The majority of the region’s core markets saw selling pressure for a variety of factors. A stronger ¥ weighed in Japan. But that wasn’t the only concern. A trade spat is brewing between Japan and S. Korea. Local press reports say Japan is prepared to expand a list of tech products prohibited from export to S. Korea. The reason is the potential to be used for military purposes. Caixin Chinese Service and Composite PMIs created uncertainty in China.
Most of the major sectors traded lower. IT was the hardest hit off by 1.5%. It was Japanese and S. Korean names that weighed. Both utilities and real estate gained about 0.5% with yields falling.
Other Important Headlines
- The Caixin June Chinese Service PMI is below expectations and at a 4 month low. The Composite reading is lower m/m and is the lowest result since October 2016.
- The BoJ is increasing its purchases of 1-3 yr. JGBs. However, it will reduce 3-5 year & 1o-25 year purchases. This is inline with prior guidance from the central bank.
- Fast Retailing’s +2.7% June Uniqlo sales are a robust +27.3% y/y.
- ABC-Mart’s +1.5% June same store sales are better by 5.5% y/y.
A significant portion of the day’s chatter has focused upon the EU post nominees. Christine Lagarde is slotted as President of the ECB adding to her history of high profile positions. Germany’s Ursula von der Leyen is named to head the European Commission. The EU Parliament must now approve all those named.
Naming Ms. Largarde to head the ECB is being received well. It is believed she will carry on Mr. Draghi’s current accommodative policy. The equity markets have been higher since the open. With the exception of energy, all sectors are green. Gains of at least 1% are being seen among autos, travel/leisure, healthcare, utilities, construction, food/bevies and personal goods.
The debts markets continue to see significant declines to yields. In addition to Ms. Largarde’s news, Pres. Trump’s nominees for the Fed are also a factor. More on this below. Germany’s 10 yr. Bund has set another record low negative yield. Italy’s 2 yr. yield has moved further into negative territory. In Sweden, the Riksbank left rates unchanged at -0.25 bps. However, it signaled an increase is on the table later this year or the beginning of next year.
- Deutsche Bk -0.6% has been shopping around a variety of assets including NPLs to private equity investors. Citigroup’s EMEA chief indicated the bank has no M&A interest in either Deutsche or Commerzbank +1.2%. The FT just reported the bank will post a FY loss due to its restructuring plans.
- U.K. food and beverage names are catching bids thanks to Boris Johnson. He indicates he will review current sin taxes on sugar, fat and salt if named as the U.K’s PM.
- A Federal judge will most like reduce the award Bayer +0.4% must pay for one the RoundUp judgements. He would not dismiss the payment but indicated the punitive damages are higher than allowed by a prior Supreme Court ruling regarding the ratio between punitive and compensatory fines.
- Sainsbury’s % Q1 LFLs ex-petrol fell -1.6% y/y. That marks the 3rd consecutive quarterly decline.
On Our Side of the Pond
- Pres. Trump has selected Christopher Waller and Judy Shelton as his nominees for the Federal Reserve Board. It should not be a surprise they are both dovish and will push for rate cuts.
- The Nikkei reports HP, Dell and Microsoft intend to shift some production from China which will make Pres. Trump happy. The article also mentions Sony and Nintendo.
- Broadcom is conducting talks to acquire Symantec.
- Tesla is trading better following strong production data released after yesterday’s close.
- Quite a bit of U.S. macro this morning due to tomorrow’s holiday. The IJCs are brought forward to release today.
- The thing you will be happiest about today, the U.S. markets close early!
Have a great Fourth of July!
Markets & Macro
|AU||AiG Perf of Services Index||Jun||—||52.2||52.5||—|
|AU||CBA Australia PMI Services||Jun F||—||52.6||53.3||—|
|AU||CBA Australia PMI Composite||Jun F||—||52.5||53.1||—|
|UK||BRC Shop Price Index YoY||Jun||—||-0.10%||0.80%||—|
|JN||Jibun Bank Japan PMI Composite||Jun||—||50.8||50.7||—|
|JN||Jibun Bank Japan PMI Services||Jun||—||51.9||51.7||—|
|AU||Building Approvals MoM||May||0.00%||0.70%||-4.70%||-3.40%|
|AU||Building Approvals YoY||May||-21.50%||-19.60%||-24.20%||-23.40%|
|CH||Caixin China PMI Composite||Jun||—||50.6||51.5||—|
|CH||Caixin China PMI Services||Jun||52.6||52||52.7||—|
|US||Wards Total Vehicle Sales||Jun||17.00m||17.30m||17.30m||—|
|IN||Markit India PMI Services||Jun||—||49.6||50.2||—|
|IN||Markit India PMI Composite||Jun||—||50.8||51.7||—|
|SP||Markit Spain Services PMI||Jun||52.8||53.6||52.8||—|
|SP||Markit Spain Composite PMI||Jun||51.7||52.1||52.1||—|
|IT||Markit Italy Services PMI||Jun||50||50.5||50||—|
|IT||Markit Italy Composite PMI||Jun||49.5||50.1||49.9||—|
|FR||Markit France Services PMI||Jun F||53.1||52.9||53.1||—|
|FR||Markit France Composite PMI||Jun F||52.9||52.7||52.9||—|
|GE||Markit Germany Services PMI||Jun F||55.6||55.8||55.6||—|
|GE||Markit/BME Germany Composite PMI||Jun F||52.6||52.6||52.6||—|
|EC||Markit Eurozone Services PMI||Jun F||53.4||53.6||53.4||—|
|EC||Markit Eurozone Composite PMI||Jun F||52.1||52.2||52.1||—|
|UK||Markit/CIPS UK Services PMI||Jun||51||50.2||51||—|
|UK||Markit/CIPS UK Composite PMI||Jun||51||49.7||50.9||—|
|UK||Official Reserves Changes||Jun||—||$3650m||$2309m||—|
|US||MBA Mortgage Applications||28-Jun||—||-0.10%||1.30%||—|
|US||Challenger Job Cuts YoY||Jun||—||—||85.90%||—|
|US||ADP Employment Change||Jun||140k||—||27k||—|
|CA||Int’l Merchandise Trade||May||-1.70b||—||-0.97b||—|
|US||Initial Jobless Claims||29-Jun||223k||—||227k||—|
|US||Bloomberg Consumer Comfort||30-Jun||—||—||63.6||—|
|US||Markit US Services PMI||Jun F||50.7||—||50.7||—|
|US||Markit US Composite PMI||Jun F||—||—||50.6||—|
|US||Factory Orders Ex Trans||May||—||—||0.30%||—|
|US||Durable Goods Orders||May F||-1.30%||—||-1.30%||—|
|US||Durables Ex Transportation||May F||—||—||0.30%||—|
|US||Cap Goods Ship Nondef Ex Air||May F||—||—||0.70%||—|
|US||Cap Goods Orders Nondef Ex Air||May F||—||—||0.40%||—|
|US||ISM Non-Manufacturing Index||Jun||56||—||56.9||—|