Aug 4 ASIAN MACRO INITIAL thoughts DOW futures open flat

06 Aug

Aug 4 ASIAN MACRO INITIAL thoughts   DOW futures open flat

Covid-19 Globally over 18.2m cases, 670k deaths
WHO warns that there may never be a cure for covid-19
DOW futures open flat -14pts S&P and NDX slightly lower

EARNINGS today include Walt Disney Co, Sony, Bayer, BP, Diageo, KKR, AMC Networks, Exelon, Incyte, Cyberark Software, Allegheny Tech, Vulcan Materials, Activision Blizzard, BioMarin Pharmaceutical, Boingo Wireless, Devon Energy, Ethan Allen, Western Union, Planet Fitness, Monster Beverage, Allstate, Pioneer Natural Resources, Owens-Illinois, Gartner

DOW +0.89%, NDX +1.47%, S&P +0.72%, Russel 2K +1.78% Markets opened higher lead by Tech and then traded sideways. Eli Lilly +1.7 on news of phase 3 trial for a covid-19 antibody treatment that could prevent its spread in Nursing Homes. Traders watching for new of the new stimulus agreement. Good PMI and ISM Manufacturing data but Construction Spending missed. Negotiations on new stimulus continue; they’ve agreed a US$1,200 stimulus cheque but other differences remain.
Infectious disease expert Birx commented that the virus had entered a new phase and was ‘extraordinarily widespread’ -VE for the hoped for V shaped recovery.
Microsoft +5.6% on potential Tik Tok deal, although Trump said the US government should get a “substantial portion” of the sales price of the US operations and warned he will ban the service in the United States on September 15 without a sale.
He said “I did say that if you buy it, whatever the price is that goes to whoever owns it, because I guess it’s China essentially … I said a very substantial portion of that price is going to have to come into the Treasury of the United States because we’re making it possible for this deal to happen,” which will raise some interesting debates. The US sale also raised questions about what that will mean for Tik Tok in Europe.
S&P at highest level since Feb and NDX closed at a new high. Apple +2.5%
Lord & Taylor, one of the US’ oldest department stores, and Tailored Brands, the parent company of Men’s Wearhouse and Jos. A. Banks, on Sunday filed for bankruptcy, joining a growing list of stores slammed by the COVID-19 pandemic. Slight -VE
ADT +VE on news that Google would buy a 6.6 per cent stake in the home alarm systems maker as part of a new long-term partnership.
Manufacturing PMI Jul 50.9 vs 49.8Jun (F/cast was 51.3)
ISM Manufacturing Data
Prices Jul 53. 2 vs 51.3 Jun (F/cast was 51.9)
New Orders Jul 61.5 vs 56.4 Jun (F/cast was 55.1)
Employment Jul 44.3 vs 42.1 Jun (F/cast was 45.9)
Manufacturing PMI Jul 54.2 vs 52.6 Jun (F/cast was 53.6)
Construction Spending Jun -0.7% vs -1.7% May revised from -2.1% (F/cast was 1%)
Total Vehicle Sales Jul vs 13.1m Jun due at 7am HK time
USD was stronger vs Yen & Euro. Bitcoin % @ , VIX -0.7% @ 24.28, US T10 0.554%
OIL Brent +2%, WTI +1.84% on +VE global PMI data
Gold +0.3%, Silver +0.2%, Copper -0.02%. Rallied initial but then eased as weaker as USD strengthen.
AHEAD Redbook, ISM New York, Factory Orders, IBD/TIPP Economic Optimism, Factory Orders Ex Transport, API Crude Oil Stocks.

DAX +2.71%, CAC +1.93%, FTSE +2.29% saw a mixed open on the PMI data but then all markets worked higher. German exporters +VE after the good Chinese Caixin data. Earnings in focus with HSBC -2.9% after missing estimates (but off early lows) along with Soc Gen -0.65% (just off day high) on increased loss provisions. Heineken -2% reported a 1H loss but said business had pricked up since the height of the lockdowns in April.
Elekta +14.6% in reaction to the possible buyout of its only real competitor. Siemens Healthineers agreed a $16.4bn cash takeover of Varian, the market leader in radiation therapy, whose 60% global market share compares to Elekta’s 40% share.
MTU Aero Engines -5.5% as Q2 income was -72%
Ferrari rose after narrowing its 2020 profit target range and reporting strong demand in June and July.
EUROZONE Manufacturing PMI Jul 51.8 vs 47.4 Jun (F/cast was 51.1)
GERMANY Manufacturing PMI Jul 51.0 vs 45.2 Jun (F/cast was 50.0)
FRANCE Manufacturing PMI Jul 52.4 vs 52.3 Jun (F/cast was 52.0)
New Car Registrations Jul +3.9% vs +1.2% Jun
UK Manufacturing PMI Jul 53.3 vs 50.1 Jun (F/cast was 53.6)
GERMANY No data due
FRANCE Budget Balance
UK No data due

