ASIAN MACRO 4 June Initial Thoughts. Dow futures open flat
Covid-19 Globally over 6.4m cases, 380k deaths
1989 Tiananmen Sq Massacre anniversary HK organisers promote an on-line vigil but say 8 of them will go to Victoria park to light candles but will not suggest where others should or should not go. It will be interesting to see how many groups of eight go to the park and how the authorities react. As well as how many mark the vigil across HK. Interesting article in the FT about TikTok and the US protests on the matter.
DOW futures open flat (+11pts)
DOW +2.1%, NDX +0.8%, S&P +1.4%, Russel 2K +2.4% Markets opened strongly following data showing the US was showing signs of recovery and worked higher through the day to close at their highs. Confidence running high with small caps out performing.
Re-opening names continue to see interest American +5.6%, Delta +7.8% and United Airlines +12.5%. JPMorgan Chase +5.4%, Wells Fargo +5.2% and Bank of America +4.6%.
Lockdown names lagged; Amazon +0.2% having opened in the red and Netflix -1.3%. Shopify -2.4%.
Microchip Technology +12.3% led semiconductor stocks higher after raising its June quarter sales and earnings guidance. +VE
Apple +0.6% after a federal judge said it must face part of a lawsuit claiming it fraudulently concealed falling demand for iPhones, especially in China, leading to tens of billions of dollars in shareholder losses. Allows shareholders to sue over Chief Executive Tim Cook’s comments touting strong iPhone demand on a Nov. 1, 2018 analyst call, only a few days before Apple told its largest manufacturers to curb production.
US Total vehicle sales May were 12.2m vs 8.6m Apr.
MBA Mortgage Applications -3.9% vs +2.7% prior and
MBA 30 yr Mortgage Rate 3.37% vs 3.42% Prior
ADP Employment Change -2.76m vs -19.557m (revised down) (F/cast was -9m)
Services PMI May 37.5 vs 26.7 Apr (F/cast was 36.9)
Composite PMI May 37.0 vs 27.0 Apr (F/cast was 36.4)
ISM Non-Manufacturing Data
Business Activity May 41.0 vs 26 Apr (F/cast was 34)
Prices May 55.6 vs 55.1 Apr
New Orders May 41.9 vs 32.9 Apr
Employment May vs 30 Apr
PMI May vs 41.8 Apr (F/cast was 44)
Factory orders Apr vs -10.3% Mar (F/cast was -14%)
EIA stock change Crude -2.077m vs +7.928m prior (F/cast was 3.038m)
EIA stock change Gasoline 2.796 vs -0.724m prior (F/cast was 1m)
USD stronger vs Yen but weaker vs Euro and Australian dollar
Bitcoin +0.7% @ 9,576.79, VIX -4.4% @ 25.7,
US T10 0.746% jumped as economic re-opening outweighed protest concerns
OIL Brent -0.2%, WTI +1.3% in choppy trading with doubts over extending production cuts as an expected early OPEC + meeting on Thursday will not now take place.
Gold -1.9%, Silver -3%, Copper -0.6%
AHEAD Challenger Job Cuts, Balance of Trade, Unit Labour Costs, Non Farm Productivity, Initial Claims, Exports, Imports, EIA Natural Gas Stocks Change
DAX +3.9%, CAC 3.4%, FTSE 2.6% Markets open high and worked higher through the day to close at their high’s on optimism about the easing for lockdowns and ahead of more support from the ECB tomorrow. Insurers are the outperforms Prudential +7.9% and Legal & General +7.2% as MS advised switching into banks, insurers and financial companies over real estate as a way to play higher yields on debt.. Covid-19 concerns continue to ease. PMI data was still weak but had improved MoM
Lufthansa +7.7% reported a net loss of Euro 2.1bn for Q1 2020
LVMH +2.2% confirmed the acquisition of Tiffany -2.4% was now ‘uncertain’ due to covid-19 and the riots in the US.
Tui +8.2% confirmed that it had received compensation from Boeing for the grounding of its fleet of 737 Max jets
Property stocks continued to rally on news of centres and sites re-opening. Hammerson +24.3% Unibal-Rodamco-Westfield +14.7% other names +VE but not to the same extent; Land Securities +2.4%, British Land +2.2%, Taylor Wimpey +4.4%
Renault +10.5% as GS upgraded the stock on the basis of changing focus to profitability from growth.
