Closing Market Summary: Financials Lead Stock Market Higher on MondayThe financial sector (+1.6%), and the broader market, opened the week with a nice bounce-back performance as participants returned in a buying frame of mind following the extended Easter weekend. The S&P 500 (+0.9%) finished in-line with the Dow (+0.9%) and the Nasdaq (+0.9%) and closed at its high for the session.
While geopolitical uncertainty continues to loom, especially with the French presidential election on the horizon, investors were encouraged by the relatively quiet weekend, which saw no major disruptions on the geopolitical front. The positive sentiment led to gains at the start of Monday's session, but the financial sector's solid performance was what really solidified the day's bullish tone.
Participants had an eye on bank stocks after JPMorgan Chase (JPM 85.86, +1.46) and Citigroup (C 58.99, +0.95) sold off last Thursday despite reporting better than expected earnings and revenues. That selling occurred incidentally amid a good bit of geopolitical headline angst in front of the weekend. JPM and C got back in gear today, though, and reclaimed all of Thursday's losses, which sent a bullish signal to the broader market ahead of earnings reports from Bank of America (BAC 22.81, +0.47) and Goldman Sachs (GS 226.26, +2.94) before Tuesday's open.
The financial space was also aided by the activity in the Treasury market, which produced a modest steepening of the yield curve that is beneficial for banks' net interest margins. The 10-yr yield (2.25%) added two basis points while the 2-yr yield (1.19%) decreased by one basis point. Paired with the decrease in the CBOE Volatility Index (14.65, -1.31, -8.2%), the slip in the 10-yr Treasury note offered further evidence of the risk-on sentiment that prevailed in the cash market on Monday.
Most of the financial sector's cyclical peers outperformed the broader market, including the technology (+1.0%), industrials (+1.0%), consumer discretionary (+1.0%), and real estate (+1.2%) sectors. Chipmakers had a hand in the tech group's solid showing. The PHLX Semiconductor Index finished higher by 1.3%.
Crude oil prices dropped 1.1% to finish the day at $52.63/bbl and contributed to the energy sector's (+0.2%) underperformance. The commodity's slip was attributed to profit-taking efforts in light of its recent three-week rally.
On the countercyclical side, the health care sector (+0.3%) struggled to keep pace as Eli Lilly (LLY 82.38, -3.50) and Incyte (INCY 126.07, -14.77) weighed on the space. The two companies slipped 4.1% and 10.5%, respectively, in reaction to the FDA's decision on Friday to deny the companies' rheumatoid arthritis drug Baricitinib. The iShares Nasdaq Biotechnology ETF (IBB 290.58, -0.01) settled at its flat line.
European markets were closed for Easter Monday, but that didn't stop the euro (1.0641) and the pound (1.2565) from adding 0.3% apiece against the U.S. dollar. As a result, the U.S. Dollar Index (100.23, -0.26) finished Monday's session lower by 0.3%.
On the data front, investors received several economic reports, including April Empire State Manufacturing Survey, April NAHB Housing Market Index, and April Net Long-Term TIC Flows:
- The Empire Manufacturing Survey for April declined to 5.2 from the prior month's reading of 16.4. The consensus estimate was pegged at 13.0.
- The NAHB Housing Market Index for April declined to 68 (consensus 70) from an unrevised reading of 71 in March.
- Net Long-Term TIC Flows for April were $53.4 billion versus a revised $5.9 billion (from $6.3 billion) for March.
On Tuesday, investors will receive the March Housing Starts (consensus 1.256 million) and March Industrial Production (consensus 0.4%) reports. The two reports will cross the wires at 8:30 ET and 9:15 ET, respectively.