JAPAN Expect Nikkei to open higher following the US SONY earnings in focus. Pre market data slight +VE but cautious sentiment after Tokyo reported 258 new covid cases Monday could limit the upside. Yen weaker currently 106.00 +VE for Exporters
out Tokyo CPI Jul +0.6% YoY vs +0.3% Jun (F/cast was +0.4%)
Tokyo Core CPI Jul 0% YoY vs +0.2% Jun (F/cast was +0.2%)
Seven & i Holdings (3382.T) bought Marathon Petroleum’s (MPC.N) Speedway gas stations in the United States for $21 billion, the companies said, five months after the deal was put on hold amid the coronavirus outbreak.
Nichiigakkan was more than +8% on Monday after Bain Capital made a sweetened $1.2 billion offer.
J-Power to invest as much as A$25 million ($17.8 million), in Australia's Genex Power Ltd. Finalising a deal that secures funding for Genex's equity component of the Kidston pumped hydro project. +VE
Major Japanese companies agreed to raise monthly wages by ¥7,096, or 2.12%, including base wage increases, on average in this year's shuntō labor-management negotiations Slight +VE
Corporate bankruptcies triggered by the spread of the novel coronavirus has exceeded 400 in Japan, Teikoku Databank Ltd. said Monday. More and more restaurants and hotels have been hit -VE
Yahoo Japan online services and messaging app provider Line Corp. said Monday they will postpone their merger to March of next year due to the impact of covid.
All Nippon Airways (ANA) yesterday resumed two weekly flights between Taipei International Airport (Songshan airport) and Tokyo International Airport (Haneda airport) after service had been suspended for almost three months due to the COVID-19 pandemic. +VE

SOUTH KOREA Expect markets to open higher with continued buying in Tech and EV related names. A slightly weaker Won helping Exporters.
Data out
Inflation Rate Jul +0.3% YoY vs 0.0% Jun (F/cast was +0.5%)
Inflation Rate Jul 0% MoM vs 0.2% Jun (F/cast was +0.2%)
Heavy rains cause widespread damage -VE for Insurers but +VE Construction related names.
Kakao Games is facing a boycott from users for sexist translations in its newly released game Guardian Tales, posing a hiccup to the company that stands on the doorstep of going public. Slight -VE
Hankook Tire & Technology -VE as a simmering family dispute has come to light because the chairman’s daughter took issue with the handover to his son. Also on Monday it posted Q2 operating profit of 70.2 billion won based on consolidated financial statements, 33.6% YoY.
Sales of mobile games in South Korea soared to a record high in 1H 2020 amid the coronavirus pandemic that has confined more people to their homes, industry data showed Monday. +VE NC Soft, Nexon, Google Play and ONE store.
Chong Kun Dang’s Q2 net profit rose 100% YoY due to decreased spending on marketing amid COVID-19 social distancing, and solid sales of its chronic illness treatments.
Samsung Electronics Co. said Monday it has set up an in-house virus testing center to ramp up its anti-virus measures amid the pandemic.
Seoul home prices now exceed 12 years’ average salary Apartment prices in the capital city continue to surge despite the government’s clampdown
Camping Goods seeing increased sales as more people are turning their eyes to outdoor camping and "chabak," a newly coined word that means sleeping and staying in a car during travel.

TAIWAN Expect market to open higher with some initial bargain hunting after Monday’s sell off on concerns over the possibility of rising covid infections
No data due
Presale and new housing transactions last quarter 
totaled NT$382.7 billion (US$12.96 billion), rising by double-digit percentages QoQ and YoY, as the market emerged from the COVID-19 pandemic unscathed, thanks to real demand and ample liquidity, a survey released by Cathay Real Estate Development Co showed.
Cathay Life Insurance Co, Taiwan Life Insurance Co and China Life Insurance Co this month cut their declared interest rates for interest-sensitive products due to lower bond yields. The declared rates are used by insurers to calculate policyholders’ distributions, based primarily on their investment returns. Slight -VE
Ample Electronic Technology Co, which supplies conductive paste to passive components maker Yageo Corp, yesterday said that net profit soared to a record high of NT$35.03 million (US$1.19 million) last quarter thanks to robust demand from solar and passive components customers. Ample expects growth momentum to extend into next quarter, driven by new orders and new customers.+VE

