  • Pres. Trump is also softening his stance regarding Huawei and may drop charges against the firm.  This bolstered ZTE Corp +1.7%.
  • Australian financials lagged their peers in other markets.  The Labor Party threatened to impose a A$640m levy upon banks and financials if they win elections being held during May.
  • Apple suppliers Largan Tech +3.2% and Wistron +0.5% are deemed to be beneficiaries from ramped up Apple iPhone 6 production to meet Indian demand.
  • Bluescope Steel firmed up 6%.  In addition to the tariff news, the company sees FY19 underlying EBIT c. 10% higher y/y.

European Markets

The region quickly gained about 0.5% but then pared about half of that advance.  The markets spent most of the rest of day trading in a fairly tight range to end the day up small.  So overall, the response to the day’s trade news has been much more muted than in Asia.

Most sectors ended the day green.  Autos gained about 2%, banks c. 1% followed by insurance.  Telecoms were off more than 0.5% with energy down by roughly that measure.  The commodities markets saw crude tumble with Pres. Trump criticizing OPEC.  He believes oil prices are too high and production curbs should be relaxed.

The Brexit picture continues to remain muddled.  PM May is calling for another vote on March 12th.  However, Parliament will vote on a measure to delay Brexit in the event of a “no-deal” scenario.  For its part, the EU is contemplating a measure to keep the UK within its block until 2021!

Corporate Snippets

  • The U.K. building sector was better offered throughout the day.  The Times reported UK Housing Sec. Brokenshire is investigating Persimmon’s -4.7% participation in a national “Help to Buy” program following a string of complaints.
  • Roche -0.3% is acquiring gene therapy company Spark Thera +120.0% for $4.8b.  The bid price of $114.50 per share is a 122.0% premium to Friday’s close!
  • Also in the specialty pharma space, Ipsen -6.5% is acquiring Clementia Pharma +73.8% for $1.31b.
  • Covestro -3.15% sees FY19 earnings lower by as much as 50% this year.  The company indicates the plastic market is seeing heavy Chinese supply.
  • Bunzl’s -3.7% margins eroded 10 bps last year and the company notes an “uncertain” outlook in the U.K.

On Our Side of the Pond

  • Barrick Gold -1.6% is making a hostile bid for Newmont Mining -0.75%.
  • GE +8.9% is selling its biopharma unit to Danaher +8.0% for $21.4b.
  • Mexico’s Q4 GDP is inline with expectations of 1.7% y/y.

On the Markets Agenda for Tonight

  • China’s National People’s Congress Standing Committee begins its two day meeting ahead of the national NPC meeting which commences on March 5th.
  •  Macro data will be light but S. Korean and German confidence will be released, Hong Kong’s trade balance with U.S. housing data due ahead of the U.S. open.
  • Earnings due include Standard Chartered, Endesa, Swiss Life and Peugeot.

Markets and Macro

Markets Snapshot

Event Survey Actual Prior Revised
JN PPI Services YoY Jan 1.10% 1.10% 1.10%
JN Leading Index CI Dec F 97.5 97.9
JN Coincident Index Dec F 101.8 102.3
SP PPI MoM Jan 0.20% -1.10% -1.00%
SP PPI YoY Jan 1.80% 1.60% 1.70%
US Chicago Fed Nat Activity Index Jan 0.1 -0.43 0.27 0.05
CA Bloomberg Nanos Confidence 22-Feb 54.4 54.8
US Wholesale Inventories MoM Dec P 0.40% 1.10% 0.30% 0.40%
US Wholesale Trade Sales MoM Dec -0.30% -1.00% -0.60% -1.20%
US Dallas Fed Manf. Activity Feb 4.7 13.1 1

 

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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