2014-07-02 23:46:42.369 GMT
By Grant Clark
July 3 (Bloomberg) -- Lists 26 compelling overweights and 6
underweights in report led by analyst Erwan Rambourg.
* Overweight: AB InBev, Nike, Essilor, Danone, Mengniu Dairy,
Samsonite, Li & Fung, SCA, Anta, AmorePacific, Biostime,
Burberry, Daimler, Haier, Orion, Sands China, Casino, H&M,
ITC, Puregold, Lotte Shopping, Chow Tai Fook, Richemont,
Tiffany, Pandora, Folli Follie
* Underweight: Beiersdorf, Belle, Carlsberg, Grupo Bimbo,
Morrison, Tesco
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gclark@bloomberg.net
Asian Market Update: Australia Retail Sales drop to 14-month lows as RBA Gov Stevens talks down AUD
***Notable Economic Data*** - (CN) CHINA JUN HSBC SERVICES PMI: 53.1 (15-month high) V 50.7 PRIOR; COMPOSITE PMI: 52.4 V 50.2 PRIOR - (CN) CHINA JUN NON-MANUFACTURING PMI: 55.0 V 55.5 PRIOR - (AU) AUSTRALIA MAY RETAIL SALES M/M: -0.5% V 0.0%E (biggest decline since Mar 2013) - (AU) AUSTRALIA MAY BUILDING APPROVALS M/M: 9.9% (8-month high) V 3.2%E; Y/Y: 14.3% V 8.0%E - (AU) AUSTRALIA JUN AIG PERFORMANCE OF SERVICES INDEX: 47.6 V 49.9 PRIOR (4th consecutive contraction, 6-month low) - (JP) JAPAN JUN MARKIT SERVICES PMI: 49.0 (3rd straight month of contraction) V 49.3 PRIOR; MARKIT/JMMA COMPOSITE PMI: 50.0 V 49.2 PRIOR
***Index Snapshot (as of 02:30 GMT)*** - Nikkei225 -0.1%, S&P/ASX +0.6%, Kospi -0.3%, Shanghai Composite -0.2%, Hang Seng +0.1%, Sept S&P500 -0.1% at 1,966
***Commodities/Fixed Income/Currencies*** - Aug gold -0.4% at $1,325, Aug crude oil -0.5% at $104.00/brl, Sept Copper flat at $3.26/lb - SLV: iShares Silver Trust ETF daily holdings fall to 10,038 tonnes from 10,042 tonnes prior (lowest since Feb 19th) - JGB: (JP) Japan MoF sells ¥2.20T in 0.6% (0.6% prior) 10-yr notes; Avg yield: 0.562% v 0.608% prior; Bid to cover: 3.43x v 3.74x prior - (CN) PBoC to drain CNY10B in 28-day repos (2nd consecutive drain); Injects net CNY55B this week v injected CNY12B prior (8th consecutive week of net injection) - USD/CNY: (CN) PBoC sets yuan mid point at 6.1581 v 6.1549 prior setting (weakest Yuan setting since Jun 6th) - (US) S&P: Fundamentals support baseline US GDP forecast of 2.3% in 2014, 3.1% in 2015
***Market Focal Points/Key Themes*** - AUD/USD is once again the most active cross among the dollar majors, falling sharply for the 2nd consecutive session after hitting an 8-month high above $0.95 earlier this week. Mixed China services PMIs have taken a back seat to increasingly more dovish sentiment from RBA Gov Stevens and the biggest drop in retail sales since March of 2013. Stevens stated that while monetary policy is very accommodative, RBA still has ammunition on interest rates, adding that AUD is overvalued by most measures and the troubling property sector inflation may be abating. Recall AUD has received a modest boost from the recent RBA policy statements when the central bank abstained from more aggressive remarks on currency in spite of the deteriorating economic fundamentals.
- China's largest cement maker Anhui is up nearly 5% in Shanghai after guiding H1 net profit to rise 90%. China's Qilu Bank also clarified that the recent missed loan payment was not related to a local government financing vehicle (LGFV). Yesterday, reports noted Qilu Bank sued the vehicle over bad loans, raising the possibility of the first official admission of a default by local govt.
- A research note from S&P reiterated baseline projections for US GDP of 2.3% in 2014, 3.1% in 2015, supported by "steady improvement in manufacturing activity employment numbers and consumer sentiment." That report was also upbeat on the auto sector for the next 12-18 months, given low interest rate environment and recovering property sector.
