Oct 7 Asian Macro Initial Thoughts US Futures drop as Trump calls off Stimulus talks
Covid-19 Globally over 35.7m cases, 1.05m deaths.
US Futures opened Dow -130pts S&P and NDX -0.5% but have eased to Dow -90pts, S&P -0.3% and NDX -0.25%
ASIAN Futures show the Nikkei Chicago futures -148pts; Australia already -0.1%, HK ADR’s only -24pts but expect more downside.
U.S. Secretary of State Mike Pompeo visited Japan on Tuesday calling for deeper collaboration with Japan, India and Australia as a bulwark against China's growing regional influence.
DOW -1.34%, NDX -1.57%, S&P -1.4%, Russel 2K -0.3% Dow opened higher, S&P and NDX flat and traded around flat until just before 3pm when news broke that Trump was calling off stimulus package talks until after the election. That prompted a sell off and stocks closed on the lows. That was after Powell’s speech in which he warned that the economy would see a weak recovery and create unnecessary hardships. He also said said too much stimulus was less of a problem than too little.
Pre market showed the US trade deficit hit a record high and the JOLTS’s data was weaker than F/cast but the markets had accepted that. It was Trumps comments that spooked the markets.
Tech was also hit by the House Antitrust Subcommittee report. Stocks that are likely to benefit are Walmart, Costco, Target, Home Depot, Lowe’s. Amazon likely to benefit but faces other issues.
Facebook -2.3%, Apple -2.9% expected to launch new iPhones at ’special event’ on Oct 13, Amazon -3.1%, Netflix -2.8%, Alphabet -2.2% and Microsoft -2.1%.
Worth noting that the House Antitrust Subcommittee determined Facebook wields monopoly powers in social network and has maintained its position by acquiring, copying or killing its competitors. It also addresses antitrust concerns regarding Amazon, Apple, Alphabet, recommends that Congress review a series of potential remedies. This includes “structural separation,” which could require the companies to split parts of their businesses. -VE
Nvidia +0.7%, AMD -1.9%, Micron -0.6% and Skyworks -2.9%.
Re-opening stocks Boeing -6.8% as it cut forecast for global passenger jet demand, Caterpillar -1.3%, Simon Property +1.7%, Gap -3.1%, Carnival +1.5%. Airlines United -3.7%, Delta -3%, Southwest -2.4% as it asked staff to take pay cuts in return for no furloughing/layoffs in 2021.
Balance of Trade Aug US$-67.1b vs -63.4b Jul revised down (F/cast was -66.5b)
Exports Aug US$171.9b vs 168.3b Jul revised up (F/cast was 171.7b)
Imports Aug US$239.0b vs 231.7b Jul (F/cast was 238.2b)
Redbook 3 Oct 2.1% YoY vs +2.2% prior. F/cast was 4% (3 Oct 0% MoM vs -0.3% prior. F/cast was 4%)
JOLT’s job openings Aug 6.493m vs 6.618m Jul (Consensus was 6.685m)
API Crude Oil Stock Change 0.951m vs -0.831m (Consensus was 0.4m)
USD was flat vs Yen & Euro. Bitcoin -1.5% @ 10,590.46, VIX +5.4% @ 29.48, US T10 0.734%
OIL Brent +3.4%, WTI +3.7% as a new hurricane approaches the Gulf of Mexico
Gold %, Silver %, Copper %
AHEAD MBA Mortgage Applications & 30yr Mortgage Rate, EIA Oil report, FOMC minutes, Fed Speakers Barkin, Williams twice, Kashkari and Evans.
DAX +0.61%, CAC +0.48%, FTSE +0.12% Opened higher, saw initial selling on poor Eurozone Construction PMI numbers but then worked higher. Before easing back in the last hour fo trading Banks +VE Healthcare weak. Covid cases in Europe remain a concern.