- Nasdaq Composite +8.8% YTD
- S&P 500 +4.9% YTD
- Dow Jones Industrial Average +4.4% YTD
- Russell 2000 +0.3% YTD
EU Mid-Market Update: Europe remains closed due to Easter Monday holiday; geopolitical front remains on front burner
**Notes/Observations**
- China economic data offered some positive surprises as Annual Q1 GDP pace, Mar Retail Sales and Industrial Production all beat expectations
- Situation on the Korean peninsula remained tense even though there was no activity at the nuclear test site over the weekend; North Korea said to have failed in a ballistic missile launch early on Sunday
- Softer US CPI and Retail Sales data has market participants rethink the probability of another Fed rate hike in June
Overnight:
Asia:
- China Q1 GDP YoY: 6.9% v 6.8%e (fastest growth since the third quarter of 2015)
- China Mar Industrial ProductionYoY: 7.6% v 6.3%e (highest since Dec 2014)
- China Mar Retail Sales YoY: 10.9% v 9.7%e (3-month high)
- (JP) Japan PM Abe: Need to pressure North Korea for a sincere dialogue; Working for China to play a larger role in North Korea
- US carrier USS Vinson to reach South Korea east coast on Apr 25th
- (JP) Japan to seeking to revive Trans-Pacific Partnership (TPP) without the US
Europe:
- Turkey passed its referendum on changing the constitution to replace its parliamentary system with the executive presidency with 51.5% v 48.7%; opposition to challenge result
- EU's Piri: Will suspend EU accession talks with Turkey if referendum package not changed
- France presidential candidate Mélenchon (far left, communist) is rapidly rising in the polls
Americas:
- US Mar CPI (released Friday) saw its 1st MoM negative reading since Feb 2016 and by its largest amount since Jan 2010
- US Mar Advance Retail Sales (released Friday) registered its 2nd straight decline (M/M: -0.2% v -0.2%e
Energy:
- (US) Weekly Baker Hughes US Rig Count: 847 v 839 w/w (+1%)(13th straight weekly rise)
**Economic Data**
- (IN) India Mar Wholesale Prices (WPI) Y/Y: 5.7% v 6.0%e
- (TR) Turkey Jan Unemployment Rate: 13.0% v 13.0%e (highest level since Feb 2010)
- (TR) Turkey Mar Central Gov't Budget Balance (TRY): -19.5B v -6.8B prior
**Fixed Income Issuance:
- None seen
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
European markets closed for Easter Monday holiday
**Speakers**
- Turkey Dep PM Simsek reiterated view that double digit inflation is unacceptable and that it will fall to single digits
- Various global leaders react to Turkey's "Yes' outcome for its Constitutional Referendum
- German Chancellor Merkel called for respectful dialogue with Turkey
- BOJ Gov Kuroda reiterated that ist needed to continue with its easy monetary policy because consumer prices were still distant from its 2 percent inflation target. Domestic economy had continued its moderate recovery trend; exports and production are recovering
- BOJ Dep Gov Nakaso: BOJ should explain exit strategy as they near 2% inflation target. Bank was naturally holding internal discussions on its exit strategy from monetary easing, including the methods and impact on the bank's profitability.
- South Korea acting President Hwang stated that it had agreed with US to tighten global network of pressure on North Korea - comments alongside US VP Pence
- US VP Pence stated US was 100% commitment to South Korea and would meet any attack
- Saudi Oil Min Al-Falih noted that it aimed to double gas output by 2030 and planned to produce energy from nuclear sources
**Currencies**
- The USD was on soft footing after Friday’s release of Mar CPI and retail sales data underwhelmed and had participants rethink the probability of another Fed rate hike in June.
- EUR/USD was higher by 0.2% at 1.0630 area in quiet trading with European markets closed for Easter Monday holiday.
- USD/JPY was softer by 0.3% and hovered near 5-month lows. Geopolitical worries over the Korean Peninsula also contributed to a firmer yen on safe-haven flows.
**Looking Ahead***
- 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
- 07:00 (BR) Brazil Apr FGV Inflation IGP-10 M/M: -0.6%e v 0.1% prior
- 07:00 (BR) Brazil Central Bank (BCB) Apr COPOM Minutes
- 07:25 (BR) Brazil Central Bank Weekly Economists Survey
- 07:30 (BR) Brazil Feb Economic Activity Index (Monthly GDP) M/M: +0.5%e v -0.3% prior; Y/Y: -2.4%e v -0.8% prior
- 07:30 (TR) Turkey TCMB Turkey Survey of Expectations
- 08:30 (US) Apr Empire Manufacturing: 15.0e v 16.4 prior
- 10:00 (US) Apr NAHB Housing Market Index: 70e v 71 prior
- 11:30 (US) Treasury to sell 3-Month and 6-month Bills
- 15:00 (CO) Colombia Feb Industrial Production Y/Y: -1.3%e v -0.2% prior
