FT : China-US talks indicate both nations open to trade war settlement

China-US talks indicate both nations open to trade war settlement
Rhetoric continues as adviser Kudlow suggests tariffs are only ‘first proposals’

China’s ambassador to Washington held talks with the acting US secretary of state on Wednesday about simmering trade tension between the world’s two biggest economies, in a sign that both governments still hope to avert a full-blown trade war.

Cui Tiankai told John Sullivan, who has been acting as the top US diplomat since President Donald Trump fired Rex Tillerson last month, that Washington should “abandon unilateralism and trade protectionism as soon as possible” and “stop the 301 investigation into China”.

Mr Cui also called on the US to “resolve relevant disagreements with China through dialogue and consultation”.

The US state department said that Mr Sullivan “reiterated the need to restore fairness and balance to our economic ties” and that he and Mr Cui “agreed to remain in close communication on these and other bilateral, regional, and global issues of mutual concern”.

Earlier on Wednesday, China unveiled its own package of proposed tariffs on about $50bn of US products, including lucrative soyabean exports, in a tit-for-tat response to the tariffs on Chinese goods announced by the Trump administration on Tuesday.

The US says it is taking action against unfair Chinese trade practices such as forced technology transfers and intellectual property theft that are designed to bolster Beijing’s plans for industrial leadership as laid out in its “Made in China 2025” strategy.

Beijing has rejected these claims and accused Washington of violating World Trade Organization rules. The tit-for-tat tariffs will not come into force for several months and both governments have suggested that they are open to negotiations.

Larry Kudlow, Mr Trump’s chief economic adviser, tried to calm investors’ fears of a trade war on Wednesday, telling Fox Business: “These are just the first proposals [for tariffs] . . . I doubt if there’ll be any concrete actions for several months.”

But initial efforts at negotiation have been hampered by the personnel turmoil in the Trump administration, a point underlined by China’s ambassador holding talks with the acting secretary of state because Mr Trump’s nominee to replace Mr Tillerson, Mike Pompeo, is still awaiting his Senate confirmation hearing.

Jacob Parker, vice-president of China operations at the US-China Business Council, said “no one wins in a trade war”, reiterating the view of many investors.

“Business wants to see solutions to the problems — results that will positively address the technology protection issues — not just tariffs and counter-tariffs that will do more harm than good,” he said.

The European Chamber of Commerce in China, which has become increasingly vocal about the lack of fair market access, called on Chinese President Xi Jinping to do his part to avert a trade war by delivering on commitments to open the economy to foreign investment.

“As a large and responsible proponent of economic globalisation, the simplest way to avoid any further disputes that could further disrupt global trade is for China to implement the measures that it has loudly and repeatedly committed itself to since President Xi’s speech at Davos in 2017,” said Mats Harborn, the chamber’s president.

>>> What to look at today - 5th of April 2018

Stocks in Asia followed U.S. equities higher as investors reassessed the danger of a trade-damaging spiral of tariff increases in the world’s top two economies. Treasuries extended declines and the yen fell. Japanese and South Korean shares led gains in the region and Australian equities advanced, with markets in China and Hong Kong closed Thursday for holidays. U.S. equity-index futures gained. The S&P 500 Index swung from a loss to close up 1.2 percent, and 10-year Treasury yields turned higher, after traders’ optimism grew that the U.S. and China will step back from the brink of a trade war. Representatives from China and the U.S. left the door open for a negotiated solution to avoid tariff proposals that wouldn’t take effect for months. US After Hours OLLI -5% following earnings, CNAT -33% after drug trial fails to meet primary endpoint

Nikkei +1.65% Hang Seng Closed CSI Closed Shanghai closed Shenzen Closed

Eur$ 1.2270 CNH 6.2850 CNY 6.3033 JPY 106.88 GBP 1.4064 CHF 0.9616 RUB 57.4929 WTI$ 63.64 +0.43%

S&P +0.26% EuroStoxx +1.17% FTSE +1.35% Dax +1.21% SMI +1.33%

Macro :
- Citi Upgrades U.K. Stocks; Cuts Japan, Continental Europe
- Norway Seafood Exports Fall 2% to NOK23.7B in 1Q Vs Year Ago