Rolls-Royce +20% on signing a deal to build a gas plant for Dhamra LNG in India
Logitech -5.1% after Bloomberg reported that Apple will stop selling other makers earphones and speakers. -VE
EUROZONE Construction PMI Sept 47.5 vs 47.8 Aug (F/cast was 49.8)
GERMANY Factory Orders Aug +4.5% vs +3.3% revised (F/cast was +2.3%)
Construction PMI Sept 45.5 vs 48.0 Aug (F/cast was 50)
FRANCE Construction PMI Sept 47.3 vs 46.0 Aug (F/cast was 49.4)
UK Construction PMI Sept 56.8 vs 54.6 Aug (F/cast was 53.7)
EUROZONE ECB’s Lagard speaks
GERMANY Industrial Production
FRANCE Balance of Trade, Current Account
UK Halifax House Price Index, Labour Productivity,
JAPAN Expect Nikkei to open lower with exporters under pressure as Trump calls off stimulus negotiations. Yen currently 105.62
Nikkei futures in Chicago 23,285 (Osaka at 23,260) vs 23,434 Tuesday’s close
Data due pre market Foreign Exchange Reserves. Later Coincident Index and Leading Economic Indicators.
Banks -VE as The Bank of Japan is moving toward stress testing many banks simultaneously based on standardized risk scenarios, bringing it in line with overseas counterparts.
Yakult Honsha -VE as Danone said it would sell its remaining 6.6% stake in the probiotic yogurt maker; a move that will strengthen the French food group's balance sheet. -VE
Toyota Motor Corp and Panasonic Corp’s JV said on Tuesday said it will produce lithium-ion batteries for hybrid cars at a plant in Western Japan from 2022 to meet growing demand for electric vehicles (EV). The production line at a Panasonic factory in Tokushima prefecture will have enough capacity to build batteries for around 500,000 vehicles a year, Prime Planet Energy & Solutions, Inc said in a statement. +VE
Toyota Motor Corp says it will develop a heavy-duty fuel-cell electric truck with its subsidiary, Hino Motor Co, for the North American market. The move expands upon Toyota's existing effort to develop a 25-ton Class 8 fuel-cell electric truck for the Japanese market, announced earlier this year.
Singapore Airlines Group said Tuesday it will resume its service connecting Singapore and Japan's Fukuoka next month after seven and a half months of hiatus due to the coronavirus pandemic. +VE
SOUTH KOREA Expect markets to open lower with broad selling as Trump calls off stimulus talks until after the election. Good news from companies to largely ignored in the light of Trump’s statement.
Data out Foreign Exchange Reserves Sept $420.55b vs 418.95b Aug (F/cast was 417.9b)
SK Telecom, Microsoft team up to create 'Netflix of video games’ Firms to target Korea’s burgeoning console, cloud gaming market; with SKT running the subscription service +VE
Hyundai Glovis said Tuesday it set up a new branch in Kazakhstan and signed a seven-year transportation business deal with local beverage firm RG Brands, its first move to target the logistics market in Central Asia. +VE
SK hynix announced Tuesday the company will launch the fifth generation of DRAM chips, DDR5, as the first in the world. Compared to its predecessor DDR4, the latest edition is 1.8 times faster and consumes 20 percent less power, making it optimal for big data, artificial intelligence and machine learning solutions. +VE
LS Cable & System said Tuesday it completed construction of its second telecommunications plant in India and has doubled production capacity of communications parts. +VE
TAIWAN Expect market to open lower with broad based selling.
Data due After Market Balance of Trade, Exports, Imports, Foreign Exchange Reserves.
CECC reported three new imported cases of Covid and also started flu vaccinations; worth noting that in the UK there are now more daily deaths from influenza than covid.
Grinnodot and AU Optronics formed a partnership to speed up solar power installations in Taiwan, addressing the fast-growing demand for green energy.
The collaboration came after Grinnodot in September last year secured a license to retail renewable energy, making it an alternative to state-run Taiwan Power Co for electricity supply for households and enterprises, the companies said in a joint statement yesterday.
CSBC Corp, yesterday confirmed that cracks have appeared in the welding joints of transition pieces it supplied to Orsted Taiwan Ltd’s offshore wind farm projects, but dismissed speculation that it could lead to Orsted switching to foreign suppliers. -VE
The Financial Supervisory Commission (FSC) yesterday rejected Thailand-based Charoen Pokphand Group Co’s (CP) application to acquire a 24 percent stake in Jih Sun Financial Holding Co, as the regulator aims to prevent industrial enterprises from taking control of the nation’s financial conglomerates.
