An interesting day with word Pakistan has shot down two Indian fighters. Prior to that news the markets had been having a decent day. Japan, Australia and S. Korea all ended the day higher. However, they had closed when Pakistan made their announcements. The news created risk- off sentiment and the markets that were still open closed lower or dipped from higher levels. Pakistan fell sharply but pared most of the loss.
Sectors were mixed with minimal moves buoyed by the markets that were already closed. IT fell more than 0.5% followed by industrials and materials. An interesting combination of energy and healthcare improved by c. 0.2%.
Other Important News from the Region
- Part of the gain in Japan was sparked by rebalances in both the Nikkei and TOPIX. Takeda Pharma +2.1% is a significant increase. Demand was forecast to be 50 m shares accounting for about 600% of its daily volume.
- Byd -4.5% slid following its results are below consensus. However, both Credit Suisse and Citi are out defending the name. Specifically, Citi cites weakness as a buying opportunity.
- Hyundai Motor +5.5% thrilled investors with a strategy update. The company is targeting 9% ROE by FY22 and is aiming to achieve 7% oper. profit margin. Additionally, Elliott Management is pushing for the company to increase its dividend payout.
The region has been trading lower since the open. However, the markets have pared their losses. Banks are higher by close to 1% and are helping the region pare the day’s declines. Basic resources and energy also providing some lift. Travel/leisure, personal goods, food/bevies have been off at least 1% all morning.
The energy markets are seeing solid gains in crude. Saudi Energy Minister Al-Falih stated U.S. inventories remain at elevated levels. Specifically, he said “brimming.” Therefore, his nation is inclined to keep the current production cuts in place during H2 of the year.
Other Snippets from the Region
- Following yesterday’s word the company’s were holding “talks,” Marks & Spencer -11.2% and Ocado +4.5% are forming a jv. To pay for its 50.0% stake, Marks & Spencer is launching £600m rights issue.
- Rio Tinto’s +0.8% FY underlying profit is a bit better than estimates. The company is retaining its FY production guidance. In addition to a final dividend of $1.80, the firm will pay a USD$4B special dividend after assets sales grew its balance sheet.
- Bayer +5.3% is providing some relief to investors. Q4 revenues are improved by +29.0% and Adj. EBITDA +16.0%. The company is seeing strong demand for herbicide and seeds as its absorbs Monsanto. They see 11,200 plaintiffs in the US concerning Round Up cases and says there is “no new evidence to show it is unsafe.”
- The Dutch government has secured a 13.0% stake in Air France-KLM -11.0% to match influence the French government has in the carrier. This sets up for a power struggle and muddies strategy for the airline.
- Merck KGAA -1.3% has agreed to purchase specialty pharma company Versum.
- Other important earnings today include Arkema -1.9%, ITV -3.6% and Taylor Wimpey +2.6%.
On Our Side of the Pond
- Weight Watchers is down sharply post results but both Lowes and Best Buy are trading well.
- In the farming space, Canada’s Nutrien will purchase Australia’s Ruralco +45.0% to grow their presence in the fertilizer and crop services space.
- Fed Chair Powell continues his testimony to Congress.
- Pres. Trump’s former attorney Michael Cohen will provide public testimony today.
On the Markets Agenda for Tonight
- Headlines from the summit between Pres. Trump and S.L. Jong-un. Their meeting is occuring as we go to press.
- Investors will keep a wary eye on the Kashmir region and any further escalation of military activity.
- Watch for local reaction to Rio Tinto and Sun Hung Kai’s results along with the China Mobile news.
- Earnings due include AB Inbev, BATS, Sberbank, Adecco and Galaxy Ent.
- Macro includes Chinese manuf. and non-manuf. PMI, S. Korean ind. production and rate decision by the BoK, Japanese ind. prod., retail sales and construction related data. Europe will see a number of inflation readings.
Markets and Macro
|UK||UK Finance Loans for Housing||Jan||38441||40634||38779||39350|
|SK||Business Survey Manufacturing||Mar||—||76||65||—|
|SK||Business Survey Non-Manufacturing||Mar||—||75||70||—|
|UK||BRC Shop Price Index YoY||Feb||0.30%||0.70%||0.40%||—|
|AU||Construction Work Done||4Q||0.50%||-3.10%||-2.80%||-3.60%|
|SK||Department Store Sales YoY||Jan||—||7.60%||-0.70%||—|
|SK||Discount Store Sales YoY||Jan||—||6.30%||-3.60%||—|
|SK||Short-Term External Debt||4Q||—||$126.6b||$128.1b||$127.7b|
|HK||GDP Annual YoY||2018||3.30%||3.00%||3.80%||—|
|HK||GDP SA QoQ||4Q||-0.60%||-0.30%||0.10%||—|
|IN||Bloomberg Feb. India Economic Survey (Table)|
|SP||Total Mortgage Lending YoY||Dec||—||23.10%||12.80%||—|
|SP||House Mortgage Approvals YoY||Dec||—||0.90%||14.20%||—|
|EC||M3 Money Supply YoY||Jan||4.00%||3.80%||4.10%||—|
|IT||Consumer Confidence Index||Feb||113.4||112.4||114||113.9|
|EC||Business Climate Indicator||Feb||0.66||0.69||0.69||—|
|EC||Consumer Confidence||Feb F||-7.4||-7.4||-7.4||—|
|US||MBA Mortgage Applications||22-Feb||—||5.30%||3.60%||—|
|CA||CMHC to Release Quarterly Data on Mortgage Trends|
|CA||CPI NSA MoM||Jan||0.10%||0.10%||-0.10%||—|
|CA||Consumer Price Index||Jan||133.6||133.6||133.4||—|
|CA||CPI Core- Common YoY%||Jan||1.90%||1.90%||1.90%||—|
|US||Advance Goods Trade Balance||Dec||-$73.6b||-$79.5b||-$70.5b||—|
|CA||CPI Core- Median YoY%||Jan||1.80%||1.80%||1.80%||—|
|US||Retail Inventories MoM||Dec||0.20%||0.90%||-0.40%||—|
|CA||CPI Core- Trim YoY%||Jan||1.90%||1.90%||1.90%||—|
|US||Wholesale Inventories MoM||Dec F||0.40%||1.10%||1.10%||—|
|US||Pending Home Sales MoM||Jan||1.00%||—||-2.20%||—|
|US||Pending Home Sales NSA YoY||Jan||-4.60%||—||-9.50%||—|
|US||Factory Orders Ex Trans||Dec||—||—||-1.30%||—|
|US||Durable Goods Orders||Dec F||—||—||1.20%||—|
|US||Durables Ex Transportation||Dec F||—||—||0.10%||—|
|US||Cap Goods Orders Nondef Ex Air||Dec F||—||—||-0.70%||—|
|US||Cap Goods Ship Nondef Ex Air||Dec F||—||—||0.50%||—|