- 15:00 (CO) Colombia Feb Retail Sales Y/Y: -1.6%e v -2.2% prior
- 16:00 (US) Feb Total Net TIC Flows: No est v $110.4B prior; Net Long-term TIC Flows: No est v $6.3B prior
- 16:00 (US) Weekly Crop Progress Report
Asia Mid-Session Market Update: China GDP, retail sales, and industrial output all top expectations; North Korea still in focus after failed missile launch; USD extending decline on low US CPI
***Friday US Session Highlights***
- (US) MAR CPI M/M: -0.3% V 0.0%E; CPI EX FOOD AND ENERGY M/M: -0.1% V +0.2%E; MAR CPI INDEX NSA: 243.801 V 244.237E
- (US) FEB BUSINESS INVENTORIES: 0.3% V 0.3%E
- (US) MAR ADVANCE RETAIL SALES M/M: -0.2% V -0.2%E (2nd straight decline); RETAIL SALES EX AUTO M/M:0.0 % V 0.1%E
- Friday US markets were closed
***Politics***
- (TR) Turkey Passes referendum on changing the constitution to replace its parliamentary system with the executive presidency with 51.5% v 48.7%; opposition to challenge result
- (FR) France presidential candidate Mélenchon (far left, communist) is rapidly rising in the polls - press
- (US) Pres Trump expected to name Randy Quarles as Federal Reserve’s top bank regulator - Politico
- (JP) Japan PM Abe's cabinet approval rating rises 4pts to 60% - Yomiuri
***Weekend US/EU Corporate Headlines***
- MGI: Ant Financial raises offer price ~36% to $18.00/shr from $13.25/shr to acquire MoneyGram
- AMZN: Said to be interested in BJ's Wholesale, who is putting itself up for sale - NY Post
***Key economic data:***
- (CN) CHINA Q1 GDP Q/Q: 1.3% (1-year low) V 1.5%E; Y/Y: 6.9% (6-quarter high) V 6.8%E
- (CN) CHINA MAR RETAIL SALES Y/Y: 10.9% (3-month high) V 9.7%E; YTD Y/Y: 10.0% V 9.6%E
- (CN) CHINA MAR INDUSTRIAL PRODUCTION Y/Y: 7.6% (highest since Dec 2014) V 6.3%E; YTD 6.8% V 6.3%E
- (CN) CHINA MAR FIXED ASSETS EX RURAL YTD Y/Y: 9.2% (10-month high) V 8.8%E
- (CN) CHINA MAR M2 MONEY SUPPY Y/Y: 10.6% V 11.1%E; 8-month low
- (CN) CHINA MAR NEW YUAN LOANS (CNY): 1.02T V 1.20TE; 4-month low
- (CN) CHINA MAR AGGREGATE FINANCING (CNY): 2.120T V 1.50TE
***Asia Session Notable Observations, Speakers and Press***
- Asian equity markets are mixed in light trade, with Australia and Hong Kong remaining closed for Easter holidays. Nikkei225 is little changed despite continued strength in JPY, as USD/JPY fell to fresh 5-month lows below 108.20 following softer than expected US CPI on Friday. USD weakness was also more pronounced against NZD, as New Zealand fundamentals justify expectations of RBNZ tracking the Fed tightening pace down the line. Gold prices rose some $7 above $1,295, tracking weaker USD, while US Treasury yield was seen testing 2.20% level.
- China economic data offered some positive surprises, as Q1 GDP, industrial output, and retail sales all topped consensus to hit multi-month rates of growth. Q1 GDP y/y rose to a 6-quarter high of 6.9%, and Stats Bureau noted Consumption accounting for 77.2% of Q1 growth, up from 64.6% in 2016. Fixed asset investment rose over 10% as property investment value rose 9%, sales value rose 25%, construction up 11%, and home sales aresa rose 17%. Industrial output growth was similarly impressive, rising at the fastest pace since late 2014 - power generation was up 7%, while coal and steel output were both up 2% despite the recent production curbs. NBS further noted that employment was stable, but also warned that structural problems remain an issue and property sales growth could start to slow as govt curbs impact is felt.
- Situation on the Korean peninsula remains tense even though there was no activity at the nuclear test site over the weekend. Instead, Pyongyang held a military parade commemorating 105th birthday of North Korea founder and also attempted to launch another missile test which reportedly failed. In the mean time, National Security Advisor McMaster remarked that US is working with China and other partners on a range of responses that will not include a military action at this, though VP Pence travelling in the region said all options are still on the table. US carrier USS Vinson is also reportedly about a week away from arriving to South Korea's east coast.
- Turkish Lira rallied over 2% in the wake of this weekends referendum to expand the executive powers of Pres Erdogan; While the "Yes" vote was deemed victorious, the margin of victory at 51.3% v 48.7% opposed was well below the 55% mandate predicted by Erdogan and will likely be challenged by the opposition. Under upcoming constitutional changes, the winner of 2019 elections will in effect assume full control of the government, ending the current parliamentary system which treated office of the president as a role without full executive authority.