Elekta -6.7% on news the President and CEO had resigned
EUROZONE Services PMI May 30.5 vs 12 Apr (F/cast was 28.7)
Composite PMI May 31.9 vs 13.6 Apr (F/cast was 30.5)
Unemployment Rate Apr 7.3% vs 7.1% Mar (F/cast was 8.2%)
PPI Apr -2% MoM vs -1.5% Mar (F/cast was -1.8%) [Apr -4.5% YoY vs -2.8% Mar (F/cast was -4%)}
GERMANY Services PMI May 32.6 vs 16.2 Apr (F/cast was 31.4)
Composite PMI May 32.3 vs 17.4 Apr (F/cast was 31.4)
Unemployment Rate May 6.3% vs 5.8% Apr (F/cast was 6.2%)
FRANCE Services PMI May 31.1 vs 10.2 Apr (F/cast was 29.4)
Composite PMI May 32.1 vs 11.1 Apr (F/cast was 30.5)
UK Services PMI May 29.0 vs 13.4 Apr (F/cast was 28.9)
Composite PMI May 30 vs 13.8 Apr (F/cast was 28.9)
EUROZONE Construction PMI, Retail Sales, ECB Rate Decision and Press Conference
GERMANY Construction PMI
FRANCE Construction PMI, Retail Sales
UK Construction PMI, Retail Sales
JAPAN Expect Nikkei to open and continue to trend higher following the strong US and European markets. Yen currently slightly weaker at 108.91; slight +VE for exporters.
Data due Foreign Bond and Stock Investments
Govt has not yet established its position on a U.S. proposal for adding countries to the Group of Seven summit to be held later this year, Finance Minister Taro Aso said on Wednesday.
Three mega banks and the major telcos to set ups panel to study the introduction of a digital currency by the BoJ.
Dentsu Group Inc has received 76.9 billion yen via a government contract to provide back-office services for a scheme to help virus-hit firms, under a framework opposition lawmakers called "opaque".
Nippon Life Insurance to invest additional Yen 23bn in Australian unit MLC Ltd -VE
Nissan Motor has estimated the closure of its plants in Barcelona could cost up to around 1.5 billion euros ($1.7 billion), a union source told Reuters.
Fast Retailing Co. is set to open a new Uniqlo store in Tokyo's Harajuku district on Friday, the first such opening in eight years in the fashion hub, while it navigates the economic fallout and low retail sales caused by the coronavirus pandemic. The company warned in April but it seems well placed to navigate the fallout from covid-19 better than some US or European brands with its focus on good basics.
SOUTH KOREA Expect markets to open higher and continue to trade higher as the supplementary budget bill was approved by the cabinet and goes to the National Assembly today. Upside could be limited after Kospi hit a 3 month high on Wednesday and the Finance minister warned of potential economic contraction in Q2
Data due Current Account Apr US$-3.12b vs +6.23b Mar
Govt warned the economy could contract over 2% in Q2 -VE for sentiment
Govt said on Wednesday it has approved the emergency use of Gilead Sciences Inc's remdesivir to treat COVID-19 after a government panel last week cited positive results for the anti-viral drug in other countries.
The Pentagon said on Tuesday that it had accepted a proposal from South Korea for it to temporarily fund thousands of Korean workers at U.S. bases who were put on unpaid leave this year.
Merck announced Wednesday the launch of Performance Materials, a newly integrated body comprising of recently acquired US-based chemicals and materials firms and its existing semiconductor solutions unit. +VE
Celltrion said Wednesday it will accelerate its insulin pen biosimilar development along with medical device manufacturer Poonglim Pharmatech. It will begin developing the insulin biosimilar this year with aims to commercially launch the product in 2025.
Coupang On Wednesday, a civic group filed a complaint against Coupang’s founder and CEO Kim Bom-suk, claiming that his firm failed to inform customers properly about the COVID-19 cases of its employees. -VE
SPC Group said Wednesday it will open a Shake Shack store in Daegu in July, its first in the city.
LG Chem said Wednesday it will power Vietnam’s first-ever electric vehicle, which can travel up to 500 kilometers on a single charge. +VE
Mirae Asset Global Investments said Wednesday it is eyeing its first initial public offering for its real estate investment trust followed by a listing on the nation’s main bourse Kospi.
TAIWAN Expect market to open higher with continued interest in Tech.
No data due
The Mainland Affairs Council said yesterday that the Chinese Communist Party’s (CCP) human rights record has worsened since the Tiananmen Square Massacre 31 years ago, which it continues to cover up. Through its aggression and its use of technology to monitor and imprison dissidents, Beijing deprives the Chinese public of basic human rights — a situation that is worsening every day, it said. The council called on Beijing to heed the calls of Chinese for democracy and to promptly reform its political system.
