A mix across the region with the markets in Greater China outperforming. Statements at the People’s National Congress sparked buying interest in the latter portions of the trading session. Australia also performed well. Q4 GDP is below expectations and comments from the RBA indicate a more dovish stance. This sent the “Aussie” lower. Worrisome comments from BoJ member Harada weighed in Japan.
This all resulted in most sectors managing to advance. Financials and miners improved by 1%. Consumer staples and healthcare were down small. China indicates it will look to cap some pharmaceutical prices.
The commentary from the China’s People’s National Congress focused upon “steady growth in consumption.” Tax cuts , “targeted, critical infrastructure spending” and further relaxation of foreign investment were some of the positives. Sectors being targeted include green energy vehicles, 5G, energy efficient appliances and heathcare reform.
Other Important Headlines
- The BoJ is raising its purchase of 5-to-10 year bonds by ¥50b.
- Capital Group has increased its holding in PICC Group +1.3% H shs to 8.08% from 0.49%.
- Real estate developer China Evergrande +1.3% sees its FY18 earnings higher by at least 90.0%.
- Sanrio +7.3% is working with Warner Brother’s to create a Hello Kitty film. Glenn is super-excited.
- After the close, Mizuho is cutting its FY NI forecast for the current FY which ends this month. It is reducing its forecast by a whopping 86%! The company is taking ¥680b in impairment charges related to restructuring of fixed assets and its investment portfolio.
For the most part, the region has been trading sideways thus far. The markets are mixed but overall essentially flat. Autos are off more than 0.5% but were even weaker earlier (See snippets below). Banks, insurance and utilities are down small. Miners provide support, better by c. 1%. Personal goods, energy and media also trade to the upside.
The OECD is cutting its FY19 gobal growth forecast to 3.3% from 3.5%. The organization notes trade concerns, Brexit and other political concerns are “clouding prospects.” It added “the global expansion continues to lose momentum.”
- The auto sector loss are being driven by two factors. EBITDA at parts manufacturer Schaeffler -9.0% missed consensus by 13% and margins decline. It is also slashing its FY20 targets. This is specifically due to poor performance at its auto parts division. The second factor is word the EU plans to file anti-trust related complaints against several automakers including Daimler -1.5%, BMW -1.0%, and VW -1.7%. Bucking the trend is Fiat Chrysler +5.0%. Comments from Peugeot % Chariman Tavares regarding M&A for the industry is sparking takeover speculation.
- Tobacco stocks trade very well in response to word FDA Gottlieb is stepping down. The speculation is this will make the agency less critical of e-cigarettes and other new nicotine related products.
- The scope of the Russian related money laundering scandal continues to grow. ING -4.5% is the latest company to have allegations levied against it.
- Dialog Semi +5.1% is providing some relief to the sector. While FY18 revenues are a miss, EPS is a solid beat: ($2.90 vs. $2.83e). This is a sign of the improved margins the company experienced. The company’s outlook is reassuring. It sees FY19 revenues down small y/y but margins are inline with consensus.
On Our Side of the Pond
- The FDA has approved Johnson & Johnson’s nasal spray depression treatment, Spravato.
- Up in the Great White North, the Bank of Canada has a rate decision. The central bank is expected to hold the rate at 1.75%.
- Abercrombie and Brown Forman are among the companies on the tape this morning.
Markets and Macro
|AU||GDP SA QoQ||4Q||0.30%||0.20%||0.30%||—|
|GE||Markit Germany Construction PMI||Feb||—||54.7||50.7||—|
|IT||Istat Releases the Monthly Economic Note|
|EC||OECD Interim Economic Outlook|
|US||MBA Mortgage Applications||1-Mar||—||—||5.30%||—|
|US||ADP Employment Change||Feb||190k||—||213k||—|
|CA||Int’l Merchandise Trade||Dec||-2.06b||—||-2.06b||—|
|CA||Labor Productivity QoQ||4Q||-0.30%||—||0.30%||—|
|CA||Bank of Canada Rate Decision||6-Mar||1.75%||—||1.75%||—|
|CA||Ivey Purchasing Managers Index SA||Feb||—||—||54.7||—|
|US||U.S. Federal Reserve Releases Beige Book|