China
- (CN) China Stats Bureau: Domestic structural problems remain relatively striking
- (CN) PBoC adviser Fan Gang: China FX reserves may decline further - Chinese press
- (CN) China to take steps to boost domestic demand this year - Chinese press
- (CN) China Securities Regulatory Commission (CSRC) approves IPO applications for 10 companies; Will be allowed to raise up to CNY5.1B - Chinese press
- (HK) Trade between mainland China and Hong Kong in Jan-Feb was down 1.5% y/y - Chinese press
Japan
- (JP) Japan Chief Cabinet Sec Suga: No comment on details of US FX report; not intervening into the FX market, committed to G20 agreement on FX policy
- (JP) Japan to seeking to revive Trans-Pacific Partnership (TPP) without the US - Singapore press
- (JP) Japan PM Abe: Need to pressure North Korea for a sincere dialogue; Working for China to play a larger role in North Korea - speaking in parliament
Australia / New Zealand
- (AU) RBA's Harper: Australia economic strength has been the result of good luck and good management; Govt does not make decisions based on rating agency implications - press
Korea
- (KR) North Korea said to have failed in a ballistic missile launch early on Sunday - press
- (KR) US National Security Advisor McMaster: US, China, and allies working on a range of responses to North Korea's latest ballistic missile test; Trump is not considering military action for now - press
- (KR) US carrier USS Vinson to reach South Korea east coast on Apr 25th - Korean press
- (KR) US State Sec Tillerson and China top diplomat Yang Jiechi discussed situation in North Korea in a phonecall on Sunday - Chinese press
- (US) VP Pence: Reiterates all options remain on the table on North Korea
***Asian Equity Indices/Futures (00:00ET)***
- Nikkei +0.1%, Hang Seng closed, Shanghai Composite -1.3%, ASX200 closed, Kospi +0.4%
- Equity Futures: S&P500 -0.1%; Nasdaq -0.1%, Dax -0.6%, FTSE100 -0.3%
***FX ranges/Commodities/Fixed Income (00:00ET)***
- EUR 1.0600-1.0630; JPY 108.15-108.80; AUD 0.7570-0.7595; NZD 0.6990-0.7030; GBP 1.2525-1.2545
- June Gold +0.3% at 1,293/oz; May Crude Oil -0.8% at $52.75/brl; May Copper +0.6% at $2.58/lb
- (CN) PBOC SETS YUAN MID POINT AT 6.8785 V 6.8740 PRIOR; 2nd straight weaker setting
- (CN) PBoC conducts CNY495.5B in combined 6-month and 1-yr Medium Term Lending Facility (MLF) operations today
- (CN) PBoC skips reverse repo operations v CNY90B prior in combined 7-day, 14-day, and 28-day reverse repos
- (KR) South Korea MoF sells 10-yr bonds at 2.165% v 2.215% prior
***Asia equities / Notables / movers***
Japan
- 4587 Peptidream +7.0%; Seen as likely to co-develop drug with major US pharmaceutical
- 6502 Toshiba -0.3%; Broadcom does not want an alliance w/ Japan govt or company if it bids for chip unit
- 6753 Sharp +1.4%; Said to consider returning into IT equipment business in partnership with Hon Hai; Smartphones said to be not part of the plan - Nikkei
China
- 601139 Shenzhen Gas Corporation +1.3%; Guides Q1 Net +5.5% y/y
- 600886 SDIC Power Holdings Co -3.1%; Reports FY16 Net CNY3.9B, -27.8% y/y
- 000036 China Union Holdings +2.3%; Guides Q1 Net higher y/y
Weekly Market Update: Risk Assets Fall Out of Favor During Holiday Shortened Week
Investors' risk appetite faded this week. Traders didn't necessarily attribute the change in sentiment to one headline; re-positioning ahead of Q2 earnings season and the French election, enhanced geopolitical concerns surrounding North Korea and Syria, combined with waning confidence in Washington DC's ability to deliver on promised economic reforms remained underlying themes. Volumes were noticeably muted, with the Easter calendar providing a bit of a lull in terms of both trader participation and likely catalysts. Against that backdrop the VIX jumped more than 20% touching levels not seen since the US election. For the week the Dow finished down 1%, the S&P lost 1.1%, and the NASDAQ slipped 1.2%.
Treasuries rallied throughout the week, and stocks fell out of favor. Today the US 10-year note yield fell to its lowest level this year at 2.21% before closing slightly higher. Medium term notes and long bonds auctioned over the week also saw average yields decline significantly from previous tenders. Gold and the Yen were also in high demand as alternative havens to fixed income. Gold moved up to levels not seen since November rising 2.6% over the week. The Yen surged to highest level against the US dollar since the November election after President Trump commented he was concerned about the Greenback getting too strong globally.
In corporate news for this shortened week, AT&T announced Monday it would acquire Straight Path for $95.63/share in a $1.6B all-stock deal. The telecom giant is aiming to strengthen its 5G service potential, as Straight Path is one of the largest holders of 28 GHz and 39 GHz millimeter wave spectrum, bands which have received FCC approval to carry 5G. AT&T and other telecoms, acquired additional spectrum for their 5G build out via a $20B FCC-run auction on Thursday. T-mobile spent just under $8B to capture about 45% of the low band spectrum being sold off by broadcasters. Swift Transportation acquired Knight Transportation in an all-stock transaction that will create the industry's largest full truckload company, with a combined EV of $6B. The deal would be the largest in the trucking sector since the $3B Con-way/XPO merger in 2015. Tesla may soon be supplying those truckers with autonomous semi-trucks, announcing that it will unveil its version of the big rig in September. Tesla also hit a financial milestone this week, surpassing General Motors in market cap to become the most valuable U.S. automaker. Late in the week, steel stocks were pressured after the US Commerce Department imposed preliminary duties on South Korean steel that were lower than had been anticipated.