CHINA Expect market to open higher but upside limited by US/China tensions. Sentiment slight +VE on fewer new covid cases.
No data due
China reported that the numbers of new Covid-19 cases
in China’s far northwestern region of Xinjiang are continuing to fall, with 28 reported Monday. China reported 43 new cases nationwide, seven of the imported and eight in the northeastern province of Liaoning.
Serbia has bought a new generation of medium-range, radar-guided surface-to-air missiles from China in a new sign of deepening cooperation between Beijing and Belgrade.
Zoom Video Communications (ZM.O) will shift to a partner-only model in mainland China from Aug. 23, suspending direct sales to all customers in the region, the company said on Monday. Zoom customers in China received an email on Monday informing them of the change, and telling them it would provide users with “better local support.” Slight -VE as the company remains under scrutiny from human rights activists and privacy advocates.
Vale looks to satisfy China’s appetite for iron ore with new deep water port in Brazil to use more of its massive Valemax ships after China last month approved four new ports to host them. Slight -VE to Australian Iron Ore suppliers; BHP, Rio Tinto and Fortescue
France halts ratification of extradition treaty with Hong Kong. The French foreign ministry criticises China’s introduction of new security law in city, saying it calls into question principle of ‘one country, two systems’ and the legislation also ‘directly affects’ France’s citizens and businesses, ministry adds
FT article says the PBOC is hoping its new digital currency will reduce the dominance of Alibaba and Tencent in digital payments.

HONG KONG ADR’s +59pts to open at 24,517 but expect an initial up tick as recent shorts cover but then for the market to trade sideways with investors cautious over US response to the postponement of HK elections, the covid lockdown and earnings. RESTAURANT groups weak as Govt announced receipts fell 25.9% YoY in Q2
No data due

Short Selling HSI Monday 19.8% vs 18.7% Friday 
Top Shorts Hang Seng Bank (11) 53%, SHKP (16) 39%, MTRC (66) 39%, BoC HK (2388) 37%, HK & China Gas (3) 34%, Galaxy (27) 33%, Want Want (151) 33%, CLP (2) 32%, CCB (939) 30%, AAC Tech (2018) 30%, Bank of China (3988) 29%, Power Assets (6) 27%, Hang Lung PPTY (101) 27%, HSBC (5) 25%.

POLITICIS Beijing's deputy director of the Hong Kong and Macau Affairs Office, Zhang Xiaoming, and Basic Law Committee vice chairman Zhang Yong are meeting this week with politicians and leading lights in the SAR to gather opinions on how the mainland should handle the transition period created by the 12-month postponement of the Legislative Council elections.

Interim net profit ended 30 June 2020 is expected -57% year-on-year. The net profit for the 2019 Interim Period was HK$6.744 billion. Such decrease was mainly due to changes in tax policies in the PRC during the 2019 Interim Period which resulted in an increase in the consolidated profits of the Group, and the recognition of impairment loss during the 2020 Interim Period.
SKYWORTH GROUP (751.HK)  announced that in relation to a proposed spin-off and separate listing of the business of Shenzhen Coocaa Network Technology, the Listing Committee of the Stock Exchange had on 31 July 2020 agreed that the Company may proceed with the Spin-off under Practice Note 15 of the Listing Rules. The Company’s management is currently reviewing the market conditions and the proposal for the Spin-off.
COUNTRY GARDEN (2007.HK) contracted sales RMB54.28 billion in July 2020,  +27.52% YoY
Xinyi Solar (968 HK), announced its interim revenue for the six months ended 30 June 2020 at around HK$4.6 billion, +15.7% YoY mainly contributed by the continuous growth in its solar glass and solar farm businesses. +VE
XINYI ENERGY (3868.HK) interim results ended June 2020. The net profit amounted to HK$438 million, +22.9% YoY  EPS was HK6.48 cents. An interim dividend of HK6 cents was declared, against a dividend of HK5 cents in the corresponding period of the previous year.
WHARF HOLDINGS (4.HK) interim result ended June 2020. Revenue -31.2% YoY to HK$5.551 bn. The profit swung into loss of HK$1.741 bn. LPS was HK$0.57. The first interim dividend of HK$0.2 was declared against a dividend of HK$0.25 in the corresponding period of the previous year.
MTR Corp (66 HK) subsidiary has been awarded a contract to operate the Shenzhen Metro Line 13 for 30 years in partnership with a state-owned railway company. +VE
The Hong Kong Polytechnic University announced that a breakthrough has been achieved in the novel coronavirus vaccine, which was co-developed with Macau University of Science and Technology and other Chinese colleges. The research team expected the vaccine to be put into clinical trials very soon, whose production cost came in lower than others. By far, no serious side effects were noted in animal tests.

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