Keep an eye on :
- ADS GY : Under Armour Brand, EPS Power to Remain Pressured: Susquehanna
- AF FP : Air France Unions Plan Four More April Strike Days: AFP
- AD NA : Investor Group VEB Seeks AGM Vote on Ahold Stichting: Telegraaf
- ATL IM : Atlantia Confirms Put Option for Cellnex Stake Sale to Edizione
- AKSO NO : Aker Solutions, Kvaerner Gets Statoil Contract Worth NOK3.4B
- ALIV SS : Autoliv Holder Cevian Capital Boosts Stake to 9.62%
- AZORA IPO : Azora Is Said to Seek to Raise EU700m in May IPO: Confidencial
- BCP PL : Banco Comercial Portugues Says Norges Bank Became 1.68% Holder
- BARC LN : Moody’s Cuts Barclays PLC’s Long-Term Issuer Rating to Baa3
- BELFIUS IPO : Belfius CEO Says IPO No Longer Possible Before Summer: L’Echo
- GBF GY : Bilfinger to Decline Discharge for 2015 Mgmt Board Members: BZ
- BIM FP : Biomérieux Says Astute Medical Purchase to Cut Operating Profit
- BX US : Blackstone, PIF of Saudi Arabia in Pact for Investment Vehicle
- ALCLS FP : Cellectis Follow-on Offering Prices at $31.00 Per ADS
- CLN SW : Clariant Targets $2b in North America Sales by 2021
- CNP FP : CNP Assurances, Caixa Seguridade in Talks for Binding Agreement
- CVR LN : Three From PwC Named Conviviality Brands Joint Administrators
- DIS US : ESPN Reaches Ten-Year Agreement for Ivy League Sports Rights
- DBX US : Dropbox Named Best Long Idea at Hedgeye, Sees Stock Hitting $40
- FPM LN : DNO Completes Tender for 10% of the Shares in Faroe Petroleum
- GE US : GE Consortium Wins Contract to Build Polish Power Plant
- MRK GY : Merck KGaA to Pay German Staff EU1000 Cash Bonus, Shares: WiWo
- MONC IM : Moncler Starts Buyback Program for up to 2.1m Shares
- FB US : Facebook Says Up to 87m People’s Data May Be Improperly Shared
- FPM LN : DNO Doesn’t Intend to Make Offer for Faroe Petroleum
- FDSA LN : SS&C Is Said to Have Approached Fidessa About A Deal: FT
- ICPT US : Intercept Pharma Falls as 1Q Ocaliva Sales View Disappoints
- IIA AV : Immofinanz Sees Full Year Dividend Per Share EU0.08
- NANO NO : Nordic Nanovector, CEO Costa Mutually Agree He Will Step Down
- UG FP : PSA CEO Tavares Confirms Plan to Sell Cars in U.S. by 2026
- RATOB SS : Ratos Portfolio Company Aibel Gets NOK8b Contract From Statoil
- RYA LN : Ryanair Says 8 Flights Were Canceled Due to Strike in Portugal
- SANN SW : Santhera’s Omigapil Study Met Safety, Tolerability Objective
- SPU NO : Spectrum Sees 1Q Net Revenue of About $26M Vs $25M Year Ago
- SYNN SW : Syngenta Plans Up to $4.8 Billion Equivalent Bond Sale
- TIT IM : Telecom Italia Board Still Plans May 4 Shareholder Meeting
- FP FP : Total Will Drill Two Exploration Wells in Mauritania by 2019
- UBI FP : Ubisoft’s Far Cry 5 Is Fastest Selling in Franchise’s History
- UCB BB : UCB Buys Duke University Spinoff Element Genomics for Up to $30m
- UCG IM : UniCredit Plans to Sell EU2b of NPLs This Year, Il Sole Says
- UBSG SW : Mubadala in Talks to Buy Minority Stake in UBS London HQ: CoStar
- VOW3 GY : Volkswagen Cancels Contracts With Prevent, Handelsblatt Reports
- WTI LN : Weatherly Says BackStop Date May Be Extended for Kitumba Project
- WPP LN : WPP Is Said to Have Settled Lawsuit Alleging Exec Misconduct:WSJ
- ZURN SW : Zurich Holders Elect Michel Liès as New Chairman, Approve Div

