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08.21.2019 18 new Morning Note posts under Morning Note (10) and International Summary (8)

International Summary

News Trading Desk

International Summary

"CAPIS Global Markets 7/3/2019"

posted by Matthew Kiselica on 07/03/2019 at 7:00 am

by Matthew Kiselica

07/03/2019 at 7:00 am

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Asian Markets

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.

European Markets

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.

Corporate Snippets

  • 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

Markets Snapshot

Event Survey Actual Prior Revised
SK Foreign Reserves Jun $403.07b $401.97b
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%
AU Trade Balance May A$5250m A$5745m A$4871m A$4820m
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 Trade Balance May -$54.0b -$50.8b
US Initial Jobless Claims 29-Jun 223k 227k
US Continuing Claims 22-Jun 1675k 1688k
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 May -0.60% -0.80%
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

 

 

About the Author

Matthew Kiselica headshot
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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