***Equities*** US markets: - LULU: Founder's advisers said to be sounding out private equity firms about buyout - financial press; +1.5% afterhours - SNX: Reports Q2 $1.52 (adj) v $1.38e, R$3.45B v $3.17Be; -2.7% afterhours - BIND: Announces Completion of Collaboration Agreement with Amgen; -16.2% afterhours - RGDO: Announces Initiation of DSMB review of REGULATE-PCI Data; -40.8% afterhours
Notable movers by sector: - Materials: Anhui Conch Cement 914.HK +4.9% (H1 guidance); Silver Lake Resources SLR.AU -5.4% (FY14 gold sales result) - Technology: Guangzhou Hongli Opto-Electronic 300219.CN +1.9% (H1 guidance); Toshiba 6502.JP +2.5% (may be awarded $4.9B reactor contract) - Healthcare: Shanghai Kehua Bio-Engineering 002022.CN +2.8%, Jilin Zixin Pharmaceutical Industrial 002118.CN +4.3%, Da An Gene Co Ltd Sun Yat-Sen University 002030.CN +10.0%, Hunan China Sun Pharmaceutical Machinery 300216.CN +6.8% (China allows usage of gene sequencing) - Consumer discretionary: ABC-Mart 2670.JP +0.8% (press reports on Q1 results) - Industrials: Hyundai Heavy 000720.KR +1.4% (contract award)
The stock market spent the Wednesday session in a narrow range, which resulted in the S&P 500 posting a slim gain of less than two points (0.1%) with six sectors ending in the green. The Dow Jones Industrial Average (+0.1%) outperformed slightly, while the Russell 2000 (-0.4%) lagged.
The major averages climbed out of the gate, but the early strength was short-lived as only a handful of sectors were able to distance themselves from their flat lines. The lack of concerted sector leadership caused the key indices to return to their flat lines, where they remained into the close.
One sector that displayed notable strength throughout the session was yesterday's leader—health care. The countercyclical group added 0.7% with biotechnology underpinning the advance. The iShares Nasdaq Biotechnology ETF (IBB 264.55, +1.43) tacked on 0.5%.
The relative strength of biotechnology was unable to boost the Nasdaq Composite (unch), which suffered from relative weakness among high-growth names. For instance Facebook (FB 66.45, -1.61), Netflix (NFLX 466.74, -6.36), Priceline.com (PCLN 1237.84, -8.93), and Tesla (TSLA 229.42, -10.29) lost between 0.7% and 4.3%. Meanwhile, the consumer discretionary (+0.2%) and technology (unch) sectors ended little changed.
‘Little changed' is how the entire cyclical side ended the trading day. The materials sector (+0.2%) posted a slim gain, while energy (-0.1%), financials (unch), and industrials (-0.1%) settled in the red.
Notably, the industrial sector was pressured by transport stocks, and specifically, airlines. Delta Air Lines (DAL 38.24, -2.07) and United Continental (UAL 39.27, -2.99) registered respective losses of 5.1% and 7.1% after Delta reported disappointing monthly passenger unit revenue, while the broader Dow Jones Transportation Average shed 0.4%.
Returning to countercyclical sectors for a second, two other defensively-oriented groups—consumer staples (+0.2%) and telecom services (+0.5%)—posted gains, while the utilities sector (-2.0%) finished at the bottom of the leaderboard for the second day in a row.
The magnitude of the loss in the rate-sensitive sector was likely assisted by today's increase in Treasury yields. Treasuries tumbled to lows following today's ADP Employment report and continued drifting lower throughout the trading day. The 10-yr note lost half a point, sending its yield higher by six basis points to 2.62%.
Participation was well below average with less than 585 million shares changing hands at the NYSE.
Economic data included May Factory Orders, June ADP Employment, and the weekly MBA Mortgage Index:Tomorrow, the Challenger Job Cuts report for June will be released at 7:30 ET, while weekly initial claims (consensus 315K), June Nonfarm Payrolls (consensus 210K), and May Trade Balance (consensus -$45.20 billion) will all be released at 8:30 ET. The day's data will be topped off with the 10:00 ET release of the June ISM Services report (expected 56.5).
- Factory orders declined 0.5% in May after increasing an upwardly revised 0.8% (from 0.7%) in April. The consensus expected a decline of 0.4%
- The revisions to the May durable goods data were extremely minor. Total orders were revised up from the advance (-1.0%), but still fell 0.9%. These orders increased 0.9% in May
- Transportation orders, which were originally down 3.0%, were revised to -2.9%
- Excluding transportation, durable goods orders were flat in May after originally reporting a small 0.1% decline
- According to the ADP National Employment Report, employment in the nonfarm private business sector rose by 281K in June. That was well above the increase of 200K expected by the consensus
- The May reading was left unrevised at 179,000
- The weekly MBA Mortgage Index slipped 0.2% to follow last week's 1.0% decline
- S&P 500 +6.8% YTD
- Nasdaq Composite +6.7% YTD
- Dow Jones Industrial Average +2.4% YTD
- Russell 2000 +3.1% YTD