SUNDAY APRIL 9TH
04/09 (HK) Macau’s biggest junket operator Suncity reports 1st half of March was +40% y/y
MONDAY APRIL 10th
(FR) BANK OF FRANCE MAR BUSINESS SENTIMENT: 103 V 104E
(EU) EURO ZONE APR SENTIX INVESTOR CONFIDENCE: 23.9 V 21.0E
Gartner: Cuts 2017 global IT spending forecast +1.4% y/y (prior 2.7%)
STRP To be acquired by AT&T for $95.63/shr in $1.6B all-stock deal
(US) Mar Labor Market Conditions Index Change: 0.4 v 1.0e
(US) Fed Chair Yellen: US economy now is pretty healthy - comments in Michigan
TUESDAY APRIL 11TH
(UK) MAR CPI M/M: 0.4% V 0.3%E; Y/Y: 2.3% V 2.3%E; CPI CORE Y/Y: 1.8% V 1.9%E
(DE) GERMANY APR ZEW CURRENT SITUATION SURVEY: 80.1 V 77.5E; EXPECTATIONS SURVEY: 19.5 V 14.8E
(SA) Saudi Arabia said to push for extension of OPEC production cuts - press
(CN) CHINA MAR CPI M/M: -0.3% (2nd straight decline) v -0.2% PRIOR; Y/Y: 0.9% V 1.0%E
(CN) CHINA MAR PPI Y/Y: 7.6% V 7.5%E; 7th consecutive increase
(KR) US Commerce Dept found South Korean steel producers have been dumping tubular steel, imposes preliminary duties of 2.76% to 24.9%
WEDNESDAY APRIL 12TH
TSCO.UK Reports FY16/17 adj PBT £729M v £335M y/y, adj Op £1.28B v £1.26Be, Rev (Inc Fuel) £55.9B v £55.7Be
(UK) FEB AVERAGE WEEKLY EARNINGS 3M/Y: 2.3% V 2.2%E; WEEKLY EARNINGS (EX BONUS) 3M/Y: 2.2% V 2.1%E
(UK) FEB ILO UNEMPLOYMENT RATE 3M/3M: 4.7% V 4.7%E
(UK) MAR JOBLESS CLAIMS CHANGE: +25.5K V -6.1K PRIOR; CLAIMANT COUNT RATE: 2.2% V 2.1% PRIOR
OPEC MONTHLY REPORT: OPEC oil production at 31.928M bpd, -153K bpd m/m
DAL Reports Q1 $0.77 v $0.73e, R$9.15B v $9.16Be
(US) MAR IMPORT PRICE INDEX M/M: -0.2% V -0.2%E; Y/Y: 4.2% V 4.0%E
(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.50%; AS EXPECTED
(US) Association of American Railroads weekly rail traffic report for week ending April 8th: 513.0K carloads and intermodal units, +7.1% y/y (13th straight week of gains)
(US) Pres Trump: US dollar is getting too strong; Will not label China a currency manipulator - press interview
THURSDAY APRIL 13th
CA.FR Reports Q1 Rev €21.3B v €21.3Be
JP Morgan Reports Q1 $1.65 v $1.51e, R$25.6B (managed) v $24.6Be; core loans +9% y/y, +1% q/q
Citigroup Reports Q1 $1.35 v $1.24e, R$18.1B v $17.8Be
(US) MAR PPI FINAL DEMAND M/M: -0.1% V 0.0%E; Y/Y: 2.3% V 2.4%E
(US) APR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98 V 96.5E
(US) Forces in Afghanistan struck ISIS tunnels with "the mother of all bombs", largest conventional bomb ever used by the US military – press
(US) FCC announces preliminary results of $19.8B spectrum auction; largest winners include T-Mobile, Dish, Comcast, U.S. Cellular
TSLA Elon Musk tweets: "Tesla Semi truck unveil set for September."
Asia Mid-Session Market Update: Volatility compressed ahead of holiday week with an eye on Middle East and Korea
***US Session Highlights***
- (US) INITIAL JOBLESS CLAIMS: 234K V 245KE; CONTINUING CLAIMS: 2.03M V 2.02ME
- (US) MAR PPI FINAL DEMAND M/M: -0.1% V 0.0%E; Y/Y: 2.3% V 2.4%E
- (US) Pres Trump tweets: "I have great confidence that China will properly deal with North Korea. If they are unable to do so, the U.S., with its allies, will!"