>>> Europe : Brokers Upgrades & Downgrades - 5th of April 2018

>>> Up
* Mediaset Upgraded to Buy at UBS; PT 3.70 Euros
* Metro AG Upgraded to Buy at HSBC; PT 17 Euros
* Pargesa Upgraded to Buy at AlphaValue
* RBS Upgraded to Neutral at MedioBanca

>>> Down
* Cargotec Downgraded to Sell at DNB Markets; PT 38 Euros
* Deutsche Wohnen Cut to Hold at Nord/LB; Price Target 41 Euros
* Global Ports Holding Cut to Neutral at Goldman; PT 4.80 Pounds
* Just Eat Downgraded to Underweight at JPMorgan

>>> Initiation
* SIT Rated New Buy at UBI Banca; PT 13.34 Euros

>>> Call
>> Stock
* *ONTEX, SBM OFFSHORE ADDED TO ABN AMRO’S MOST FAVOURITES LIST
>> Country
* Citi Upgrades U.K. Stocks; Cuts Japan, Continental Europe

>>> After Hours Research Calls


After Hours Research Calls

  • Advanced Micro (AMD) upgraded to Buy from Hold at Stifel and initiated with Neutral at UBS
  • Broadcom (AVGO), KLA-Tencor (KLAC), Marvell (MRVL) initiated with Buy ratings at UBS
  • Intel (INTC) downgraded to Hold from Buy at Stifel
  • Micron (MU), Texas Instruments (TXN) initiated with Sell ratings at UBS
  • Navient (NAVI) upgraded to Buy from Neutral at Compass Point
  • NVIDIA (NVDA), Teradyne (TER), Skyworks (SWKS) initiated with Neutral ratings at UBS
  • Under Armour (UAA / UA) cautious stance reiterated at Susquehanna following 10-K review

>>> US After Hours Summary: OLLI -5% following earnings, CNAT -33% aft


After Hours Summary: OLLI -5% following earnings, CNAT -33% after drug trial fails to meet primary endpoint

After Hours Gainers:

Companies trading higher in after hours in reaction to news: PRTK +3% (new drug applications for oral and intravenous omadacycline accepted for priority review by FDA), FB +2.7% (higher in extended trade after CEO Zuckerberg hosts call with media), SGMO +2.4% (after closing up 6% on the day), MRVL +2.4% and AVGO +1% (initiated with Buy ratings at UBS), CASI +2.3% (after Exec Chairman Wei-Wu He and founder of Emerging Technology Partners affirmed increased active stake of 10.4% following previously disclosed securities purchase agreement), AMD +1.8% (upgraded to Buy from Hold at Stifel and initiated with Neutral at UBS)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: OLLI -4.9%, NG -3.9%

Companies trading lower in after hours in reaction to news: CNAT -33.4% (reports top-line results from Ph 2b POLT-HCV-SVR clinical trial - did not meet its primary endpoint but biopsy-based proof of concept in liver fibrosis and cirrhosis supports further evaluation), CHEK -15.6% (files for $10 mln ordinary share offering), CPRX -6.8% (following today's 16% move higher), LFIN -6.1% (pulling back in after seeing notable move higher ahead of tonight's CEO appearance on Fast Money), NOG -4.2% (amended exchange agreement -- reduced minimum amount of equity raise to $140 mln while providing common stock in the equity raise be issued solely for cash), RPAI -1.7% (attributed to block trade pricing), MU -1.6% (Director Johnson disclosed the sale of 25000 shares valued at ~$1.26 mln; initiated with Sell rating at UBS), ICPT -0.6% (proposes $120 million offering and concurrent $92 million private placement of common stock; CEO and Board members indicated interest in participating in the offering; expects net sales of Ocaliva for the quarter to be slightly lower y/y), INTC -0.3% (downgraded to Hold from Buy at Stifel)

