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10.15.2019 14 new posts under Morning Note (10), CAPIS Headlines (3), International Summary (1)

International Summary

News Trading Desk

International Summary

"CAPIS Global Recap – 8/7/2019"

posted by Clayton Duff on 08/07/2019 at 6:43 am

by Clayton Duff

08/07/2019 at 6:43 am

Asian Headlines

Asian indices saw subdued moves overnight, a welcome session in light of recent weakness and volatility.  The Yuan is weaker today as the PBoC setting the reference rate to 6.9996 vs the prior 6.9683 level. A financial story out noted banks there were buyers of USD.  Central bank moves are in focus elsewhere with New Zealand’s RBNZ lowering their cash rate by 50bps, to 1.0%, as a 25bps cut was expected.  Governor Orr said the move was a strategic one adding negative rates could be utilized if needed. On that, the Kiwi Dollar fell to levels not seen since last October but have recovered somewhat today.

In the sector space, Utilities led on the Nikkei along with Health Care while Materials and IT slipped. Utilities led in Hong Kong as well with Industrials lagging. Conversely, Materials led in China with IT and Communication weaker.  Down Under, Real Estate and Consumer goods rallied, this after mixed home loan readings.

In individual names Softbank – .2% closed near flat post reporting 1Q op income sharply ahead of estimates.  Much of the gain was from a ¥856.8B gain from its 2016 Aliaba share sale.  Son said he sees 5-6 IPOs from the Vision fun this year with 10 expected next year.

Chipmaker Sumco fell 9% post missing estimates. They forecast 3Q op income at only ¥8B, well light vs the ¥14.4B expectation. Restrictions on Huawei are trickling down to them with Citi downgraded the name to Sell.  Several reasons cited included chip material export restrictions and the subsequent removal from the favored trade list along with general macroeconomic deterioration.

Post the close China reported a small paring of foreign reserves, to $3.104T vs the $3.105T estimate while gold reserves rose.   Like the RBNZ, Thailand’s central bank also lowered rates, cutting to 1.5%, as expected, from 1.75%.  Baht strength was noted as a concern with inflation seen missing their 2019 target.   Post yesterday’s 35bps cut by India’s RBI, Gov Das said a 25bp cut was inadequate with a 50bp cut seen as excessive.   He said further cuts will be calibrated.

 

European Headlines

European indices have steadily worked higher with broad gains sector-wise.  Tech and Construction names lead with only the Basic Resources sector down despite Gold and Copper to the upside. 533 of the Stoxx 600 names are to the upside with turnover up slightly.  On the economic front German Industrial Production fell 1.5% MoM, after a slight gain in May.   With the easing noted above bond yields continue to slip with with German 10 year holding just above 2% while the UK Gilt is at 1.67%.

News concerning earnings and other headlines include Commerzbank -3% which met 2Q operating earnings estimates. Revenues too were inline but the firm stated its FY NI goal is “significantly more ambitious”.  They did note that cost reduction targets will be met adding negative rates have not hurt the firm.  Unicredit -3.8% missed on 2Q NI and subsequently lowered their FY revenue guidance to €18.7B from €19B.  Trading profit was off 19% YoY.

Bayer +7% is moving in a different direction today, up, as it will sell a JV with Lanxess +6% to Macquarie.  The €3.5B deal will see Bayer freeing up cash as they offload Currenta which they call a non-core business unit.  Additionally, the next Glyphosate trial appears to be postponed.

Lower again, corporate financing firm Burford Capital is off 48%. The firm has said their cash position is strong and access to additional funds is sufficient as Muddy Waters calling the name a short.  Its use of fair value accounting is said to be in focus with Burford threatening appropriate legal action if actionable misconduct is found.  The firm is off over 60% in just three days.

Shipper Hapag-Lloyd is up 17% on encouraging earnings.  This allowed the firm to reiterate FY estimates as freight rates are to the upside. 

Event Survey Actual Prior Revised
AU 15) AiG Perf of Construction Index Jul 39.1 43
JN 16) Official Reserve Assets Jul $1316.5b $1322.3b
AU 17) Home Loans MoM Jun 0.50% 0.40% -0.10% -0.40%
AU 18) Investment Lending Jun 0.50% 0.50% -1.70% -1.90%
AU 19) Owner-Occupier Loan Value MoM Jun -1.00% 2.40% -2.70% -3.00%
SZ 20) UBS Real Estate Bubble Index 2Q 0.78 0.83 0.8
DE 21) Industrial Production MoM Jun -6.80% 3.50% 4.20%
GE 22) Industrial Production SA MoM Jun -0.50% -1.50% 0.30% 0.10%
GE 23) Industrial Production WDA YoY Jun -3.10% -5.20% -3.70%
IN 24) RBI Repurchase Rate 7-Aug 5.50% 5.40% 5.75%
IN 25) RBI Reverse Repo Rate 7-Aug 5.25% 5.15% 5.50%
IN 26) RBI Cash Reserve Ratio 7-Aug 4.00% 4.00% 4.00%
FR 27) Trade Balance Jun -4118m -5187m -3278m
FR 28) Current Account Balance Jun -0.8b 0.3b
SP 29) House transactions YoY Jun -9.00% 1.10%
SZ 30) Foreign Currency Reserves Jul 767.9b 759.1b 759.8b
AS 31) Wholesale Price Index MoM Jul 0.40% -1.60%
AS 32) Wholesale Price Index YoY Jul -0.30% -0.70%
UK 33) Halifax House Prices MoM Jul 0.30% -0.20% -0.30% -0.40%
UK 34) Halifax House Price 3Mths/Year Jul 4.40% 4.10% 5.70%
SW 35) Budget Balance Jul 28.2b -24.8b
HK 36) Foreign Reserves Jul $448.5b $445.6b $445.7b
CH 37) Foreign Reserves Jul $3105.00b $3103.70b $3119.23b
IC 38) Trade Balance Jul P -18600m -28563m
PO 39) Unemployment Rate 2Q 6.30% 6.80%

About the Author

Clayton Duff headshot
ClaytonDuffFVP,Senior International Trader

Clayton Duff joined the firm in 2008. He has worked in the industry since 1994 and held various trading and sales positions before CAPIS, including four years as a trader for First Southwest. He earned his bachelor’s degree from the University of Texas Arlington. Clayton maintains Series 3,...

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