- (US) APR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 98 V 96.5E; Current conditions: 115.2 v 113.2 prior final reading (highest since 2000)
- (US) Forces in Afghanistan struck ISIS tunnels with "the mother of all bombs", largest conventional bomb ever used by the US military - press
***US markets on close: Dow -0.7%, S&P500 -0.7%, Nasdaq -0.5%***
- Best Sector in S&P500: Real Estate
- Worst Sector in S&P500: Energy
- Biggest gainers: ALXN +3.3%; INCY +1.9%; COTY +1.7%
- Biggest losers: SWN -5.0%; FTR -4.4%; CHK -4.2%
- At the close: VIX 16.0 (+0.2pts); Treasuries: 2-yr 1.21% (flat), 10-yr 2.23% (-7bps), 30-yr 2.89% (-4bps)
***US movers afterhours***
- STRP: Verizon said to consider topping AT&T bid - press; +9.4% afterhours
- SABR: To enter S&P MidCap 400 index, effective ahead of the open on April 19; +4.6% afterhours
***Politics***
- (FR) France IFOP daily presidential poll: Second round poll: Macron 58.5% (unchanged), Le Pen 41.5% (unchanged)
***Key economic data***
- (KR) South Korea Mar Import Price Index M/M: -2.0% v -2.1% prior (revised from -2.2%); Y/Y: 6.9% v 9.2% prior (revised from 9.1%)
- (CN) China Finance Ministry: Q1 Fiscal Rev rose 14.1% y/y at CNY4.44T - Chinese press
***Asia Session Notable Observations, Speakers and Press***
- Asian equity markets are trending lower, tracking continued selling in US that took its indices to 2-month lows. Despite the fairly constructive start to the US earnings season with a beat by JP Morgan and a mixed report from Wells Fargo, investors focus remained on geopolitical jitters around South Korea and the Middle East. Selling momentum picked up at the end of the US session after reports that US forces in Afghanistan struck ISIS tunnels with "the mother of all bombs" - the largest conventional bomb ever used by the US military - raising concerns of an expanded US involvement in other parts of the Middle East.
- In Asian trading hours, the focus is centered on North Korea as it approaches the key Apr 15th birthday of its founder Kim Il-sung. Overnight reports suggested that there's been new activity at its nuclear test cite, and today NBC reported that US would consider a preemptive strike against North Korea with conventional weapons if it believes Pyongyang will proceed with a nuclear test. In response, North Korea's Vice Foreign Minister said Pyongyang will conduct a nuclear test when it sees fit, adding that its military will not sit idly in the event of a US strike.
- Despite the ongoing saber-rattling, currency volatility is compressed going into Good Friday / Easter holidays. USD/JPY is not reacting to the news that would typically dictate safehaven flows, flat-lining just below 109.20. CME futures markets are also closed for holiday and not responding to developments.
- Toshiba remained in the corporate headlines, falling nearly 6% on press reports that it stopped meetings regarding sale of its chip unit due to contractual obligations to Western Digital, but pared half of that decline after reports of Apple interest in a joint bid for the division with Hon Hai.
China
- (CN) China Finance Ministry: Q1 Fiscal Rev rose 14.1% y/y - Chinese press
- (CN) Japan Coast Guard claims China Coast Guard vessels entered its waters - financial press
Japan
- (JP) Bank of Japan (BoJ) Exec Dir Amamiya: BOJ easing is not for financing govt debt - press
Australia/New Zealand
- (NZ) DairyNZ: Cyclone Cook may have an impact on the coming season's dairy production - NZ press
Korea
- (KR) North Korea Vice Foreign Min: Will conduct another nuclear test when HQ sees fit; Pres Trump is "making trouble" with aggressive tweets - press
- (KR) South Korea Deputy Fin Min Song In-chang: Pres Trump's remarks on China not being a currency manipulator reduce the risks of Korea being labeled one as well - press
***Asian Equity Indices/Futures closed (23:000ET)***
- Nikkei -0.3%, Hang Seng closed, Shanghai Composite -0.6%, ASX200 closed, Kospi -0.6%
***FX ranges/Commodities/Fixed Income (23:00ET)***
- EUR 1.0605-1.0625; JPY 109.00-109.20; AUD 0.7555-0.7575; NZD 0.6975-0.7000
- (US) Weekly Baker Hughes US Rig Count: 847 v 839 w/w (+1%) (13th straight weekly rise)
- SPDR Gold Trust ETF daily holdings rise 6.5 tonnes to 848.9 tonnes; highest since Dec 14th
- (CN) PBOC SETS YUAN MID POINT AT 6.8740 V 6.8651 PRIOR