>>> US Close Dow +0.96% S&P +1.16% NAsdaq +1.45% Russell +1.29%

Closing Market Summary: Fighting Through Trade War Fears

Stocks fought through trade war fears on Wednesday to advance for the second session in a row. The S&P 500, which opened Wednesday with a loss of around 1.5%, finished higher by 1.2% at 2644.69. The Nasdaq and the Dow also opened solidly lower, but ended with gains of 1.5% and 1.0%, respectively, advancing to 7042.11 and 24264.30.

Newly unveiled tariff plans between the world's two largest economies left investors feeling a bit uneasy on Wednesday morning; the Trump administration announced a plan to impose tariffs of 25% on Chinese imports across 1,300 product categories worth $50 billion in total, and China retaliated by announcing a similar plan, calling for duties of 25% on American imports across 106 product categories -- including soybeans, planes, cars, and chemicals -- also worth approximately $50 billion in total. However, the realization that the tariffs have yet to be put in force provided some comfort to investors.

The specific turnaround point for the market came mid-morning when NEC Director Larry Kudlow told reporters that there is a chance that the China tariffs do not go into effect, emphasizing that President Trump wants to solve the China trade issue with the least amount of pain possible. Stocks began trimming losses immediately after the opening bell, eventually triggering some short-covering activity that further accelerated the upward move. The major averages finished near their best marks of the day.

10 of 11 S&P sectors closed Wednesday's session in positive territory, with seven adding more than 1.0%. The consumer discretionary sector (+1.8%) was the best-performing group, with just about all of its components finishing in the green. Amazon (AMZN 1410.57, +18.52) rallied 1.3%, while homebuilders showed particular strength after Lennar (LEN 62.82, +5.73) reported better-than-expected earnings for its fiscal first quarter; LEN shares jumped 10.0%, and the iShares U.S. Home Construction ETF (ITB 40.52, +1.80) added 4.7%.

The top-weighted technology (+1.4%) and financials (+1.1%) sectors performed in-line with, or slightly better than, the broader market, but the industrial space (+0.4%) underperformed, as names with a large exposure to China, including Dow component Boeing (BA 327.44, -3.38), struggled; BA shares lost 1.0%. The utilities space (+0.2%) also lagged, and the energy sector was the only group to finish in negative territory, shedding 0.1%.

U.S. Treasuries finished Wednesday on a mostly lower note, pushing yields a tick higher; the benchmark 10-yr yield climbed one basis point to 2.79%. Elsewhere, West Texas Intermediate crude futures declined 0.2% to $63.37/bbl, gold futures advanced 0.3% to $1340.60/oz, and the U.S. Dollar Index ticked down 0.1% to 89.80.

Reviewing Wednesday's economic data, which included the ADP Employment Report for March, the ISM Services Index for March, and Factory Orders for February:

  • The ADP National Employment Report showed an increase of 241,000 in March (consensus 203,000). The January reading was revised to 246,000 from 235,000.
    • This report should solidify expectations for another strong nonfarm payrolls number when the government releases the Employment Situation Report on Friday.
  • The ISM Services Index for March dipped to 58.8 (consensus 59.0) from an unrevised reading of 59.5 in February.
    • The key takeaway from the report is that the services sector is still growing nicely, albeit at a slightly slower pace than February.
  • The Factory Orders report for February showed an increase of 1.2% (consensus +1.8%). The January reading was revised to -1.3% from -1.4%.
    • The key takeaway from the report is that it revealed a rebound in business spending, evidenced by the 1.4% increase in orders for nondefense capital goods excluding aircraft.

On Thursday, investors will receive the Trade Balance for February (consensus -$56.7 billion) and weekly Initial Claims (consensus 255K).

  • Nasdaq Composite: +2.0% YTD
  • S&P 500: -1.1% YTD
  • Dow Jones Industrial Average: -1.8% YTD
  • Russell 2000: -0.3% YTD