CHINA Market Closed
No data due
Between April and July 2020, China net purchased JPY1.46 trillion mid-to-long term treasury bonds of Japan, representing 3.6 times over a year ago, Nikkei Asian cited the data from Ministry of Finance Japan and Bank of Japan. China was as a result the second largest bond buyer of Japan, following the US. For July 2020, China bought JPY723.9 billion of Japanese treasury bonds, the highest intra-month record since January 2017.
China's outstanding foreign debt has risen in the first half of this year amid government measures to facilitate cross-border financing. Foreign debt stood at US$2.13 trillion in the first half, up by US$75.1 bn from the end of 2019, +3.7%, data from the State Administration of Foreign Exchange showed, Xinhua reports.
China in talks with WHO over assessing its COVID-19 vaccines for global use. Comes as hundreds of thousands of essential workers and other groups considered at high risk in China have been given locally-developed vaccines even as clinical trials had not been fully completed, raising safety concerns among experts.
US deficit for goods traded with China on a non-seasonally adjusted basis shrinks in August, but still higher than any other month this year except July
Shanxi province will merge five coal companies into a single entity called Jinneng Holding Group, creating the country’s second largest coal producer. The Government-led merger, which involves trillions of yuan in assets and thousands of employees, is the latest effort to improve efficiency in the coal industry +VE
More than half of 50 new home projects in Beijing are offering discounts during the Golden Week after transactions in the city shrank 18 percent year-on-year from January to August, mainland media reported. -VE for Chinese Devlopers.
HONG KONG ADR’s -24pts to open at 23,956 but I think we are likely to see more downside.
Data due pre market Sept PMI. (Aug was 44.0 F/cast is 49)
IPO JHBP-B (06998.HK), debut today closed at $31.6 in gray market, up $7.6 or +31.7% vs listing price of $24, on volume of 12.6 million shares and turnover of $443 million, PhillipMart data showed. Excluding the handling fees, a book gain of $3,800 was reported per board lot of 500 shares. The retail IPO was 1,247x over subscribed and the institutional 32x; press views the grey level to be disappointing.
SHORT SALES Tuesday 21.3% vs 23.5% Monday
Top Shorts BABA-SW (9988) 37%, Country Garden (2007) 36%, China Res Land (1109) 31%, Bank of China (3988) 34%, Galaxy Ent (27) 33%, NWD (17) 33%, Ping An (2318) 32%, HSBC (5) 29%, CCB (939) 27%, Hang Seng Bank (11) 25%.
Excellence Commercial Property (06989.HK) said the company has been providing property management services to TENCENT (00700.HK) since 2010, involving 16 projects with an area of 600,000 sq.m.. It also takes care of OPPO's office and staff dormitory in India. At this juncture, the company is initially prioritizing development in China given enormous market potential, while scouting overseas market accompanying major customers.
CK Asset (1113) will launch the fifth batch of flats at Sea to Sky in Tseung Kwan O this Saturday, offering 285 units at an average price of HK$17,441 per square foot after discounts.
The Land Registry announced that the number of sale and purchase agreements for all building units received for registration in September was 6,581 (+22.1% MoM and +60.9% YoY). The total consideration for sale and purchase agreements in September was $51.3 billion (+12.6% MoM and +41.0% YoY).
The Singaporean Government's sovereign wealth fund GIC plans to subscribe for Ant Group’s public offering shares in an over US$1-billion deal, Bloomberg citing inside sources. Temasek is also interested in the subscription.
HKMA announced that, as USD/HKD triggered the Strong-side Convertibility Undertaking during Hong Kong trading hours on Tuesday, the HKMA undertook a US$150 million selling order to inject HK$1.163 billion into the market. The balance of the banking system of Hong Kong will increase to HK$267.593 billion on Thursday (8 October).
Cushman & Wakefield released the 3Q20 review for Hong Kong's Grade A office and commercial leasing markets. The city's office and shop rents continued to decrease, with Grade A office rents down for the 6th straight quarter. Given shrinking leasing demand and meager office demand, Cushman & Wakefield projected Hong Kong's Grade A office rents to decline by 21% this year.