- (CN) PBoC injects CNY90B combined in 7, 14, and 28-day reverse repos; Injects net CNY70B this week v drained CNY100B prior
***Asia equities / Notables / movers***
Japan
- 6502.JP Toshiba -5.7% (speculation to stop chip unit sale)
- 7974.JP Nintendo Co +3.4% (Switch becomes fast-selling video games system)
- 9983.JP Fast Retailing Co +1.0% (Q2 result)
Taiwan
- 2330.TW Taiwan Semiconductor Manufacturing Co -1.8% (Q1 result)
China
- 002143.CN Sichuan Gaojin Food Co -10.0%
- 000415.CN Bohai Leasing Co +5.3% (Xiongan new area momentum)
- 000338.CN Weichai Power +1.6% (guidance)
- 601898.CN China Coal Energy -1.3% (Mar result)
BofA-ML
HUNTING - Better than exp rev and EBITDA of c.USD5.5m in 1Q17 (607.5).....+3-4%
FAURECIA - Strong. Sales 2.3% beat and org growth implies 560bps o/p (43.6).+3%
DAIMLER - Strong start in Q1 with EBIT €4b significantly above cons (68.6)..+3%
MEGGITT - We UPGRADE to Buy, with PO 530p.See attractive cash story (458).+2-3%
VASTNED - Launches share buyback tender offer for upto EU50m (8% of co) (36)+2%
DUNELM - Homeware mkt remains in decline but underlying nos look ok (634)...+2%
PAGEGROUP - Strong nos with gross profit 4% and org growth 3.3% ahead (452).+2%
INDRA - We UPGRADE to Neutral post very strong Q4 results & guidance (12).+1-2%
IMI - Is being pushed away from us this morning as a buy. Small o/p (1208)..+1%
HAYS - Positive read across from Pagegroup beating cons this morning (164)..+1%
TESCO - Better than exp with 1%-3% beat with UK/ROI op profit at £803m (198)+1%
WH SMITH - Inline with H1 pretax £83m meeting ests.Travel profits +11%(1825)u/c
LOW&BONAR - Has made a good start to the year. Stock has had good run (77.3)u/c
MINERS - Copper -0.35%,Iron ORe fut -1.4% with BHP OZ -0.6%,RIO OZ +0.1%..-0.5%
AKZO - Elliott requests EGM to dismiss supervisory board Chairman (78.7)..-0.5%
BARCLAYS - Times reporting that DOJ has joined the FCA into Staley inv.(213)-1%
WINDELN - We DOWNGRADE to Underperform. Continues to burn cash flows (3.2)..-2%
MICRO FOCUS - We D/GRADE to Underperform, see as rel. u/performer (2427)..-2-3%
CSFB
Altice UNCH Altice USA Files IPO, Initial Amount Up to $100m
Barry Call M/P H1 Sales 1.5% ahead, volumes sold, guidance confirmed
CNH +0.5-1% US peer Deere +1.4% in the US on solid combine sales
Daimler +3% Pre-releases Q1 EBIT, clean 7% beat
Ericsson M/P CS UPGRADE to NEUTRAL (risk reward balanced)
Faurecia +2% Strong Q1 sales, confirms FY guidance
Fraport +1% March traffic stats, Passengers +1.8%, cargo +10.5%
Hunting +2-3% Revenues ahead of management’s expectations
Miners UNCH Copper -0.25%, Brent +1.40%, Iron Ore -0.90%, China UNCH
Oils +0.5% US API showed a draw of 1.3m barrels, Brent +1.40%
Pagegroup +1-2% No's 4% aqhead of cons, 9.1% LFL growth
Puma +2-3% Q1 sales €1005m vs cons €962m, outlook raised
Tesco +1% FY adj op profit GBP1.28B est GBP1.26B, to resume divi
WH Smith M/P H1 PBT £83m vs cons 83.15m, divi 14.6p vs cons 14.7p
MF
*DAIMLER-Q1 Ebit 4.01b(Incl 690m 1-offs),Underlying 3.3b(3.05).......+3%
*ORANGE/CANAL PLUS-In talks on Sports-Rights bids & distribution.....U/C
*BARRY CALLEBAUT-H1 Sales 3.5b(3.59),Ebit 238.4m(215.5),m/t ok.......+1%
*FRAPORT-Says Frankfurt Airport March Traffic +1.8%-stk +27% ytd.....U/C
*FAURECIA-Q1 Rev 4.23b,China could grow 3%,No outlook for FY(SI 7%)..+3%
*VESTAS-Chairman would like a large,long-term owner - DI.............U/C
*VW-To offer warrantieson SUVS transferable after first owner........+0.25%
*BNP-Sumitomo Trust to take stake 20% stake in insurance unit........+0.5%
*DIOR-Q1 Rev €10.4b,says environment particulary uncertain...........+1%
*CS-May seek full Irish banking license says Irish Times.............+0.25%
*SIEMENS-CFO confirms further cost savings in FY16/17 - FAZ..........U/C
*PUMA-Raises FY o/l,Q1 Ebit 70m,Sales 1.01b,FY Ebit 185-200(191).....+2%
*K&N-Announce B2B partnership with Alibabac.com......................+1.25%
Shore
WH SMITH-H1 revs 643m.H1 ptp 83m.op pft 84m.Divi 14.6p....................UNCH
TESCO-Op pft 1.28b(Est1.26b).LfL sales +0.7%.Intention to resume div payment+2%
KAINOS-Trading in yr continued to be in line with estimates................UNCH
ATKINS-Traded well through Q4.Fy expectations unchanged....................UNCH
LOW&BONAR-Says has made a good start to year................................+2%
BHP-Resp to Elliot's prop,share buybacks good,US petrol core to growth.....UNCH