Chunghwa Precision yesterday reported that revenue +67.8% YoY last month, fueled by rising demand for 5G-related chips, and processors for smartphones and servers. As the COVID-19 pandemic has not stalled the deployment of 5G, Chunghwa Precision has “a cautiously optimistic view about the outlook for the third quarter,” it said in a statement. +VE
Nanya Tech yesterday reported that revenue +30.76% YoY last month to NT$5.55 billion as prices rose amid strong demand, but -1.24% MoM. In the first five months of this year, cumulative revenue + 29.71% to NT$25.59 billion from a year earlier, the company said in a statement. Nanya Technology said that its operations have not been affected by the COVID-19 outbreak, but that lockdowns in Europe and the US, as well as renewed US-China tensions, would likely affect growth.
Canalys says PC shipments are forecast to contract by 7% pa this year due to a global recession -VE if correct
Machvision yesterday said that it remains optimistic about its performance this year, as new products related to 5G applications — such as flexible PCB inspection equipment, automated optical inspection equipment for rigid PCBs and IC inspection equipment — are likely to boost growth, even as it posted lower revenue in the first five months of this year than the previous year. Consolidated revenue for last month -13.91% YoY and -12.43% MoM to NT$224.1 million. In the first five months, revenue -1.59% YoY to NT$1.17 billion.
Wisdom Marine Group dry bulk shipper, yesterday reported that operating income last month -79.8% YoY to US$1.78 million, while revenue -17.96% to US$30.76 million, with pretax losses of US$1.17 million, or losses per share of US$0.05. Wisdom attributed the poor performance to a downturn in the dry bulk market amid the COVID-19 pandemic. The decline was worse than a month earlier, due to non-operating losses, including foreign-exchange gains and bond investment gains. In the first five months of this year, the company posted pretax losses of US$10.2 million, or losses per share of US$0.44, while consolidated revenue fell 16.67 percent to US$153.42 million. -VE
CHINA Expect market to open higher, investors will be encouraged by money being sent direct to local authorities but they are still cautious and want to see detail of Government money will be spent. Increased tension with the US likely to limit the upside.
No data due
Govt under pressure as Dr Hu Weifeng passed away on 2 June, after a four-month fight with Covid-19. He made headlines in March, when his skin turned black "due to liver dysfunction" during his treatment. The exact cause of his death has not been made public but the news has triggered an outpouring of anger on Chinese social media sites.
China to bypass provinces with direct payments to cash-strapped local governments, but revenue problems remain. A clear signal that the government wants to make sure the money gets to local authorities and isn’t ‘diverted’ en route.
The US Commerce Department said on Wednesday that new restrictions on 33 Chinese firms and institutions it announced last month will take effect on Friday. The entities include software giant Qihoo 360 Technology, cloud robot and services start-up Cloudminds and lidar company Skyeye Laser Technology. -VE
The US has added its voice to growing calls at the United Nations objecting to China’s claims over the South China Sea saying they do not comply with the 1982 US Law of the Sea Convention (Unclos). This comes months after China underlined its claims to the the contested waters by notifying the UN of its claims; at the time that demoted many countries to file objections.
The United Kingdom will not walk away from the people of Hong Kong if China imposes a national security law which conflicts with Beijing’s international obligations under a 1984 accord, Prime Minister Boris Johnson said on Wednesday.
Foreign institutes have been raising their Chinese bonds holdings for 18 months, during which the purchase volume in May reached RMB111.9 bn, logging a new high on record, according to data from China Central Depository & Clearing Co Ltd
AIRLINES -VE as Trump bans them flying to the US from June 16 in response to China not permitting US carriers to fly to China. US says the move is to ensure that both parties get to fully exercise their bilateral rights.
Huawei Technologies Reuters reports acted to cover up its relationship with a firm that had tried to sell prohibited US computer gear to Iran, after Reuters in 2013 reported deep links between the firm and the telecom-equipment giant’s chief financial officer, newly obtained internal Huawei documents show.
HONG KONG ADR’s +231pts to open at 24,556 with all ADR’s +VE except CNOOC. After the initial squeeze expect the market to trade sideways. HSBC could come under pressure having now publicly backed the imposition on HK of a National Security Law. There will also be some concerns about potential protests today to mark the Tiananmen Sq massacre 31 years ago. As Carrie Lam says Beijing is aware of the opinions of Hong Kongers on the National Security Law issue but would not give details.
No data due
Short Selling HSI Wednesday 18% vs 18.2% Tuesday Top Shorts Wharf REIC (1997) 37%, CLP (2) 35%, CKI (1038) 35%, ICBC (1398) 31%, BoC (3988) 28%, Ping An (2318) 28%, China Shenhua (1088) 25%, Country Garden (2007) 25%.
HSBC Asia-Pacific Chief Executive Peter Wong signed the petition and HSBC itself “respects and supports all laws that stabilise Hong Kong’s social order”, the bank said in a post on social media in China.