DUNELM-3Q LFL sales decline 2.2% to GBP255mill,FY sales forecast unchd....UNCH
COUNTRYSIDE PROP-1H completions +31%,av price GBP440k,order book +69%.......+2%
PAGEGROUP-1Qincome GBP170m,fx raised gr profit to GBP15m,op prof GBP3m......+2%
HUNTING-1Q rev ahead of forecasts,EBITDA USD6m,+ve exp on US shale..........+1%
Dow-0.03% S&P -0.14% Nasdaq -0.24% Russell +0.72%
Geopolitical tensions spooked investors on Tuesday, but the S&P 500's 50-day moving average provided support to keep losses in check. Stocks retreated out of the gate, hitting their lowest levels of the day about an hour after the opening bell. By noon, equities had reclaimed about half of their earlier losses, but they still had difficulty shaking the risk-off sentiment until the final minutes of action. Even still, the late rally left the cash market short of its flat line. Sector standings echoed the day's risk-off sentiment as countercyclical groups held the upper hand over their more-risky, cyclical peers. The real estate (+0.4%), consumer staples (+0.1%), and telecom services (+0.1%) spaces closed in the green while the utilities sector (unch) finished flat. financials (-0.3%) and technology (-0.4%) sectors were hit. WTI crude settled 1.6% higher at $53.88/bbl, marking the commodity's sixth consecutive win. S&P 500 managed to close above its 50-day moving average (2349), the sharp rise in the CBOE Volatility Index (VIX 15.26, +1.21) provides evidence that investors are putting the pro-growth trade into question. The VIX Index now sits at its highest level since the presidential election. US After Hours NBIX +18% following INGREZZA FDA approval... TSCO -3% on guidance. Safehaven flows remain the prevalent theme in Asian trade as geopolitical risks related to conflicts in Syria and saber-rattling by North Korea are not abating. Ahead of his arrival in Moscow, US State Sec Tillerson is calling on Putin to denounce his support for Syria's Assad, just as Kremlin continues to hint that chemical attacks were actually done by the rebels to garner international sympathy. US President Trump has also tweeted that "North Korea is looking for trouble" and added today that US is "sending a powerful armada", while Pyongyang warned of a nuclear attack on the US at any sign of American aggression. Vix has spiked up to a 2-week high, US benchmark Treasury yield is testing a key long-term support of 2.30%, and Nikkei225 is the worst performing major index on Yen strength (both Nikkei and USD/JPY are at lowest levels since mid-Nov). Gold prices have also extended their gains on safehaven demand.
Nikkei -1.35% Hang Seng -0.17% CSI -0.03% Shanghai -0.33%
Eur$ 1.0605 CNH 6.9027 CNY 6.8979 JPY 109.44 GBP 1.2483 RYB 56.9405 WTI$ 53.53
S&P -0.15% EuroStoxx +0.38% Dax +0.36% SMI +0.37% FTSE +0.02%
Macro :
- U.S. Said to Have Told Japan of N. Korea Strike Option: Kyodo
- Too Early to Buy Value Stocks After Recent Selloff: Bernstein
Keep an eye on :
- AKZA NA : Akzo Questions Elliott, PPG Ties as Hostilities Over Bid Begin
- AKZA NA : Elliott Said to Near Securing Support for Akzo EGM: Reuters
- AGL IM : Autogrill Move to Unleash the Hidden Value, PT Raised at Citi
- POP SM : Banco Popular Said to Consider Coco Issuance: Cinco Dias
- BARN SW : Barry Callebaut Completes Program to Weed Out Contracts
- BLT LN : BHP CEO Says Questioned Petroleum Unit at Time of South32 Split
- BLT LN : BHP CEO Says Strategy Is Correct; Elliott Plan Has ’Major Flaws’
- CDI FP : Christian Di or 1Q Rev. Up 15%; Dior Brand Had 159 Stores in 2016
- CSGN VX : Credit Suisse May Seek Full Irish Banking License: Irish Times
- DAI GY : Daimler Group Prelim. 1Q Ebit EU4.01b vs EU2.15b Y/y
- EO FP : Faurecia Expects U.K. Car Market to Decline This Year
- IMPN SW : Implenia Gets CHF100m Order to Renovate Stockholm Railways
- ORA FP : Orange, Canal Plus Said in Talks on Distribution Accord: Echos
- RB/ LN : Mead Johnson/Reckitt Deal Remains on Track for 3Q Close
- RNO FP : Renault PT Raised at Morgan Stanley, Possible Upside From Nissan
- SHP LN : Shire Sues CSL to Block Competing Treatment of HAE Blood Ailment
- TEF SM : Pablo Isla Said Set to Leave Telefonica Board: El Mundo
- VIV FP : Orange, Canal Plus Said in Talks on Distribution Accord: Echos
- WFM US : Amazon Said to Mull Bid for Whole Foods Before Jana Stepped In